When inventors contact my company about Due Diligence I like to clarify the concept with a simple example. Think of it this way, if a manufacturer is getting ready to decide to develop, manufacture, and market a new item that could potentially cost $50,000 to $150,000 to produce plus inventory costs, they would most definitely take their time to ensure that they may be creating a good business decision in moving forward with all the product (i.e.: they have 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 prior to making 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 Product Idea, the more they are going to evaluate the potential license. Stay in mind that even if a product seems to be easy and low cost, the entire process of developing and manufacturing is rarely easy and affordable. Companies will evaluate such criteria as customer opinions, 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 own invention. As discussed, this may depend on the option you have elected when planning on taking your products or services to promote.
Option 1 – Manufacturing on your own – If you are planning on manufacturing and marketing the invention on your own, then yes you will need to perform due diligence. Essentially, you feel the maker from the product and for that reason you need to perform research on your invention just like other manufacturers would. The issue i have found is the fact many inventors who opt to manufacture their very own inventions do little, if any marketing due diligence, 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 just before any company licensing your invention, they will likely perform their very own homework. If you are employing a company like Invention Home, the expenses to promote your invention to companies can be minimal – therefore it may cost more to really perform the homework than it could to just market the Product Ideas to companies (which, is ultimately your very best form of due diligence anyway). Remember, you need to have taken enough time to do your basic market research along with a patent search earlier during this process to be confident that your products or services is worth pursuing in the first place (i.e.: the product is not really already on the market and there exists a demand).
Let me summarize. If you are planning on investing a lot of funds on your invention, then you should always analyze an opportunity 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 due diligence (not rely on yours). Note: it will always be useful to have marketing research information available as you discuss your invention opportunity with prospective companies; however, it is really not always easy to get these details so you need to balance the effort and cost of gathering the data with the real necessity of having it.
I also provides you with some research tips.As discussed, the thought of marketing research is to gain as much information as is possible to produce a well-informed decision on investing in any invention. In a perfect world, we would have all the relevant 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 cover a professional firm to do your marketing evaluation, it is actually possible to perform research on your own; however, you must know that research ought to be interpreted and used for decision-making and by itself, it has no value. It really is whatever you do with the information that matters. Note: I would personally recommend that you just do NOT PURCHASE “researching the market” from an Invention Promotion company. Often sold as a “initial step” (they’ll usually approach you again with an expensive “marketing” package), the information is largely useless as it is not specific research on your own invention. Rather, it really is off-the-shelf “canned” industry statistics, which will not always help you make an informed decision.
Before we arrive at the “tips”, let me clarify that “due diligence” can come under various names, but essentially all of them mean exactly the same thing. Some of the terms i have experienced to explain the diligence process are:
· Due Diligence
· Marketing Evaluation
· Commercial Potential
· Invention Salability
· Profitably Marketable
· Market Research
· Invention Assessment
Each one of these terms is actually referring to the research to evaluate the chance of the 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 understand the chance of success.
Again, if you are planning on manufacturing your invention by yourself, you should think about 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 research are highlighted below.
1. Ask and answer some elementary questions
– Is the invention original or has someone else already develop the invention? Hopefully, you may have already answered this query in your basic research. If not, check trade directories or perhaps the Internet.
– Is your invention a solution to your problem? Otherwise, why do you think it is going to sell?
– Does your invention really solve the problem?
– Can be your invention already on the market? If so, what does your invention offer over the others?
– The number of competing products and competitors can you find on the market?
– What exactly is the range of price of the products? Can your product 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 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 preexisting demand for your invention?
– Market – does a market exists for your invention, and when so, what is the dimensions of the current market?
– Production Capabilities – will it be easy or hard 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 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)?
– List Price – have you got a price point advantage or disadvantage?
– Life – will your invention last over 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 – will it be 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 within the field.
– Request objective feedback and advice.
– Speak with marketing professionals.
– Ask sales people within the field.
– Ask people you know in the field.
– Speak with close family and friends whom you trust.
– Request input on the invention such as features, benefits, price, and when they would purchase it.
Throughout the diligence stage, existing manufactures provide an advantage in this they have the capacity to speak with their customers (retail buyers, wholesalers, etc.). In my experience, one of the most key elements which a company will consider is if their existing customers would buy the product. Should I took Ideas For Inventions to some company to talk about licensing (assuming they might produce it at the right price point), you will find a high likelihood they would license the product if one 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 in which a company had interest within an invention but they ultimately atgjlh to move 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 with a cool product each time a retailer expresses interest in it.