When inventors contact my company about Due Diligence I like to clarify the concept with a simple example. Think of it this way, if a manufacturer is getting ready to choose 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 definitely take their time to ensure these are creating 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 “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 more time, effort and money (i.e.: “risk”) that a company must spend to develop What To Do With An Invention Idea, the more they are going to evaluate the potential license. Stay in mind that even if a product is apparently easy and affordable, the entire process of developing and manufacturing is rarely easy and inexpensive. Companies will evaluate such criteria as customer comments, list 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 will depend on the option you have elected to take your product to advertise.
Option 1 – Manufacturing by yourself – If you are intending on manufacturing and marketing the invention on your own, then yes you will have to perform due diligence. Essentially, you are the maker from the product and as a result you ought to carry out the due diligence on your invention just like other manufacturers would. The issue i have found is the fact that many inventors who opt to manufacture their very own inventions do little, if any marketing due diligence, that is a big mistake.
Option 2 – Licensing for Royalties – if you are intending on licensing for royalties, then I believe you can minimize your research efforts, because prior to any company licensing your invention, they will perform their very own research. In case you are working with a company like Invention Home, the costs to advertise your invention to companies can be minimal – therefore it might set you back more to actually perform homework than it could to just market the Inventors Help to companies (which, is ultimately your very best kind of research anyway). Remember, you should have taken the time to accomplish your basic consumer research and a patent search earlier in the process to be confident that your products or services is worth pursuing to begin with (i.e.: the merchandise will not be already on the market and there is a demand).
Let me summarize. If you are intending on investing a substantial amount of funds on your invention, then you should always analyze the opportunity first to make certain it’s worth pursuing; however, should you can actively market your invention to companies with minimal cost, you can be reassured that an interested company will perform their very own homework (not rely on yours). Note: it is usually useful to have marketing research information available while you discuss your invention opportunity with prospective companies; however, it is far from easy to acquire these details so you need to balance the time and effort and expense of gathering the information using the real necessity of having it.
In addition, i will provide you with some due diligence tips.As discussed, the thought of marketing due diligence is always to gain as much information as possible to produce a well-informed decision on purchasing any invention. In a perfect world, we may have got all the relevant information on sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, these details may not be simple to come by.
If you are not in a position to cover an expert firm to do your marketing evaluation, it really is possible to carry out the research all on your own; however, you must understand that research needs to be interpreted and employed for decision-making and on its own, it offers no value. It really is everything you use the details that matters. Note: I would personally recommend that you DO NOT PURCHASE “consumer research” from an Invention Promotion company. Often sold as being a “starting point” (they’ll usually approach you again with the expensive “marketing” package), the details are largely useless as it is not specific research on your invention. Rather, it is actually 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 “due diligence” can come under various names, but essentially each of them mean the same thing. A number of the terms i have experienced to explain the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Consumer Research
· Invention Assessment
Each one of these terms is basically discussing the research to evaluate the likelihood of your invention’s salability and profitability. The question of whether your invention will sell can never be known with certainty, however, you can perform some steps to help you better be aware of the probability of success.
Again, if you are intending on manufacturing your invention by yourself, you should think about performing marketing due diligence on your own product. If you are intending on licensing your invention for royalties the company licensing your invention should perform this research.
Some suggestions for marketing research are listed below.
1. Ask and answer some basic questions
– Is the invention original or has someone else already develop the invention? Hopefully, you have already answered this query in your basic research. Or even, check trade directories or perhaps the Internet.
– Is the invention a solution to a problem? Or even, why do you reckon it can sell?
– Does your invention really solve the issue?
– Can be your invention already on the market? If so, precisely what does your invention offer on the others?
– How many competing products and competitors can you locate on the market?
– What is the range of price of these items? Can your product or service fall into this range? Don’t forget to factor 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 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 are available for your invention, and in case so, exactly what is the scale of the marketplace?
– Production Capabilities – will 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 – will 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 simple to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are there special laws that really must be followed (i.e.: FDA approval)
3. Seek advice or input from others (consider confidentiality)
– Target professionals / experts within the field.
– Request objective feedback and advice.
– Speak with marketing professionals.
– Ask sales representatives in the field.
– Ask people you know inside the field.
– Speak with close family and friends whom you trust.
– Demand input on the invention such as features, benefits, price, and when they could purchase it.
Through the diligence stage, existing manufactures provide an advantage in this they are able to talk with their clients (retail buyers, wholesalers, etc.). Inside my experience, probably the most crucial elements that the company will consider is whether or not their existing customers would buy the product. Basically If I took Inventhelp Invention Idea to a company to talk about licensing (assuming they could produce it at the right price point), you will find a extremely high likelihood which they would license the product if an individual of the top customers consented to sell it.
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 wherein a company had interest inside an invention however they ultimately atgjlh to pass through on the idea as their customer (the retailer) did not show any interest within the product. Conversely, I’ve seen companies with mild interest inside an idea who jump in a new product when a retailer expresses interest in it.