When inventors contact my company about Due Diligence I like to clarify the concept with a simple example. Consider 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 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 “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 additional time, effort and cash (i.e.: “risk”) that a company must spend to develop Inventhelp Vibe, the more they will evaluate the potential license. Stay in mind that even if a product seems to be basic and inexpensive, the entire process of developing and manufacturing is rarely simple and affordable. Companies will evaluate such criteria as customer feedback, list price points, unit cost to manufacture, competitive landscape, manufacturing feasibility, market opportunity, etc.
Inventors often wonder if they should perform Research on the invention. As discussed, this will depend on the option you have elected to take your product or service to market.
Option 1 – Manufacturing on your own – If you are intending on manufacturing and marketing the invention by yourself, then yes you need to perform due diligence. Essentially, you feel the producer of the product and for that reason you need to carry out the research on the invention just like other manufacturers would. The problem i have found is the fact that many inventors who opt to manufacture their own inventions do little, if any marketing homework, which is a big mistake.
Option 2 – Licensing for Royalties – if you are planning 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 own research. Should you be employing a company such as Invention Home, the expense to promote your invention to companies can be minimal – therefore it may set you back more to completely perform the research than it would to just market the How To File A Patent With Inventhelp to companies (which, is ultimately your best kind of research anyway). Remember, you need to have taken the time to do your basic consumer research and a patent search earlier during this process to be confident that your product may be worth pursuing in the first place (i.e.: the item 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 money on your invention, then it is recommended to analyze the chance first to ensure it’s worth pursuing; however, should you can actively promote your invention to companies with minimal cost, you can be assured that an interested company will work their own research (not rely on yours). Note: it is usually beneficial to have marketing due diligence information available while you discuss your invention opportunity with prospective companies; however, it is not easy to acquire these details so you need to balance the time and effort and expense of gathering the information with all the real need for having it.
I also provides you with some homework tips.As discussed, the concept of marketing research would be to gain as much information as possible to produce a well-informed decision on purchasing any invention. In a perfect world, we would have the appropriate information 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.
Should you be not in a position to pay an expert firm to do your marketing evaluation, it is actually possible to perform research on your own; however, you must understand that research should be interpreted and utilized for decision-making and by itself, it has no value. It is actually what you use the information that matters. Note: I would personally recommend that you DO NOT PURCHASE “researching the market” from an Invention Promotion company. Often sold as being a “first 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 off-the-shelf “canned” industry statistics, that will not necessarily help you make an educated decision.
Before we reach the “tips”, let me clarify that “due diligence” can come under various names, but essentially they all mean the same thing. Some of the terms that I have seen to explain the diligence process are:
· Due Diligence
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Consumer Research
· Invention Assessment
All these terms is actually talking about the study 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 that will help you better understand the likelihood of success.
Again, if you are planning on manufacturing your invention all on your own, you should look at performing marketing due diligence on the product. If you are planning on licensing your invention for royalties the company licensing your invention should perform this research.
Some suggestions for marketing due diligence are listed below.
1. Ask and answer some basic questions
– Is your invention original or has someone else already come up with the invention? Hopefully, you might have already answered this inquiry within your basic research. Or even, check trade directories or even the Internet.
– Can be your invention a solution to some problem? If not, why do you think it will sell?
– Does your invention really solve the situation?
– Can be 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 price of the products? 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 being a better product?
2. List the pros and cons that will impact how your invention sells and objectively evaluate your list
– Demand – is there a current demand for your invention?
– Market – does a market exists for your invention, and in case so, what exactly is the scale of the marketplace?
– Production Capabilities – will it be easy or challenging to produce your invention?
– Production Costs – can you obtain accurate manufacturing costs (both per unit and setup/tooling)?
– Distribution Capabilities – could 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, simplicity 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 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 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.
– Ask for objective feedback and advice.
– Talk to marketing professionals.
– Ask sales representatives in the field.
– Ask people you know in the field.
– Speak to close friends and family members whom you trust.
– Ask for input on the invention like features, benefits, price, and when they might buy it.
During the diligence stage, existing manufactures come with an advantage in that they have the capacity to talk with their clients (retail buyers, wholesalers, etc.). Inside my experience, one of the most crucial elements that a company will consider is if their existing customers would purchase the product. Should I took Inventhelp Prototype to a company to discuss licensing (assuming they might produce it on the right price point), there exists a high likelihood that they would license the product if one of their top customers consented to sell it.
Whether a retail buyer is interested in investing in a item is a driving force for companies considering product licensing. I’ve seen many scenarios wherein a company had interest within an invention but they ultimately atgjlh to move on the idea because their customer (the retailer) did not show any interest within the product. Conversely, I’ve seen companies with mild interest within an idea who jump in a new product whenever a retailer expresses interest inside it.