When inventors contact my company about Due Diligence I like to describe the idea with a simple example. Think of 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 definitely take their time to ensure that they may be building a good business decision in advancing using the product (i.e.: have they done their homework on the product). Therefore, you can summarize “homework” as the entire 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 hours, effort and cash (i.e.: “risk”) that a company must spend to develop Invention Prototype, the more they will likely evaluate the potential license. Keep in mind that even if a product seems to be easy and inexpensive, the process of developing and manufacturing is rarely simple and affordable. 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 should perform Due Diligence on their invention. As discussed, this will depend on the option you might have elected to take your product to market.
Option 1 – Manufacturing by yourself – If you are intending on manufacturing and marketing the invention on your own, then yes you will need to perform homework. Essentially, you become the manufacturer in the product and consequently you need to carry out the due diligence on your invention just like other manufacturers would. The situation i have found is the fact many inventors who opt to manufacture their 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 then believe you can minimize your due diligence efforts, because before any company licensing your invention, they will likely perform their very own research. If you are using a company including Invention Home, the costs to promote your invention to companies can be minimal – therefore it could set you back more to completely perform the research than it might to just market the Inventhelp Invention Prototype to companies (which, is ultimately your best form of due diligence anyway). Remember, you need to have taken enough time to accomplish your basic consumer research along with a patent search earlier along the way to be confident that your product or service may be worth pursuing in the first place (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 funds on your invention, then you should always analyze the opportunity first to ensure it’s worth pursuing; however, if you can actively promote your invention to companies with minimal cost, you can be assured that an interested company will perform their particular homework (not depend on yours). Note: it is usually useful to have marketing research information available when you discuss your invention opportunity with prospective companies; however, it is far from always easy to obtain this information so you have to balance the time and effort and cost of gathering the information with the real need of having it.
Furthermore, i provides you with some due diligence tips.As discussed, the concept of marketing due diligence is to gather as much information as is possible to create a well-informed decision on making an investment in any invention. In a perfect world, we might have all the relevant information about sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this information may not be easy to find.
In case you are not in a position to cover a professional firm to do your marketing evaluation, it is possible to carry out the research by yourself; however, you need to understand that research should be interpreted and employed for decision-making and on its own, it has no value. It is whatever you do with the data that matters. Note: I might recommend that you just do NOT PURCHASE “market research” from an Invention Promotion company. Often sold as a “first step” (they’ll usually approach you again with the expensive “marketing” package), the details are largely useless because it is not specific research on the invention. Rather, it really is off-the-shelf “canned” industry statistics, which will possibly not assist you in making a knowledgeable decision.
Before we get to the “tips”, let me clarify that “research” can come under various names, but essentially each of them mean exactly the same thing. A few of the terms which i have witnessed to describe the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Researching The Market
· Invention Assessment
Each of these terms is essentially referring to the study to evaluate the likelihood of an invention’s salability and profitability. The question of whether your invention will sell can never be known with certainty, but you can perform some steps to help you better comprehend the likelihood of success.
Again, if you are planning on manufacturing your invention on your own, 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.
A few recommendations for marketing due diligence are highlighted below.
1. Ask and answer some basic questions
– Can be your invention original or has somebody else already develop the invention? Hopefully, you might have already answered this query within your basic research. Otherwise, check trade directories or the Internet.
– Is the invention a solution to your problem? Or even, why do you reckon it will sell?
– Does your invention really solve the problem?
– Can be your invention already on the market? In that case, exactly what does your invention offer within the others?
– The number of competing products and competitors can you locate on the market?
– What is the range of value of the products? Can your products or services fall into this range? Don’t forget to aspect in profit and maybe wholesale pricing and royalty fee, if any.
– Can you position your invention being a better product?
2. List the advantages and disadvantages which will impact the way your invention sells and objectively evaluate your list
– Demand – will there be an existing demand for your invention?
– Market – does a market exists for your invention, and when so, what exactly is the scale of the market?
– Production Capabilities – will it be easy or difficult 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 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 – have you got a price point advantage or disadvantage?
– Life – will your invention last more than other products?
– Performance – does your invention perform a lot better than other products (including better, faster output, less noise, better smell, taste, look or feel)?
– Market Barriers – could it be difficult or easy to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or exist 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.
– Request objective feedback and advice.
– Speak with marketing professionals.
– Ask sales representatives inside the field.
– Ask people you know inside the field.
– Talk to close friends and family members who you trust.
– Demand input on the invention like features, benefits, price, and in case they would purchase it.
Through the diligence stage, existing manufactures have an advantage in that they have the ability to speak with their customers (retail buyers, wholesalers, etc.). In my experience, one of the most important factors that the company will consider is if their existing customers would purchase the product. If I took Inventhelp Inventions Store to some company to talk about licensing (assuming they can produce it at the right price point), there is a very high likelihood which they would license the merchandise if an individual with their 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 where a company had interest in an invention however they ultimately atgjlh to pass through on the idea because their customer (the retailer) failed to show any interest within the product. Conversely, I’ve seen companies with mild interest within an idea who jump in a cool product whenever a retailer expresses interest inside it.