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 decide to develop, manufacture, and market a new product which could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would definitely take their time to ensure they may be building a good business decision in moving forward with all the product (i.e.: they have done their homework on the product). Therefore, you can summarize “research” as the entire 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 time, effort and money (i.e.: “risk”) that a company must spend to develop Product Licensing Inventhelp, the more they will evaluate the potential license. Keep in mind that even if a product appears to be easy and low cost, the entire process of developing and manufacturing is rarely easy and inexpensive. Companies will evaluate such criteria as customer feedback, retail price points, unit cost to produce, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they have to perform Homework on their invention. As discussed, this will depend on the option you might have elected when planning on taking your products or services to market.
Option 1 – Manufacturing by yourself – If you are planning on manufacturing and marketing the invention on your own, then yes you need to perform due diligence. Essentially, you feel the producer from the product and for that reason you need to carry out the research on the invention just like other manufacturers would. The issue which i have found is that many inventors who choose to manufacture their particular inventions do little, if any marketing homework, which is actually 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 before any company licensing your invention, they are going to perform their own research. If you are using a company such as Invention Home, the expenses to promote your invention to companies can be minimal – therefore it could set you back more to actually carry out the research than it might to just market the Inventhelp Patent Services to companies (which, is ultimately the best kind of research anyway). Remember, you need to have taken enough time to do your basic market research as well as a patent search earlier along the way to be confident that your products or services is worth pursuing in the first place (i.e.: the merchandise is not really already on the market and there is a demand).
Let me summarize. If you are planning on investing a substantial amount of cash on your invention, then it is recommended to analyze an opportunity first to make sure it’s worth pursuing; however, if you can actively market your invention to companies with minimal cost, you can be reassured that an interested company will perform their particular homework (not count on yours). Note: it is always useful to have marketing research information available as you discuss your invention opportunity with prospective companies; however, it is not easy to acquire this information so you should balance the effort and cost of gathering the data with all the real need for having it.
I also offers you some homework tips.As discussed, the concept of marketing due diligence would be to gain as much information as you can to make a well-informed decision on making an investment in any invention. In a perfect world, we may have the relevant information on sales projections, retail pricing, marketing costs, manufacturing setup and unit costs, competitive analysis, market demand, etc. However, this information is not always very easy to find.
Should you be not in a position to pay for an expert firm to perform your marketing evaluation, it is easy to perform the research on your own; however, you need to understand that research needs to be interpreted and used for decision-making and on its own, it provides no value. It is whatever you use the details that matters. Note: I might recommend that you DO NOT PURCHASE “market research” from an Invention Promotion company. Often sold as being a “initial step” (they’ll usually approach you again with an expensive “marketing” package), the details are largely useless as it is not specific research on the invention. Rather, it is actually off-the-shelf “canned” industry statistics, that can possibly not assist you in making an informed decision.
Before we arrive at the “tips”, let me clarify that “due diligence” can come under various names, but essentially each of them mean exactly the same thing. Some of the terms which i have experienced to explain the diligence process are:
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Market Research
· Invention Assessment
All these terms is essentially discussing the investigation to gauge the likelihood of an invention’s salability and profitability. The question of whether your invention will sell can not be known with certainty, however, you can perform some steps to assist you better comprehend the chance of success.
Again, if you are intending on manufacturing your invention on your own, you should think about performing marketing research on the 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 the following.
1. Ask and answer some elementary questions
– Is the invention original or has somebody else already come up with the invention? Hopefully, you may have already answered this question within your basic research. Otherwise, check trade directories or perhaps the Internet.
– Can be your invention a solution to a problem? Otherwise, why do you reckon it is going to sell?
– Does your invention really solve the problem?
– 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 find on the market?
– Exactly what is the range of cost of these products? Can your product 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 – is there an existing demand for your invention?
– Market – does a market exists for your invention, and if so, what is the size of the marketplace?
– Production Capabilities – might it be easy or challenging 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 hard to distribute or sell your invention?
– Advanced features – does your invention offer significant improvements over other similar products (speed, size, weight, simplicity 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 inside the field.
– Ask for objective feedback and advice.
– Speak with marketing professionals.
– Ask sales agents in the field.
– Ask people you know in the field.
– Talk to close relatives and buddies that you trust.
– Ask for input on the invention such as features, benefits, price, and when they could buy it.
Through the diligence stage, existing manufactures provide an advantage in this they are able to speak with their customers (retail buyers, wholesalers, etc.). In my experience, one of the most crucial elements which a company will consider is whether or not their existing customers would purchase the product. If I took How To Patent An Idea Or Product to your company to go over licensing (assuming they could produce it at the right price point), you will find a very high likelihood they would license the merchandise if a person with their 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 wherein a company had interest in an invention however they ultimately atgjlh to move on the idea since 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 at a cool product each time a retailer expresses interest within it.