When inventors contact my company about Due Diligence I like to clarify the reasoning with a simple example. Think of it this way, if a manufacturer is getting ready to make the decision to develop, manufacture, and market a new item that could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would definitely take their time to ensure these are building a good business decision in continuing to move forward with the product (i.e.: have they done their homework on the product). Therefore, you can sum up “due diligence” as the entire process of gathering all the information necessary to make a good business decision prior to making the large financial expenditure. It can generally be assumed that the more time, effort and cash (i.e.: “risk”) that a company must spend to develop Invention Patent, the more they will likely evaluate the potential license. Keep in mind that even if a product seems to be basic and inexpensive, the whole process of developing and manufacturing is rarely simple and low cost. Companies will evaluate such criteria as customer opinions, list price points, unit cost to produce, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they need to perform Research on the invention. As discussed, this will depend on the option you might have elected when planning on taking your products or services to promote.
Option 1 – Manufacturing all on your own – If you are intending on manufacturing and marketing the invention on your own, then yes you will have to perform homework. Essentially, you are the producer in the product and consequently you ought to perform the research on your own invention just like other manufacturers would. The problem i have found is the fact that many inventors who choose to manufacture their particular inventions do little, if any marketing homework, that is a big mistake.
Option 2 – Licensing for Royalties – if you are intending on licensing for royalties, i believe you can minimize your homework efforts, because prior to any company licensing your invention, they will perform their very own due diligence. Should you be employing a company including Invention Home, the expenses to market your invention to companies can be minimal – therefore it may set you back more to completely perform due diligence than it would to just market the How To Invent A Product to companies (which, is ultimately your very best form of due diligence anyway). Remember, you ought to have taken enough time to perform your basic market research along with a patent search earlier in the process to be confident that your product or service is worth pursuing to start with (i.e.: the product is not really already on the market and you will find a demand).
Let me summarize. If you are planning on investing a large amount of money on your invention, then you should always analyze the opportunity first to make certain it’s worth pursuing; however, if you can actively promote your invention to companies with minimal cost, you can be assured that an interested company will work their own homework (not depend on yours). Note: it is always beneficial to have marketing due diligence information available as you discuss your invention opportunity with prospective companies; however, it is not always easy to get this info so you need to balance the effort and expense of gathering the data with all the real need of having it.
In addition, i offers you some due diligence tips.As discussed, the concept of marketing homework would be to gain as much information as possible to create a well-informed decision on purchasing any invention. In a perfect world, we would have all the appropriate information on sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this information might not be very easy to come by.
In case you are not in a position to pay an expert firm to accomplish your marketing evaluation, it is possible to perform the research on your own; however, you must understand that research ought to be interpreted and used for decision-making and by itself, it offers no value. It is everything you use the details that matters. Note: I would personally recommend that you just do NOT PURCHASE “consumer research” from an Invention Promotion company. Often sold being a “first step” (they’ll usually approach you again with an expensive “marketing” package), the details are largely useless because it is not specific research on the invention. Rather, it is actually off-the-shelf “canned” industry statistics, which will not necessarily assist you in making an educated decision.
Before we arrive at the “tips”, let me clarify that “homework” can come under various names, but essentially each of them mean the same thing. Some of the terms which i have seen to describe the diligence process are:
· Due Diligence
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Consumer Research
· Invention Assessment
Each one of these terms is essentially referring to the investigation to evaluate the likelihood of an invention’s salability and profitability. The question of whether your invention will sell can do not be known with certainty, however you can perform some steps that will help you better comprehend the chance of success.
Again, if you are intending on manufacturing your invention on your own, you should look at performing marketing research on your product. If you are planning on licensing your invention for royalties the company licensing your invention should perform this research.
A few recommendations for marketing homework are the following.
1. Ask and answer some fundamental questions
– Is the invention original or has another person already develop the invention? Hopefully, you might have already answered this question inside your basic research. Or even, check trade directories or the Internet.
– Is your invention a solution to some problem? If not, why do you reckon it will sell?
– Does your invention really solve the issue?
– Can be your invention already on the market? In that case, exactly what does your invention offer on the others?
– How many competing products and competitors can you locate on the market?
– Exactly what is the range of price of the products? Can your product or service fall into this range? Don’t forget to element in profit and possibly wholesale pricing and royalty fee, if any.
– Can you position your invention as being a better product?
2. List the pros and cons that can impact how your invention sells and objectively evaluate your list
– Demand – will there be a current demand for your invention?
– Market – does a market exist for your invention, and in case so, what is the scale of the current market?
– Production Capabilities – could it be easy or difficult to produce your invention?
– Production Costs – can you get accurate manufacturing costs (both per unit and setup/tooling)?
– Distribution Capabilities – could it be easy or challenging to distribute or sell your invention?
– Advanced features – does your invention offer significant improvements over other similar products (speed, size, weight, convenience)?
– Retail Price – have you got a price point advantage or disadvantage?
– Life – will your invention last longer than other products?
– Performance – does your invention perform much better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – could it be difficult or simple to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are there special laws that really must be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts within the field.
– Ask for objective feedback and advice.
– Speak with marketing professionals.
– Ask sales people inside the field.
– Ask people you know in the field.
– Speak to close relatives and buddies that you trust.
– Request input on the invention such as features, benefits, price, and when they could buy it.
Throughout the diligence stage, existing manufactures come with an advantage because they have the ability to chat with their clients (retail buyers, wholesalers, etc.). Inside my experience, just about the most important factors which a company will consider is whether or not their existing customers would purchase the product. If I took How To Sell My Invention Idea To A Company to your company to go over licensing (assuming they might produce it in the right price point), there exists a extremely high likelihood which they would license the merchandise if a person with their top customers decided to sell it.
Whether a retail buyer is interested in purchasing a product is a driving force for companies considering product licensing. I’ve seen many scenarios wherein a company had interest inside an invention but they ultimately atgjlh to pass through on the idea as their customer (the retailer) did not show any interest inside the product. Conversely, I’ve seen companies with mild interest in an idea who jump in a new product each time a retailer expresses interest within it.