When inventors contact my company about Due Diligence I like to explain 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 definitely take their time to ensure that these are building a good business decision in moving forward using the product (i.e.: they have done their homework on the product). Therefore, you can sum up “homework” 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 hours, effort and cash (i.e.: “risk”) that a company must spend to develop Product Ideas, the more they will evaluate the potential license. Stay in mind that even if a product seems to be basic and low cost, the entire process of developing and manufacturing is rarely simple and low cost. Companies will evaluate such criteria as customer comments, list price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they have to perform Due Diligence on their own invention. As discussed, this will depend on the option you may have elected to take your product or service to promote.
Option 1 – Manufacturing by yourself – If you are planning on manufacturing and marketing the invention on your own, then yes you need to perform homework. Essentially, you feel the producer from the product and for that reason you should perform the due diligence on your own invention just like other manufacturers would. The situation i have found is that many inventors who choose to manufacture their own 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 then believe you can minimize your research efforts, because prior to any company licensing your invention, they are going to perform their particular research. In case you are working with a company such as Invention Home, the expense to advertise your invention to companies can be minimal – therefore it might cost you more to completely perform the homework than it would to just market the Inventhelp Inventor to companies (which, is ultimately the best form of research anyway). Remember, you should have taken enough time to perform your basic researching the market along with a patent search earlier in the process to be confident that your product or service may be worth pursuing in the first place (i.e.: the item is not already on the market and there exists a demand).
Let me summarize. If you are intending on investing a lot of money on your invention, then it is best to analyze the opportunity first to make sure it’s worth pursuing; however, in the event you can actively advertise your invention to companies with minimal cost, you can be confident that an interested company will work their particular research (not rely on yours). Note: it will always be beneficial to have marketing homework information available when you discuss your invention opportunity with prospective companies; however, it is not easy to acquire this info so you should balance the time and effort and cost of gathering the data using the real necessity of having it.
In addition, i will provide you with some homework tips.As discussed, the idea of marketing due diligence would be to gather as much information as is possible to create a well-informed decision on purchasing any invention. In a perfect world, we would have the relevant information about sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, these details may not be easy to come by.
In case you are not in a position to cover a professional firm to perform your marketing evaluation, it is actually easy to perform research by yourself; however, you must know that research ought to be interpreted and used for decision-making and on its own, it has no value. It is actually what you use the data that matters. Note: I would recommend that you just do NOT PURCHASE “market research” from an Invention Promotion company. Often sold as being a “first step” (they’ll usually approach you again having an expensive “marketing” package), the details are largely useless since it is not specific research on the invention. Rather, it is actually off-the-shelf “canned” industry statistics, that can possibly not assist you in making a knowledgeable decision.
Before we get to the “tips”, let me clarify that “homework” can come under various names, but essentially each of them mean the same thing. A few of the terms which i have witnessed to illustrate the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Consumer Research
· Invention Assessment
Each of these terms is essentially discussing the investigation to assess the chance of your invention’s salability and profitability. The question of whether your invention will sell can not be known with certainty, but you can perform some steps to help you better understand the likelihood of success.
Again, if you are intending on manufacturing your invention all on your own, you should look at performing marketing research on your own 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 highlighted below.
1. Ask and answer some fundamental questions
– Can be your invention original or has somebody else already develop the invention? Hopefully, you have already answered this query within your basic research. If not, check trade directories or perhaps the Internet.
– Can be your invention a solution to a problem? Or even, why do you reckon it will sell?
– Does your invention really solve the problem?
– Is the invention already on the market? If so, exactly what does your invention offer on the others?
– How many competing products and competitors can you discover on the market?
– What exactly is the range of value of these products? Can your product or service fall into this range? Don’t forget to factor in profit and maybe wholesale pricing and royalty fee, if any.
– Can you position your invention as a better product?
2. List the pros and cons that can impact the way your invention sells and objectively evaluate your list
– Demand – can there be a preexisting demand for your invention?
– Market – does a market are available for your invention, and if so, what exactly is the size of the market?
– Production Capabilities – might 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 – might 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)?
– List Price – do you have a price point advantage or disadvantage?
– Life – will your invention last over other products?
– Performance – does your invention perform better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – will it be 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 inside the field.
– Request objective feedback and advice.
– Talk to marketing professionals.
– Ask sales agents in the field.
– Ask people you know within the field.
– Speak to close relatives and buddies who you trust.
– Ask for input on the invention like features, benefits, price, and in case they would purchase it.
Through the diligence stage, existing manufactures come with an advantage because they are able to speak with their customers (retail buyers, wholesalers, etc.). Within my experience, probably the most crucial elements that a company will consider is whether or not their existing customers would get the product. If I took Inventhelp George Foreman Commercials to a company to go over licensing (assuming they can produce it on the right price point), there exists a very high likelihood that they would license the product if a person of the top customers agreed to sell it.
Whether a retail buyer is interested 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 however they ultimately atgjlh to pass through on the idea since their customer (the retailer) did not show any interest in the product. Conversely, I’ve seen companies with mild interest within an idea who jump in a new product when a retailer expresses interest inside it.