When inventors contact my company about Due Diligence I like to describe the reasoning with a simple example. Think of it this way, if a manufacturer is getting ready to decide 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 certainly take their time to ensure they may be making a good business decision in continuing to move forward using the product (i.e.: they have done their homework on the product). Therefore, you can sum up “due diligence” 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 more hours, effort and money (i.e.: “risk”) that a company must spend to develop Invent Help Invention Ideas, the more they will evaluate the potential license. Keep in mind that even if a product is apparently easy and affordable, the process of developing and manufacturing is rarely basic and inexpensive. Companies will evaluate such criteria as customer feedback, retail price points, unit cost to produce, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they need to perform Research on their invention. As discussed, this may depend on the option you may have elected to take your product to advertise.
Option 1 – Manufacturing on your own – If you are intending on manufacturing and marketing the invention on your own, then yes you will need to perform research. Essentially, you are the maker from the product and as a result you need to perform the homework on your own invention just like other manufacturers would. The issue which i have found is that many inventors who opt to manufacture their particular inventions do little, if any marketing due diligence, that is a big mistake.
Option 2 – Licensing for Royalties – if you are intending on licensing for royalties, then I believe you can minimize your research efforts, because just before any company licensing your invention, they will likely perform their particular homework. In case you are working with a company such as Invention Home, the expenses to promote your invention to companies can be minimal – therefore it may set you back more to really perform the due diligence than it would to just market the Inventions to companies (which, is ultimately the best type of homework anyway). Remember, you should have taken the time to do your basic researching the market as well as a patent search earlier along the way to be assured that your product or service may be worth pursuing in the first place (i.e.: the product is not really already on the market and there exists a demand).
Let me summarize. If you are planning on investing a substantial amount of money on your invention, then it is recommended to analyze the opportunity first to ensure 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 rely on yours). Note: it is always helpful to have marketing due diligence information available when you discuss your invention opportunity with prospective companies; however, it is far from always easy to get this information so you need to balance the time and effort and cost of gathering the information with all the real need of having it.
I also will provide you with some homework tips.As discussed, the thought of marketing due diligence is to gather as much information as you can to create a well-informed decision on purchasing any invention. In a perfect world, we may have all the appropriate information about sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this information is not always easy to find.
In case you are not in a position to pay for an expert firm to do your marketing evaluation, it is actually possible to carry out the research all on your own; however, you must understand that research needs to be interpreted and employed for decision-making and alone, it provides no value. It is whatever you use the data that matters. Note: I might recommend that you DO NOT PURCHASE “market research” from an Invention Promotion company. Often sold as being a “initial step” (they’ll usually approach you again having an expensive “marketing” package), the details are largely useless since it is not specific research on your invention. Rather, it is actually off-the-shelf “canned” industry statistics, that can not always help you make an educated decision.
Before we reach the “tips”, let me clarify that “research” can come under various names, but essentially each of them mean the same thing. Some of the terms that I have experienced to illustrate the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Consumer Research
· Invention Assessment
All these terms is essentially referring to the research to evaluate the chance of an invention’s salability and profitability. The question of whether your invention will sell can not be known with certainty, however you can perform some steps to help you better comprehend the probability of success.
Again, if you are intending on manufacturing your invention by yourself, you should look at performing marketing homework on your product. If you are intending on licensing your invention for royalties the company licensing your invention should perform this research.
Some suggestions for marketing due diligence are listed below.
1. Ask and answer some basic questions
– Can be your invention original or has someone else already come up with the invention? Hopefully, you have already answered this question inside your basic research. If not, check trade directories or the Internet.
– Is your invention a solution to a problem? Or even, why do you think it will sell?
– Does your invention really solve the issue?
– Is your invention already on the market? In that case, precisely what does your invention offer over the others?
– The number of competing products and competitors can you discover on the market?
– What exactly is the range of cost of the products? Can your product or service fall into this range? Don’t forget to factor in profit and possibly wholesale pricing and royalty fee, if any.
– Can you position your invention being a better product?
2. List the advantages and disadvantages that will impact the way your invention sells and objectively evaluate your list
– Demand – will there be an existing interest in your invention?
– Market – does a market exist for your invention, and if so, what exactly is the scale of the market?
– Production Capabilities – might it be easy or challenging to produce your invention?
– Production Costs – can you obtain accurate manufacturing costs (both per unit and setup/tooling)?
– Distribution Capabilities – could it be easy or difficult to distribute or sell your invention?
– Advanced features – does your invention offer significant improvements over other similar products (speed, size, weight, simplicity of use)?
– Retail Price – do you have a price point advantage or disadvantage?
– Life – will your invention last over other products?
– Performance – does your invention perform a lot better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – will 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 must definitely be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts inside the field.
– Ask for objective feedback and advice.
– Talk to marketing professionals.
– Ask sales people inside the field.
– Ask people you know within the field.
– Speak to close friends and family members whom you trust.
– Request input on the invention such as features, benefits, price, and in case they might buy it.
Through the diligence stage, existing manufactures have an advantage in this they have the capacity to talk with their potential customers (retail buyers, wholesalers, etc.). In my experience, one of the most key elements that the company will consider is if their existing customers would purchase the product. If I took Prototype Service Inventhelp to some company to go over licensing (assuming they might produce it on the right price point), you will find a extremely high likelihood which they would license the merchandise if a person of the top customers decided to market it.
Whether a retail buyer has an interest in purchasing a item is a driving force for companies considering product licensing. I’ve seen many scenarios where a company had interest within an invention but they ultimately atgjlh to pass on the idea since their customer (the retailer) failed to show any interest inside the product. Conversely, I’ve seen companies with mild interest in an idea who jump in a new product when a retailer expresses interest in it.