When inventors contact my company about Due Diligence I like to explain the concept with a simple example. Consider it this way, if a manufacturer is getting ready to decide to develop, manufacture, and market a new item that could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would most certainly take their time to ensure that these are making a good business decision in advancing using the product (i.e.: have they done their homework on the product). Therefore, you can summarize “due diligence” as the whole process of gathering all the information necessary to make a good business decision before you make the large financial expenditure. It can generally be assumed that the additional time, effort and cash (i.e.: “risk”) that a company must spend to develop Inventhelp Inventors, the more they will likely evaluate the potential license. Stay in mind that even if a product appears to be simple and affordable, the process of developing and manufacturing is rarely basic and low cost. Companies will evaluate such criteria as customer feedback, list price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they have to perform Research on their own invention. As discussed, this may depend on the option you have elected for taking your product or service to promote.
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 feel the producer in the product and for that reason you should perform the due diligence on the invention just like other manufacturers would. The problem which i have found is that many inventors who elect to manufacture their very own inventions do little, if any marketing due diligence, which is a big mistake.
Option 2 – Licensing for Royalties – if you are intending on licensing for royalties, i believe you can minimize your research efforts, because prior to any company licensing your invention, they will perform their own homework. In case you are working with a company such as Invention Home, the expense to promote your invention to companies can be minimal – therefore it might set you back more to actually perform the research than it would to just market the Prototype Services Inventhelp to companies (which, is ultimately the best kind of due diligence anyway). Remember, you should have taken the time to do your basic market research as well as a patent search earlier along the way to be assured that your product may be worth pursuing to begin with (i.e.: the merchandise is not already on the market and you will find a demand).
Let me summarize. If you are planning on investing a substantial amount of funds on your invention, then you should always 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 work their own homework (not rely on yours). Note: it will always be helpful to have marketing homework information available when you discuss your invention opportunity with prospective companies; however, it is really not always easy to obtain these details so you need to balance the time and effort and expense of gathering the information with the real necessity of having it.
In addition, i will provide you with some homework tips.As discussed, the thought of marketing due diligence is to gain as much information as possible to make a well-informed decision on making an investment in any invention. In a perfect world, we may have got all the relevant info on sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this information might not be simple to come across.
In case you are not in a position to pay for an expert firm to perform your marketing evaluation, it really is easy to carry out the research all on your own; however, you must know that research ought to be interpreted and used for decision-making and alone, it has no value. It is actually 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 “initial step” (they’ll usually approach you again with the expensive “marketing” package), the details are largely useless since it is not specific research on your own invention. Rather, it really is off-the-shelf “canned” industry statistics, that will possibly not help you make an educated decision.
Before we get to the “tips”, let me clarify that “research” can come under various names, but essentially they all mean the same thing. Some of the terms i have experienced to illustrate the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Market Research
· Invention Assessment
All these terms is basically referring to the investigation to gauge the likelihood of an invention’s salability and profitability. The question of whether your invention will sell can do not be known with certainty, however you can perform some steps to assist you better be aware of the probability of success.
Again, if you are planning on manufacturing your invention all on your own, you should look at performing marketing homework on your 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 due diligence are the following.
1. Ask and answer some basic questions
– Can be your invention original or has another person already come up with the invention? Hopefully, you have already answered this inquiry within your basic research. Or even, check trade directories or perhaps the Internet.
– Can be your invention a solution to your problem? Or even, why you think it is going to sell?
– Does your invention really solve the situation?
– Is the invention already on the market? If you have, exactly what does your invention offer over the others?
– How many competing products and competitors can you find on the market?
– Exactly what is the range of value of these products? Can your product 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 being a better product?
2. List the pros and cons that can impact how your invention sells and objectively evaluate your list
– Demand – is there a current interest in your invention?
– Market – does a market exists for your invention, and when so, exactly what is the size of the marketplace?
– Production Capabilities – could 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 challenging to distribute or sell your invention?
– Advanced features – does your invention offer significant improvements over other similar products (speed, size, weight, ease 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 much better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – is it difficult or simple 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 in the field.
– Demand objective feedback and advice.
– Speak to marketing professionals.
– Ask sales agents in the field.
– Ask people you know within the field.
– Speak to close relatives and buddies that you trust.
– Ask for input on the invention like features, benefits, price, and when they might buy it.
During the diligence stage, existing manufactures come with an advantage because they have the capacity to speak with their clients (retail buyers, wholesalers, etc.). Inside my experience, one of the most key elements which a company will consider is whether their existing customers would get the product. Should I took Patent Ideas to some company to talk about licensing (assuming they could produce it at the right price point), there exists a high likelihood that they would license the product if one of the top customers agreed to sell it.
Whether a retail buyer is interested in buying a item is a driving force for companies considering product licensing. I’ve seen many scenarios wherein a company had interest inside an invention however they ultimately atgjlh to move on the idea as their customer (the retailer) did not show any interest in the product. Conversely, I’ve seen companies with mild interest inside an idea who jump with a new product each time a retailer expresses interest inside it.