When inventors contact my company about Due Diligence I like to describe the reasoning with a simple example. Think about it this way, if a manufacturer is getting ready to make the decision to develop, manufacture, and market a new product that could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would most definitely take their time to ensure that they may be making a good business decision in advancing using the product (i.e.: have they done their homework on the product). Therefore, you can summarize “homework” as the whole process of gathering all the information necessary to make a good business decision before making the large financial expenditure. It can generally be assumed that the additional time, effort and cash (i.e.: “risk”) that a company must spend to develop Invention Help, the more they will likely evaluate the potential license. Keep in mind that even if a product is apparently simple and affordable, the process of developing and manufacturing is rarely basic and inexpensive. Companies will evaluate such criteria as customer opinions, list price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they have to perform Homework on the invention. As discussed, this can depend on the option you might have elected for taking your products or services to advertise.
Option 1 – Manufacturing by yourself – If you are planning on manufacturing and marketing the invention all on your own, then yes you need to perform homework. Essentially, you become the maker in the product and consequently you need to perform the research on your own invention just like other manufacturers would. The problem that I have found is the fact that many inventors who elect to manufacture their very own inventions do little, if any marketing research, that is a big mistake.
Option 2 – Licensing for Royalties – if you are planning on licensing for royalties, i believe you can minimize your due diligence efforts, because before any company licensing your invention, they are going to perform their own due diligence. If you are employing a company including Invention Home, the expense to advertise your invention to companies can be minimal – therefore it might cost more to really perform the homework than it could to just market the Product Idea to companies (which, is ultimately your best kind of homework anyway). Remember, you should have taken enough time to accomplish your basic consumer research as well as a patent search earlier during this process to be reassured that your product is worth pursuing to begin with (i.e.: the product is not already on the market and you will find a demand).
Let me summarize. If you are intending on investing a lot of funds on your invention, then it is recommended to analyze an opportunity first to ensure it’s worth pursuing; however, should you can actively advertise your invention to companies with minimal cost, you can be reassured that an interested company will perform their particular due diligence (not depend on yours). Note: it will always be beneficial to have marketing research information available while you discuss your invention opportunity with prospective companies; however, it is far from easy to obtain this information so you need to balance the time and effort and cost of gathering the data with all the real need of having it.
I also will provide you with some due diligence tips.As discussed, the thought of marketing homework is always to gain as much information as you can to produce a well-informed decision on purchasing any invention. In a perfect world, we might have the appropriate information about sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this information may not be easy to come across.
In case you are not in a position to cover an expert firm to do your marketing evaluation, it is possible to carry out the research by yourself; however, you need to understand that research should be interpreted and used for decision-making and on its own, it offers no value. It is what you use the information that matters. Note: I might recommend that you just do NOT PURCHASE “market research” from an Invention Promotion company. Often sold being a “initial step” (they’ll usually approach you again having an expensive “marketing” package), the information is largely useless as it is not specific research on your own invention. Rather, it is off-the-shelf “canned” industry statistics, which will not necessarily help you make a knowledgeable decision.
Before we reach the “tips”, let me clarify that “homework” can come under various names, but essentially they all mean the same thing. Some of the terms i have experienced to explain the diligence process are:
· Due Diligence
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Researching The Market
· Invention Assessment
Each one of these terms is basically referring to the investigation to assess the chance of an invention’s salability and profitability. The question of whether your invention will sell can never be known with certainty, however, you can perform some steps to assist you better be aware of the chance of success.
Again, if you are planning on manufacturing your invention on your own, you should think about performing marketing research on your product. If you are intending on licensing your invention for royalties the company licensing your invention should perform this research.
A few recommendations for marketing due diligence are highlighted below.
1. Ask and answer some fundamental questions
– Is your invention original or has another person already think of the invention? Hopefully, you might have already answered this inquiry within your basic research. Or even, check trade directories or perhaps the Internet.
– Is your invention a solution to some problem? Or even, why do you reckon it can sell?
– Does your invention really solve the problem?
– Is your invention already on the market? If you have, what does your invention offer on the others?
– How many competing products and competitors can you find on the market?
– What is the range of price of these products? Can your products or services fall into this range? Don’t forget to element in profit and perhaps wholesale pricing and royalty fee, if any.
– Can you position your invention being a better product?
2. List the pros and cons which will impact how your invention sells and objectively evaluate your list
– Demand – will there be a preexisting demand for your invention?
– Market – does a market exists for your invention, and if so, what exactly is the scale of the market?
– Production Capabilities – could it be easy or difficult to produce your invention?
– Production Costs – can you have accurate manufacturing costs (both per unit and setup/tooling)?
– Distribution Capabilities – will it be easy or hard to distribute or sell your invention?
– Advanced features – does your invention offer significant improvements over other similar products (speed, size, weight, ease of use)?
– 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 – is it difficult or easy to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or exist special laws that must definitely be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts within the field.
– Request objective feedback and advice.
– Speak with marketing professionals.
– Ask sales people inside the field.
– Ask people you know in the field.
– Talk to close friends and family members that you trust.
– Ask for input on the invention such as features, benefits, price, and when they could buy it.
During the diligence stage, existing manufactures provide an advantage in that they have the capacity to chat with their customers (retail buyers, wholesalers, etc.). Inside my experience, probably the most key elements that a company will consider is whether their existing customers would purchase the product. Should I took Inventions Ideas to a company to talk about licensing (assuming they could produce it on the right price point), there is a high likelihood that they would license the product if a person of the top customers decided to sell it off.
Whether a retail buyer has an interest in buying a item is a driving force for companies considering product licensing. I’ve seen many scenarios in which a company had interest within an invention but they ultimately atgjlh to pass on the idea because 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 whenever a retailer expresses interest within it.