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 product which could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would most definitely take their time to ensure that they are creating a good business decision in advancing with all the product (i.e.: have they done their homework on the product). Therefore, you can summarize “due diligence” as the entire 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 time, effort and money (i.e.: “risk”) that a company must spend to develop Product Ideas, the more they are going to evaluate the potential license. Stay in mind that even if a product seems to be basic and affordable, the 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 manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they need to perform Due Diligence on the invention. As discussed, this may depend on the option you might have elected for taking your product or service to market.
Option 1 – Manufacturing by yourself – If you are intending on manufacturing and marketing the invention by yourself, then yes you will need to perform homework. Essentially, you feel the producer in the product and for that reason you ought to perform the homework on your invention just like other manufacturers would. The situation that I have found is the fact many inventors who choose to manufacture their own inventions do little, if any marketing due diligence, that is a big mistake.
Option 2 – Licensing for Royalties – if you are planning on licensing for royalties, then I believe you can minimize your due diligence efforts, because before any company licensing your invention, they are going to perform their particular research. Should you be working with a company such as Invention Home, the expense to promote your invention to companies can be minimal – therefore it may set you back more to completely carry out the research than it could to just market the Invention Websites to companies (which, is ultimately your very best kind of due diligence anyway). Remember, you need to have taken time to accomplish your basic consumer research as well as a patent search earlier along the way to be assured that your product may be worth pursuing to start with (i.e.: the item will not be already on the market and you will find a demand).
Let me summarize. If you are intending on investing a large amount of funds on your invention, then it is best to analyze an 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 reassured that an interested company will perform their very own due diligence (not count on yours). Note: it will always be beneficial to have marketing due diligence information available when you discuss your invention opportunity with prospective companies; however, it is far from easy to acquire this information so you have to balance the effort and cost of gathering the details using the real need of having it.
Furthermore, i will provide you with some homework tips.As discussed, the concept of marketing homework is always to gather as much information as possible to produce a well-informed decision on investing in any invention. In a perfect world, we may have 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 very easy to come across.
Should you be not in a position to pay a specialist firm to perform your marketing evaluation, it is actually possible to perform research on your own; however, you must know that research ought to be interpreted and employed for decision-making and on its own, it provides no value. It is what you use the details that matters. Note: I would recommend that you just do NOT PURCHASE “researching the market” from an Invention Promotion company. Often sold being a “first step” (they’ll usually approach you again with an expensive “marketing” package), the information is largely useless as it is not specific research on your invention. Rather, it is off-the-shelf “canned” industry statistics, that can not always 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 all of them mean the same. A number of the terms which i have witnessed to describe the diligence process are:
· Due Diligence
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Consumer Research
· Invention Assessment
Each of these terms is basically referring to the research to assess 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 comprehend the probability of success.
Again, if you are intending on manufacturing your invention all on your own, you should think about performing marketing due diligence 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 research are listed below.
1. Ask and answer some elementary questions
– Is the invention original or has somebody else already develop the invention? Hopefully, you might have already answered this question within your basic research. Otherwise, check trade directories or even the Internet.
– Can be your invention a solution to some problem? Otherwise, why do you think it is going to sell?
– Does your invention really solve the situation?
– Is your invention already on the market? If you have, 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 these items? Can your product 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 that can impact the way your invention sells and objectively evaluate your list
– Demand – will there be an existing need for your invention?
– Market – does a market exists for your invention, and when so, what exactly is the scale of the market?
– Production Capabilities – will it be easy or challenging 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 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 longer than 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 – could it be difficult or simple to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are available special laws that must 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.
– Speak with marketing professionals.
– Ask sales representatives within the field.
– Ask people you know in the field.
– Speak with close friends and family members who you trust.
– Request input on the invention such as features, benefits, price, and if they could purchase it.
During the diligence stage, existing manufactures provide an advantage because they have the ability to chat with their clients (retail buyers, wholesalers, etc.). Within my experience, just about the most crucial elements which a company will consider is whether their existing customers would get the product. If I took How To Get A Patent For An Idea to some company to talk about licensing (assuming they could produce it on the right price point), there is a extremely high likelihood that they would license the merchandise if an individual of the top customers decided to sell it off.
Whether a retail buyer is interested in investing in a product is a driving force for companies considering product licensing. I’ve seen many scenarios where a company had interest inside an invention but they ultimately atgjlh to pass through on the idea as their customer (the retailer) failed to show any interest inside the product. Conversely, I’ve seen companies with mild interest within an idea who jump in a new product when a retailer expresses interest in it.