So– you’ve got a great idea, you think it can develop into a useful product and you feel like the market is ready for you to share. You’ve possibly even imagined a catchy name and packaging to go along with your new idea.
But are you really ready?
There’s more than meets the eye when it comes to inventing and, often times, people aren’t aware of the behind-the-scenes process that goes into creating a successful product. Inventors immerse themselves into the idea itself and fail to look outside the product itself.
1.How will I define my market?
You really need to answer to “so what?” of inventing. Will people care about your product and, to further that, why should they care?
Tap into niche markets and prove it’s the right market with data. Look at the demographics, market segment and needs of the niche market. Are they male? Are they female? What income bracket are they? What are their hobbies? Do they own or lease a car? Do they own their own home? Do they have kids?Use the data to create a story about the people you’ll be selling to. The small details can help you clearly define price points, promotions and where to advertise.
2. Am I considering all costs?
There’s quite a few hidden costs to turning and idea into an invention:
- Conceptual design fees- the initial costs of designing your invention
- First prototype- expenses to create the proof of your concept and to test ideas
- Patent fees- required to keep anyone else from taking your hard work
- Engineering- payment for engineering your product
- Sourcing- costs to locate a manufacturer. Do you need to travel to them? When you find them, how much are they asking as a retainer?
- Final Prototypes- once you’ve gotten the glaring kinks worked out, you need to order the “final” prototype
- Business license- the cost of being in business
- Tooling- a set-up fee to create things needed to being production like molds and dies
- Initial inventory- cost of having the product available for sale
- Sample shipping- cost of transporting product samples from your manufacturer to you
- Quality assurance- the cost to have your product reviewed for inconsistencies before shipping out
- Product testing- fees associated with having an outside source or agency to inspect and test your product
- Freight- expenses of shipping to retailers and to your customers
- Duty- taxes imposed on your shipment when shipped outside of the US
- Customs- fees imposed on your shipment coming into the US
- Warehousing- the cost of storing your product
- Fulfillment- packaging and shipping of your product
- Credit card processing- fees you take on for accepting credit cards
- Customer support- your customers direct line to you, you need this to maintain an ongoing relationship with your customers
- Product liability insurance- cost to cover yourself and your business in case someone is injured while using
One of the most universal roadblocks inventors run into when turning their ideas into a product is coming up with the funds at each stage of the invention process. If you lack foresight when investing and budgeting, you can run out of funds and can no long drive the development process forwards until more funding is found. In turn, this will reduce your bottom line.
3. Where will I manufacture my product?
There’s lots of options out there for choosing somewhere to manufacture your product. Places like China, India and Taiwan can be very alluring with their low costs of manufacturing thanks to low costs of labor. It’s easy to send your product to be manufactured overseas and reap higher profit margins. But, there’s many reasons to consider keeping your manufacturing in the United States.
U.S. facilities are very clean thanks to recent rules and regulations regarding pollution and proper waste disposal. There’s also less of a waiting period for your products to come in once production is complete. If you decide to work with an American factory, the product doesn’t have to clear customs or be shipped overseas– it’s already on land in the U.S. This makes supply chain management simpler, too. Dealing with customs brokers and understanding tariffs can lead to a loss of time and money.
4. Where will I find funds?
Traditional funding avenues can severely limit your ability to raise the necessary cash to help bring your idea to life. If your finances are good enough, maybe you can borrow from the bank but it can be frustrating to find a bank that will say yes.
There are other options. Websites like Kickstarter or IndieGoGo are available to try crowdfunding but there are some drawbacks to those avenues. A lot of preparation needs to go into a crowdfunding campaign in order for it to be set up for success and you don’t get to keep all the money. Using crowdfunding sources, you can expect to lose 8-12% of your funding from site fees.
Invention platforms or inventor services are another avenue you can pursue. You can make the right connections but sometimes there are restrictions that might not be best for your vision.
Some choose to work with angel investors but that presents another series of problems to overcome. Many angel investors have little training in evaluating business ideas so that doesn’t necessarily mean they’ll be able to translate their success to your business. They can also be difficult to find; many angel investors look for businesses that require little start-up money so those in need of more funding might need to look elsewhere.
Alotech offers another creative investment solution. As a full-service contract manufacturer, we can handle everything from start to finish. We look for people who have already made it to the manufacturing stage, purchase their current inventory while acting as a storage warehouse and sell to the inventor as needed. Once current inventory runs out, we look for more cost-effective solutions for manufacturing the product.
There’s many points to consider while inventing and you have to ask yourself the tough questions. It’s important to have a clear understand of what you’re trying to do before sinking a lot of time and money into a project that’s doomed from the start. The better prepared you are, the easier the process from idea to product will be.