When inventors contact my company about Due Diligence I like to clarify the concept with a simple example. Consider 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 definitely take their time to make sure that these are making a good business decision in moving forward using the product (i.e.: they have done their homework on the product). Therefore, you can summarize “research” as the whole 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 Websites, the more they will likely evaluate the potential license. Keep in mind that even if a product seems to be simple and low cost, the entire process of developing and manufacturing is rarely simple and inexpensive. Companies will evaluate such criteria as customer feedback, retail price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they need to perform Due Diligence on the invention. As discussed, this can depend on the option you may have elected when planning on taking your product or service to advertise.
Option 1 – Manufacturing by yourself – If you are planning on manufacturing and marketing the invention on your own, then yes you will have to perform homework. Essentially, you feel the manufacturer from the product and consequently you should perform homework on the invention just like other manufacturers would. The problem that I have found is that many inventors who opt to manufacture their particular inventions do little, if any marketing research, which is a big mistake.
Option 2 – Licensing for Royalties – if you are intending on licensing for royalties, i believe you can minimize your due diligence efforts, because prior to any company licensing your invention, they will likely perform their particular research. Should you be using a company such as Invention Home, the expenses to promote your invention to companies can be minimal – therefore it could set you back more to actually perform the due diligence than it could to just market the Patent Filing Services to companies (which, is ultimately your very best form of research anyway). Remember, you should have taken time to accomplish your basic market research as well as a patent search earlier during this process to be reassured that your product or service is worth pursuing to begin with (i.e.: the item is not really 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 you should always analyze the chance first to ensure it’s worth pursuing; however, in the event you can actively market your invention to companies with minimal cost, you can be assured that an interested company will work their very own due diligence (not count on yours). Note: it will always be useful to have marketing due diligence information available when you discuss your invention opportunity with prospective companies; however, it is not always easy to get this info so you have to balance the time and effort and cost of gathering the information with the real need for having it.
In addition, i offers you some homework tips.As discussed, the thought of marketing research would be to gather as much information as you can to make a well-informed decision on investing in any invention. In a perfect world, we would have all the relevant information about sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this info might not be very easy to come across.
Should you be not in a position to cover an expert firm to do your marketing evaluation, it really is possible to perform research on your own; however, you must understand that research ought to be interpreted and used for decision-making and on its own, it has no value. It is whatever you do with the data that matters. Note: I would personally recommend that you just do NOT PURCHASE “market research” from an Invention Promotion company. Often sold as a “starting point” (they’ll usually approach you again with an expensive “marketing” package), the information is largely useless because it is not specific research on your own invention. Rather, it is off-the-shelf “canned” industry statistics, that can possibly not assist you in making 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. A few of the terms i have witnessed to explain the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Market Research
· Invention Assessment
Each one of these terms is essentially talking about the investigation to gauge the chance of your invention’s salability and profitability. The question of whether your invention will sell can never be known with certainty, but you can perform some steps that will help you better understand the likelihood of success.
Again, if you are planning on manufacturing your invention by yourself, you should consider performing marketing homework on the 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 basic questions
– Can be your invention original or has someone else already come up with the invention? Hopefully, you have already answered this query in your basic research. Otherwise, check trade directories or even the Internet.
– Is your invention a solution to a problem? If not, why you think it is going to sell?
– Does your invention really solve the problem?
– Is your invention already on the market? In that case, what does your invention offer on the others?
– The number of competing products and competitors can you discover on the market?
– Exactly what is the range of value of these products? Can your products or services 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 which will impact the way your invention sells and objectively evaluate your list
– Demand – can there be an existing interest in your invention?
– Market – does a market are available for your invention, and when so, exactly what is the scale of the current market?
– Production Capabilities – will it be easy or challenging to produce your invention?
– Production Costs – can you have 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 very easy to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are available special laws that really must be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts inside the field.
– Demand objective feedback and advice.
– Speak to marketing professionals.
– Ask sales representatives inside the field.
– Ask people you know within the field.
– Speak with close family and friends whom you trust.
– Demand input on the invention like features, benefits, price, and if they might buy it.
Through the diligence stage, existing manufactures come with an advantage because they are able to talk with their potential customers (retail buyers, wholesalers, etc.). In my experience, just about the most key elements that the company will consider is if their existing customers would get the product. If I took How To Patent Your Idea to some company to talk about licensing (assuming they can produce it in the right price point), there exists a high likelihood that they would license the merchandise if a person with their top customers decided to sell it off.
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 in which a company had interest inside an invention however they ultimately atgjlh to move on the idea because their customer (the retailer) did not show any interest within the product. Conversely, I’ve seen companies with mild interest within an idea who jump at a cool product whenever a retailer expresses interest inside it.