When inventors contact my company about Due Diligence I like to explain the idea 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 certainly take their time to ensure they are building a good business decision in continuing to move forward with all the product (i.e.: they have 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 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 Getting A Patent, the more they will evaluate the potential license. Keep in mind that even if a product appears to be basic and inexpensive, the process of developing and manufacturing is rarely basic and affordable. 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 Due Diligence on the invention. As discussed, this may depend on the option you might have elected for taking your products or services to advertise.
Option 1 – Manufacturing on your own – If you are planning on manufacturing and marketing the invention all on your own, then yes you need to perform homework. Essentially, you are the maker of the product and consequently you ought to perform homework on your invention just like other manufacturers would. The situation that I have found is the fact many inventors who elect to manufacture their 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 homework efforts, because before any company licensing your invention, they will likely perform their particular due diligence. In case you are working with a company including Invention Home, the costs to market your invention to companies can be minimal – therefore it may cost you more to really perform research than it could to just market the How To Get An Idea Patented to companies (which, is ultimately the best type of research anyway). Remember, you need to have taken enough time to accomplish your basic consumer research along with a patent search earlier along the way to be confident that your products or services is worth pursuing to begin with (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 lot of cash on your invention, then it is best to analyze the opportunity first to ensure it’s worth pursuing; however, in the event you can actively promote your invention to companies with minimal cost, you can be reassured that an interested company will do their very own research (not rely on yours). Note: it is always helpful to have marketing homework information available when you discuss your invention opportunity with prospective companies; however, it is really not easy to obtain this information so you need to balance the time and effort and cost of gathering the data using the real necessity of having it.
Furthermore, i provides you with some research tips.As discussed, the idea of marketing homework is to gain as much information as is possible to make a well-informed decision on investing in any invention. In a perfect world, we would have got all the appropriate info on sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, these details is not always simple to find.
If you are not in a position to pay for a professional firm to perform your marketing evaluation, it is possible to perform research on your own; however, you must understand that research should be interpreted and used for decision-making and on its own, it provides no value. It really is whatever you do with the details that matters. Note: I might 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 since it is not specific research on the invention. Rather, it really is off-the-shelf “canned” industry statistics, that can not necessarily help you make an educated 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 i have witnessed to describe the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Market Research
· Invention Assessment
Each of these terms is basically discussing the investigation to gauge the likelihood 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 assist you better be aware of the chance of success.
Again, if you are intending on manufacturing your invention all on your own, you should think about performing marketing research on your own product. If you are planning on licensing your invention for royalties the company licensing your invention should perform this research.
Some suggestions for marketing homework are the following.
1. Ask and answer some fundamental questions
– Is the invention original or has somebody else already develop the invention? Hopefully, you might have already answered this question in your basic research. Or even, check trade directories or the Internet.
– Is your invention a solution to your problem? If not, why do you think it is going to sell?
– Does your invention really solve the situation?
– Is the invention already on the market? If so, exactly what does your invention offer on the others?
– The number of competing products and competitors can you find on the market?
– What is the range of value of these products? Can your product or service fall into this range? Don’t forget to element in profit and maybe wholesale pricing and royalty fee, if any.
– Can you position your invention as being a better product?
2. List the advantages and disadvantages that will 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 exist for your invention, and if so, what is the dimensions 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, simplicity of use)?
– Retail Price – do you have a price point advantage or disadvantage?
– Life – will your invention last more than 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 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 with marketing professionals.
– Ask sales people within the field.
– Ask people you know in the field.
– Talk to close relatives and buddies who you trust.
– Request input on the invention like features, benefits, price, and in case they might purchase it.
During the diligence stage, existing manufactures provide an advantage in this they have the capacity to speak with their clients (retail buyers, wholesalers, etc.). Inside my experience, probably the most important factors that a company will consider is if their existing customers would purchase the product. Basically If I took Patent Idea to your company to talk about licensing (assuming they might produce it on the right price point), there exists a extremely high likelihood that they would license the merchandise if an individual of the top customers consented to sell it off.
Whether a retail buyer is interested in buying a product is a driving force for companies considering product licensing. I’ve seen many scenarios in which a company had interest in an invention nevertheless they ultimately atgjlh to pass on the idea since their customer (the retailer) failed to show any interest within the product. Conversely, I’ve seen companies with mild interest within an idea who jump at a new product when a retailer expresses interest in it.