When inventors contact my company about Due Diligence I like to explain the reasoning with a simple example. Consider 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 definitely take their time to ensure that these 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 sum up “research” as the process of gathering all the information necessary to make a good business decision before 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 Product Idea, the more they are going to evaluate the potential license. Keep in mind that even if a product is apparently basic and inexpensive, the process of developing and manufacturing is rarely simple and affordable. Companies will evaluate such criteria as customer opinions, retail price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they should perform Due Diligence on their invention. As discussed, this may depend on the option you may have elected for taking your product to advertise.
Option 1 – Manufacturing by yourself – If you are intending on manufacturing and marketing the invention by yourself, then yes you will need to perform homework. Essentially, you become the maker of the product and for that reason you should perform the due diligence on the invention just like other manufacturers would. The issue i have found is the fact that many inventors who elect to manufacture their own inventions do little, if any marketing homework, that is a big mistake.
Option 2 – Licensing for Royalties – if you are planning on licensing for royalties, i believe you can minimize your due diligence efforts, because just before any company licensing your invention, they will perform their own research. If you are employing a company like Invention Home, the expense to market your invention to companies can be minimal – therefore it might set you back more to actually perform the research than it might to just market the Free Invention Help to companies (which, is ultimately your best kind of due diligence anyway). Remember, you should have taken the time to perform your basic researching the market as well as a patent search earlier in the process to be confident that your products or services is worth pursuing to start with (i.e.: the product is not already on the market and there is a demand).
Let me summarize. If you are intending on investing a large amount of cash on your invention, then it is best to analyze the opportunity first to make certain it’s worth pursuing; however, if you can actively market your invention to companies with minimal cost, you can be confident that an interested company will do their very own due diligence (not depend on yours). Note: it is always beneficial to have marketing homework information available when you discuss your invention opportunity with prospective companies; however, it is far from always easy to get this info so you should balance the time and effort and expense of gathering the data with all the real need of having it.
In addition, i offers you some due diligence tips.As discussed, the thought of marketing homework would be to gather as much information as possible to produce a well-informed decision on investing in any invention. In a perfect world, we might have got all the relevant information about sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this information is not always simple to find.
If you are not in a position to pay a professional firm to do your marketing evaluation, it really is possible to perform research by yourself; however, you need to understand that research needs to be interpreted and used for decision-making and alone, it provides no value. It is whatever 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 as being a “first step” (they’ll usually approach you again with an expensive “marketing” package), the information is largely useless because it is not specific research on your invention. Rather, it really is off-the-shelf “canned” industry statistics, that will not necessarily assist you in making a knowledgeable decision.
Before we arrive at the “tips”, let me clarify that “due diligence” can come under various names, but essentially they all mean exactly the same thing. A few of the terms that I have seen to describe the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Researching The Market
· Invention Assessment
Each of these terms is actually discussing the research to assess 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 help you better be aware of the chance of success.
Again, if you are planning on manufacturing your invention on your own, you should look at 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.
A few recommendations for marketing research are the following.
1. Ask and answer some basic questions
– Can be your invention original or has another person already develop the invention? Hopefully, you might have already answered this question inside your basic research. Otherwise, check trade directories or even the Internet.
– Can be your invention a solution to your problem? Or even, why do you reckon it will sell?
– Does your invention really solve the problem?
– Is the invention already on the market? If so, precisely what does your invention offer over the others?
– How many competing products and competitors can you locate on the market?
– What exactly is the range of cost of these products? Can your products or services fall into this range? Don’t forget to aspect in profit and possibly 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 – will there be an existing interest in your invention?
– Market – does a market exist for your invention, and when so, what exactly is the scale of the market?
– Production Capabilities – could 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, convenience)?
– Retail Price – have you got 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 inside the field.
– Ask for objective feedback and advice.
– Speak with marketing professionals.
– Ask sales agents inside the field.
– Ask people you know within the field.
– Speak with close friends and family members whom you trust.
– Ask for input on the invention such as features, benefits, price, and in case they would purchase it.
Through the diligence stage, existing manufactures have an advantage because they have the capacity to chat with their potential customers (retail buyers, wholesalers, etc.). Inside my experience, one of the most crucial elements that a company will consider is if their existing customers would get the product. Should I took Patent Filing Services to your company to discuss licensing (assuming they might produce it in the right price point), there is a high likelihood which they would license the product if a person of the top customers decided to market it.
Whether a retail buyer has an interest in buying a item is a driving force for companies considering product licensing. I’ve seen many scenarios where a company had interest inside an invention however they ultimately atgjlh to pass through on the idea because their customer (the retailer) did not show any interest inside the product. Conversely, I’ve seen companies with mild interest in an idea who jump at a new product when a retailer expresses interest in it.