Baxter IP are patent attorneys (and good ones). What’s more, we can offer unique insights that you might not get from other patent attorneys, because we pride ourselves on being entrepreneurs too. We have hands-on experience in the commercialisation of our own ideas, and we take an active involvement in the commercial success of our clients.
This post will help you to understand the next steps you should be taking once your provisional patent application is filed, to start the process of transforming your idea into a viable business.
Right at the beginning, when your invention is just a concept in your head, it may represent a lot of potential value. But until you take steps to objectively research and evaluate your idea, that potential value is almost completely offset by risk.
From my experience, there are a huge number of questions you will need to answer in order to assess whether you can successfully market your invention. You can sort these questions into three separate ‘proof of concept’ categories, which collectively give you a solid picture of whether you might be able to make money out of your invention.
Technical proof of concept
The first proof of concept is technical. At this stage you need to answer questions around the technology on which your invention is based. These might include:
- Does the technology exist to carry out what I have in mind?
- Will the technology actually work?
- What will my product be made of?
- What manufacturing process will be used?
- What tooling is required for that manufacturing process?
- How do I make a prototype?
- Are there manufacturing facilities nearby, or do I need to look offshore?
It is usually quite simple to find the answers to questions of this type.
Business model proof of concept
The business model proof of concept requires you to answer questions around costs, sales and profits, such as:
- What will the mould tooling costs be?
- What are the raw material costs for each product?
- What will the manufactured cost be for each product?
- What are the shipping costs if it is made offshore?
- What is the mark-up by my distributors?
- What are the fixed costs?
- What are the variable costs?
- What are the marketing budgets?
- What are the salaries of the people I will need?
- Do I have to pay license fees to anybody else?
- What is the mark-up by the retailers?
- What profit will I make on each product (i.e. what is my own mark-up)?
- How many products do I need to sell per month/year to be able to pay back setup costs within a reasonable time span (and what is a reasonable time span)?
- Should I be manufacturing and selling these products myself, or should I license an established manufacturer to make and/or distribute them for me on a royalty basis – or both?
- Can I get business partners into a joint venture with me (with capacities and abilities that I don’t have, in order to complement my weaknesses)?
- What is the expected return on investment (ROI) within the first few years?
These are the type of questions investors are likely to be particularly interested in. Remember that investors, especially ‘angel’ investors, are always on the look out for exceptionally good investments that have a possibility of going really big, really quickly (to make up for those other risky investments that will not).
If you’re not very familiar with the business modelling process, a simple spreadsheet is a good place to start. This will allow you to make conservative initial estimates of things like material costs and mark-ups, which you can then adjust and refine as you gather more information.
By playing around with the variables you can quickly establish what sensitivities you have in your business model. For example, you could test what the impact would be if your material cost were to go up by a few percentage points: how much more product would you need to sell to make the same amount of profit?
Market proof of concept
You will also need to prove your market. To answer the unknowns around this you will need to take a very close look at whether there is a genuine demand for your product – or whether it is really just a solution looking for a problem.
The questions that you need to answer include:
- Is there a pain point that you will be solving (i.e. Is there a problem that is causing somebody a form of ‘pain’, which they would be willing to pay money to overcome)?
- How much money would they be prepared to pay to make that pain go away? (This will give you an idea of the cost range for your product.)
- How many people have this pain point (i.e. the size of your market)?
- How frequently do people have to deal with this pain point – is it daily/monthly/yearly?
- Which countries are the main target markets for your solution?
- What alternative solutions currently exist? (Even if these alternatives are not doing exactly what yours would do, they are still your competition.)
One fact that is confirmed over and again in entrepreneurial talks and discussions is that the only real way to check whether there is a market for your invention is to ASK people.
However, if you simply put your product in front of people and ask them if they like it, there’s a real risk that you won’t get honest responses. On the whole, people are unlikely to be confrontational or uncomplimentary about a product when asked directly – especially if they will never see you again.
However, by taking the opposite approach and asking the kind of questions set out above, you can explore whether there is a common problem among your target market – and therefore a compelling need for your product. This will not only help you (and potential financiers) decide whether your product is worth investing in, it will also give you a strong marketing angle to convince customers that your product is worth the money they will pay for it.
When you make changes to your product design or strategic plan based on the answers to one of these concepts, you can affect the outcome for the other two. So you may need to reiterate this process a few times, until you have established answers to each of the three proofs of concept that complement each other and satisfy all of the requirements of each.
In addition to these three proofs of concept, there are some other important factors to consider:
- The importance of obtaining strong intellectual property protection, and especially patent protection, for your idea (as this can strongly affect your business model).
- The effect of any other legal issues, such as your freedom to operate, or regulatory standards in your relevant industry.
As you answer more questions around these three proofs of concept, the potential value of your invention will start to crystallise into ‘real’ value – making a much more compelling case for why others should choose to join or invest in your venture.
If you have any questions, or if you’ve been sitting on an idea for a while, give us a call today and get expert advice on how to make it a reality.
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