When inventors contact my company about Due Diligence I like to describe the idea with a simple example. Consider it this way, if a manufacturer is getting ready to choose to develop, manufacture, and market a new product which could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would most certainly take their time to make sure that these are building a good business decision in continuing to move forward with all the product (i.e.: have they done their homework on the product). Therefore, you can sum up “due diligence” 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 cash (i.e.: “risk”) that a company must spend to develop How To Pitch An Idea To A Company, the more they will likely evaluate the potential license. Keep in mind that even if a product appears to be easy and low cost, the whole process of developing and manufacturing is rarely easy and affordable. 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 should perform Due Diligence on their own invention. As discussed, this will depend on the option you have elected for taking your products or services to market.
Option 1 – Manufacturing all on your own – If you are intending on manufacturing and marketing the invention all on your own, then yes you need to perform research. Essentially, you are the manufacturer in the product and as a result you should perform homework on your invention just like other manufacturers would. The problem i have found is the fact that many inventors who elect to manufacture their particular 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, then I believe you can minimize your homework efforts, because just before any company licensing your invention, they are going to perform their own due diligence. In case you are working with a company such as Invention Home, the expense to market your invention to companies can be minimal – therefore it may cost more to really perform the due diligence than it would to just market the How Do I Patent An Idea to companies (which, is ultimately the best type of due diligence anyway). Remember, you ought to have taken the time to do your basic researching the market and a patent search earlier during this process to be assured that your product may be worth pursuing in the first place (i.e.: the product is not really already on the market and you will find a demand).
Let me summarize. If you are planning on investing a substantial amount of funds on your invention, then it is best to analyze an opportunity first to make certain it’s worth pursuing; however, in the event you can actively advertise your invention to companies with minimal cost, you can be assured that an interested company will do their very own homework (not depend on yours). Note: it will always be beneficial to have marketing due diligence information available as you discuss your invention opportunity with prospective companies; however, it is not always easy to acquire this information so you should balance the time and effort and expense of gathering the information with all the real need for having it.
I also will provide you with some research tips.As discussed, the thought of marketing research is always to gather as much information as possible to produce a well-informed decision on purchasing 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 simple to come by.
If you are not in a position to cover an expert firm to do your marketing evaluation, it is actually possible to carry out the research all on your own; however, you must understand that research ought to be interpreted and employed for decision-making and alone, it has no value. It is what you use the data that matters. Note: I might recommend that you just do NOT PURCHASE “market research” from an Invention Promotion company. Often sold as being a “initial step” (they’ll usually approach you again with the expensive “marketing” package), the details are largely useless because it is not specific research on your invention. Rather, it is actually off-the-shelf “canned” industry statistics, which will not always help you make an educated decision.
Before we arrive at the “tips”, let me clarify that “due diligence” can come under various names, but essentially each of them mean the same. Some of the terms 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 essentially discussing the research to gauge the chance of your invention’s salability and profitability. The question of whether your invention will sell can not be known with certainty, but you can perform some steps to help you better comprehend the chance of success.
Again, if you are intending on manufacturing your invention on your own, you should look at performing marketing homework 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 highlighted below.
1. Ask and answer some elementary questions
– Is the invention original or has somebody else already develop the invention? Hopefully, you may have already answered this inquiry inside your basic research. Or even, check trade directories or the Internet.
– Is the invention a solution to a 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, exactly what does your invention offer over the others?
– How many competing products and competitors can you find on the market?
– What exactly is the range of value of these products? Can your products or services 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 as being a better product?
2. List the pros and cons that will impact how your invention sells and objectively evaluate your list
– Demand – will there be a preexisting interest in your invention?
– Market – does a market exists for your invention, and when so, what is the dimensions of the market?
– Production Capabilities – could 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 – might 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, simplicity of use)?
– List Price – do you have 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 very easy to enter your market?
– Regulations and Laws – does your invention require specific regulatory requirements or are there special laws that 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 to marketing professionals.
– Ask sales representatives within the field.
– Ask people you know inside the field.
– Speak with close relatives and buddies whom you trust.
– Request input on the invention like features, benefits, price, and if they would purchase it.
Throughout the diligence stage, existing manufactures come with an advantage in that they have the ability to talk with their clients (retail buyers, wholesalers, etc.). Inside my experience, one of the most important factors that a company will consider is whether or not their existing customers would purchase the product. Should I took Can I Patent An Idea to some company to talk about licensing (assuming they can produce it on the right price point), you will find a very high likelihood which they would license the product if an individual of the top customers consented to sell it off.
Whether a retail buyer has an interest in purchasing a product is a driving force for companies considering product licensing. I’ve seen many scenarios wherein a company had interest in an invention but they ultimately atgjlh to pass on the idea since their customer (the retailer) did not show any interest in the product. Conversely, I’ve seen companies with mild interest inside an idea who jump at a cool product when a retailer expresses interest in it.