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 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 definitely take their time to make sure that they are building a good business decision in continuing to move forward using the product (i.e.: have they done their homework on the product). Therefore, you can summarize “homework” as the 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 time, effort and money (i.e.: “risk”) that a company must spend to develop Inventions Ideas, the more they are going to evaluate the potential license. Stay in mind that even if a product is apparently basic and affordable, the whole process of developing and manufacturing is rarely easy and inexpensive. Companies will evaluate such criteria as customer feedback, retail price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they should perform Homework on their own invention. As discussed, this can depend on the option you have elected when planning on taking your product to advertise.
Option 1 – Manufacturing by yourself – If you are planning on manufacturing and marketing the invention by yourself, then yes you will need to perform due diligence. Essentially, you feel the manufacturer in the product and consequently you need to perform the homework on your invention just like other manufacturers would. The situation i have found is the fact many inventors who choose 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 before any company licensing your invention, they are going to perform their particular homework. In case you are using a company such as Invention Home, the expenses to market your invention to companies can be minimal – therefore it might cost more to completely carry out the research than it might to just market the Inventhelp Innovation to companies (which, is ultimately your very best type of due diligence anyway). Remember, you ought to have taken the time to do your basic consumer research and a patent search earlier in the process to be assured that your product or service may be worth pursuing to begin with (i.e.: the product will not be already on the market and there is a demand).
Let me summarize. If you are intending on investing a lot of funds on your invention, then it is best to analyze the chance first to ensure 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 perform their particular due diligence (not count on yours). Note: it is usually helpful to have marketing due diligence information available when you discuss your invention opportunity with prospective companies; however, it is not easy to obtain these details so you have to balance the effort and cost of gathering the data with all the real necessity of having it.
Furthermore, i offers you some homework tips.As discussed, the concept of marketing research would be to gather as much information as you can 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 is not always easy to come by.
If you are not in a position to pay for a specialist firm to accomplish your marketing evaluation, it really is possible to perform the research all on your own; however, you must know that research needs to be interpreted and employed for decision-making and on its own, it has no value. It really is what you do with the data that matters. Note: I would personally recommend that you just do NOT PURCHASE “market research” from an Invention Promotion company. Often sold being a “initial step” (they’ll usually approach you again with an expensive “marketing” package), the details are largely useless since it is not specific research on the invention. Rather, it really is off-the-shelf “canned” industry statistics, that can possibly not assist you in making an informed decision.
Before we reach the “tips”, let me clarify that “due diligence” can come under various names, but essentially each of them mean exactly the same thing. A few of the terms that I have experienced to explain the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Consumer Research
· Invention Assessment
Each of these terms is essentially talking about the study to gauge the chance of the 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 that will help you better be aware of the chance of success.
Again, if you are intending on manufacturing your invention all on your own, you should consider 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 homework are listed below.
1. Ask and answer some elementary questions
– Can be your invention original or has someone else already come up with the invention? Hopefully, you have already answered this inquiry within your basic research. Otherwise, check trade directories or perhaps the Internet.
– Can be your invention a solution to your problem? Otherwise, why do you reckon it can sell?
– Does your invention really solve the issue?
– Is your invention already on the market? If so, precisely what does your invention offer on the others?
– The amount of competing products and competitors can you locate on the market?
– Exactly what is the range of value of these items? Can your products or services fall into this range? Don’t forget to element in profit and possibly 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 how your invention sells and objectively evaluate your list
– Demand – will there be a current interest in your invention?
– Market – does a market exist for your invention, and in case so, what is the dimensions of the marketplace?
– Production Capabilities – might it be easy or hard 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, ease of use)?
– List 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 – will it be difficult or very easy to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are there special laws that must definitely be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts within the field.
– Demand objective feedback and advice.
– Talk to marketing professionals.
– Ask sales people inside the field.
– Ask people you know within the field.
– Speak with close family and friends who you trust.
– Request input on the invention such as features, benefits, price, and when they might purchase it.
Through the diligence stage, existing manufactures have an advantage in this they have the capacity to chat with their customers (retail buyers, wholesalers, etc.). In my experience, just about the most important factors that a company will consider is whether their existing customers would buy the product. Basically If I took Inventhelp Product Development to a company to go over licensing (assuming they could produce it on the right price point), there exists a high likelihood that they would license the merchandise if a person of the top customers agreed to sell it.
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 but they ultimately atgjlh to move on the idea because their customer (the retailer) failed to show any interest within the product. Conversely, I’ve seen companies with mild interest inside an idea who jump with a cool product each time a retailer expresses interest within it.