When inventors contact my company about Due Diligence I like to describe 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 item that could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would most certainly take their time to ensure they may be creating a good business decision in advancing with the product (i.e.: have they 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 money (i.e.: “risk”) that a company must spend to develop New Inventions, the more they will likely evaluate the potential license. Stay in mind that even if a product seems to be simple and inexpensive, the entire process of developing and manufacturing is rarely easy and low cost. Companies will evaluate such criteria as customer opinions, list price points, unit cost to produce, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they should perform Research on their own invention. As discussed, this can depend on the option you have elected to take your product or service to promote.
Option 1 – Manufacturing by yourself – If you are intending on manufacturing and marketing the invention all on your own, then yes you need to perform due diligence. Essentially, you are the manufacturer in the product and for that reason you should perform homework on the invention just like other manufacturers would. The issue which i have found is the fact many inventors who elect 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, then I believe you can minimize your due diligence efforts, because before any company licensing your invention, they are going to perform their very own due diligence. Should you be working with a company including Invention Home, the costs to promote your invention to companies can be minimal – therefore it may cost you more to completely perform research than it might to just market the Inventhelp Caveman Commercial to companies (which, is ultimately the best kind of homework anyway). Remember, you need to have taken time to perform your basic market research and a patent search earlier during this process to be assured that your product is worth pursuing to begin with (i.e.: the merchandise will not be already on the market and there exists a demand).
Let me summarize. If you are planning on investing a large amount of money on your invention, then it is recommended 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 particular due diligence (not rely on yours). Note: it is always beneficial to have marketing homework information available as you discuss your invention opportunity with prospective companies; however, it is far from always easy to get these details so you have to balance the time and effort and expense of gathering the data with all the real need for having it.
I also offers you some due diligence tips.As discussed, the thought of marketing due diligence is to gain as much information as possible to produce a well-informed decision on making an investment in any invention. In a perfect world, we might 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 may not be very easy to come across.
In case you are not in a position to pay for a specialist firm to do your marketing evaluation, it is actually easy to perform research by yourself; however, you must know that research should be interpreted and used for decision-making and by itself, it provides no value. It really is what you do with the information that matters. Note: I would personally recommend that you just do NOT PURCHASE “researching the market” from an Invention Promotion company. Often sold being a “initial step” (they’ll usually approach you again with the expensive “marketing” package), the information is largely useless because it is not specific research on your own invention. Rather, it is actually off-the-shelf “canned” industry statistics, that can not necessarily help you make an educated decision.
Before we reach the “tips”, let me clarify that “homework” can come under various names, but essentially they all mean the same. A number of the terms i have experienced to explain the diligence process are:
· Due Diligence
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Researching The Market
· Invention Assessment
All these terms is essentially discussing the research to gauge the chance of an 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 be aware of the chance of success.
Again, if you are intending on manufacturing your invention on your own, you should look at 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 due diligence are the following.
1. Ask and answer some basic questions
– Is your invention original or has someone else already come up with the invention? Hopefully, you have already answered this question within your basic research. Otherwise, check trade directories or even the Internet.
– Is the invention a solution to some problem? If not, why do you think it can sell?
– Does your invention really solve the situation?
– Is your invention already on the market? In that case, exactly what does your invention offer on the others?
– The amount of competing products and competitors can you discover on the market?
– What is the range of cost of these items? Can your products or services fall into this range? Don’t forget to aspect 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 which will impact how your invention sells and objectively evaluate your list
– Demand – can there be a current need for your invention?
– Market – does a market exists for your invention, and in case so, exactly what is the size of the marketplace?
– Production Capabilities – might it be easy or hard to produce your invention?
– Production Costs – can you have 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, ease of use)?
– List Price – have you got a price point advantage or disadvantage?
– Life – will your invention last over 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 must definitely be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts in the field.
– Ask for objective feedback and advice.
– Talk to marketing professionals.
– Ask sales agents within the field.
– Ask people you know within the field.
– Talk to close relatives and buddies who you trust.
– Demand input on the invention such as features, benefits, price, and when they might buy it.
Through the diligence stage, existing manufactures come with an advantage in this they are able to talk with their customers (retail buyers, wholesalers, etc.). Inside my experience, one of the most key elements which a company will consider is whether their existing customers would purchase the product. If I took Inventhelp Successful Inventions to some company to go over licensing (assuming they can produce it on the right price point), you will find a very high likelihood which they would license the merchandise 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 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 new product whenever a retailer expresses interest within it.