My Next New Job - Invention
So I have this idea....
If "necessity is the mother of invention," and you are out of work...does that not suggest you may have a way out of being unemployed - if you could just invent something? Well, maybe, but generally it just isn't that simple. We are going to explore the process - from fuzzy thought to market of a new invention. Is it fun - yes! Can it be rewarding? Yes! Can you fail? Yes!!! Does it cost a lot of money? Maybe. Can anyone do it? Almost. So let's get started, and think through the process.
Every day I hear advertisements on radio and television asking "have you got an invention or an idea for an invention?" I imagine you too have heard these ads, and maybe even contacted the company to see what you need to do next. I just hope you didn't send money or your invention for "evaluation by their team of professionals." So how do you go about making a new invention come to life? Standard business practices apply - and must be considered - or the risk is way to high to proceed. But don't let these practices keep you from reaching your dream - just be patient and diligent and you can make it happen.
First, let's consider the question not asked, do I need a patent to sell a new invention. This answer may well surprise you - no! You do not need a patent to sell a product. Now this comes with some caveats - you can't copy a presently being sold patented product exactly and sell these against the other manufacturer. Key word here is "exactly." In fact, companies sell similar products every day until the company that has the patent defends their patent requesting the new competitor to "cease and desist." Even after getting the letter saying to cease and desist, a company may go on filling orders and shipping product - but now under the threat of being sued in court and losing any income derived from those sales - IF the patent holder chooses to take them to court.
According to some sources, the cost of defending a patent last year was in excess of $1.2 million. So you have a great new invention - you are deciding to patent or not. This must weigh heavily into your decision to spend limited resources on a patent that you will spend an average $1.2 million defending - every time you defend it. If your next new invention is going to be worth $10 billion, doesn't that $1.2 million look small? What if the best you can imagine your profits being from your new invention are $300,000. Why do a patent? These are more extreme examples but important to illustrate why we need to evaluate the value of our new invention.
So we have some hypothetical concepts to work through. I'll try to be coherent in putting down these processes, as with my inventions I didn't have a guide and it would surely have been nice to have one. For the sake of discussion, we are going to invent a new widget. We are going to call it a crado. The reason is I don't find crado anywhere and my spell check says it is misspelled. So I feel pretty good that I am not stepping on some inventors product. Let's get on with the process of making some money on our new crado!
I'm sitting at my breakfast room table and have this thought. It is a design for a new widget - "The Crado." Now I am going to do some research before I go getting excited about making my crados and getting rich. My crado is a physical product - not software (we'll save that for the next discussion) and not a process or recipe.
I decide to research my crado for other products similar to it. Of course I go to the internet and start with standard searches for other products that do exactly what my new product does. Keep in mind, as you do this, what you are expecting your crado to do may be used in a different industry or craft to do something else. For example, I invented a product that set off an alarm when a worker using a fall protection harness fell - letting people know around him - and in the home office (via a text message). While researching the product, I found out there were alarms for people falling out of wheel chairs and hospital beds already in use. Similar use - and interestingly enough, their patents didn't cover other falls - allowing me to pursue ownership. But obviously for an industrial (and deer hunting) application, it wasn't previously considered an alarm for a person falling from a wheel chair would conflict with my idea.
Our crado isn't a modification of a currently used product - it is a new product altogether. No one makes something like it. There are no other crados available that I can find. Is that extensive enough? Maybe, but probably not. How do I hire someone that can do a better job in searching? There are people who, for a reasonable fee, will do a complete patent search and certify that according to their search these products are as close as they came to identifying current patents that may conflict with your design. Companies like Simply Patents, www.simplypatents.com, work hard to find any competing patent doing a patent search. Their report back to you provides the other similar patents and why it was similar. There are other companies, and Simply Patents is just a great example.
Now that we have done our patent search and found that there were no products that come close to our crado currently under patent protection (remember, patents have a lifespan and after that can be used by the public). So we are free to move forward with a patent - if we want to. But do we want to?
One statistic most people don't realize is 98% of patents never get to the market. Think about that for a minute. 98% of the products that people spend life savings creating or developing, never make it to the market. Why? In many cases because all their money was spent going into a patent - that did nothing for bringing the product to the market. Or, as is often the case, they didn't do any kind of market research to see if someone would need their new fangled widget. If there isn't a market - creating one is very expensive.
Let's do our market research. What is involved? Where are we going to sell our new Crado? We see it as something a lot of people could use it for in their garden. We go to gardening websites and start getting ideas as to how we could reach out to the other people that go to gardening websites to see what interest they would have in making something like our crado. Commenting on articles, writing articles that include the idea of a crado without disclosing one exists, just for responses . The interest seems genuine from the forums and our anecdotal exploration we are doing. But is it good enough to make a business decision on? No, not really. We need solid information.
One thing the US government is very good at is statistical information. Within may states there are organizations that support small business - likely the Small Business Administration or a subsidiary of theirs - who will work to help you with your research. And again, they may see something you aren't seeing as to an application of our crado in other areas.
A gentleman came into my office only last week with an invention he felt would be good for hunting, deer hunting in particular. It was certainly something I immediately saw the value of from his description. He had also had some samples developed, even a prototype form. I work in a number of industries so when I saw it i said, what about use by podiatrists for their patients? He was astounded when I offered a name of a couple forward seeing podiatrists that I thought would help him with that concept. Deer hunting products for use by diabetics with foot problems...you see it may pay to let others see your product. This led to discussions of use by the military and two or three others industries that may have as large a payoff. His market went from a potential of 3-400,000 deer hunters in the northern states to millions of people worldwide. This is very, very important.
So now we are able to understand why we are going to do this market exploration. The broader the market, the better chance of success. Think of a pyramid. If you look at the top third of the pyramid represents a small amount of the general market. As you come down the pyramid it gets wider and wider. In other words, the market gets larger and larger. The closer to the bottom of the pyramid that your product can exist, the more market opportunity your product has and the greater chance of success.
Let's be more specific. If we have a blue spoon with a special curve in it that only allows it to fit into holes in trees growing on the North slope of a mountain in Idaho every third year. That would be a product near the very top of the pyramid. If we have an absorbent paper product that is extremely inexpensive, highly available and easily distributed - at the bottom of the pyramid. Now figure out where your product is. Consider availability of resources, distribution capability, cost to manufacture, distribution costs, government limitations and taxes, and of course, just how bad will the public "want or need" your invention?
In each of the previous hubs we have mentioned the ubiquitous business plan. Believe me, it is even more important here. You may be saying, sure, but no one makes my crado or anything like it so how am I going to build a business plan with no possible market information? Don't kid yourself. Even though your crado is unique in many ways, I am positive if there is a market for it, that market is being served by something - although maybe not as effectively - now. It may actually take two or more other items to serve that market today (think about your cell phone today compared to the first bag phones of yesteryear). Sure we could make phone calls - but now we are entertained, make videos and still photos, have a GPS, calculator, calendar, and 25,000 other available aps to download for free or close to it. How does your crado compare in potential versatility? My fall alert product started out with a flashing LED light and a loud siren. I didn't think of the text and GPS capability until much later in the process. Don't shortchange your invention design and therefore your market.
How are you going to protect yourself in the market from having someone else take your great new idea and making it cheaper and steal it away from you? There is the patent, copyright, trademark and probably the best solution, first to market.
If we do a patent search, and I suggest you spend the $400 to do so with a professional company like Simply Patents to do so, and we find there really isn't anything out there close to the product we have on paper - put a check in the box for maybe a patent. If we find 1 or more products that are very similar but may have applications not intended in the same notion as our new crado, still put that mark in the maybe column. IF there are 3 or more products that basically are the same as our crado and in the same world, put a mark in the no freaking need to spend the money on a patent column and we'll look at some other options.
If we are one or two in the above, then we look into the market. If this is a new product that everyone can use, that is priced in a range that everyone can afford, that positively changes something for the better and cost to manufacture is low, it may have a large opportunity. So we need to ask more questions.
Can we buy this made for us cheaper than getting geared up to make it ourselves? Can we manufacture it in the U.S. as cheaply as in any other country in the world? Keep in mind when this last question is asked, control over the process, quality, minimum order required, shipping expenses, distribution costs,
Did you know that reptile drink from Florida isn't patented? That salty yellow, orange, blue, and red drink formula isn't a matter of a patent at all. Nope, it is however, trademarked. That trademark is more powerful and easier to defend - and in its first year and every year since - worth millions of dollars. So the evaluation of your new invention or product may be better served with a solid trademark. Copyright - not really worth a lot.
We have to decide if we are going to build or buy. Build means either we buy in semi-constructed pieces and assemble a final product, or we manufacture (or mine) from the very start and assemble a finished, marketable product. We break down every item of cost so we can tell if we can save something in the process having someone else make it for us. Usually that is the case if we aren't schooled in manufacturing something or don't have the machinery. Assembly may be our best position after we make that analysis. Or do we buy the whole thing and let them make it for us in China?
There is a defunct business here in my home town that once thrived making children's clothing - primarily baby clothes through 2 years olds. At one point, the owners finally decided they would need to go to China like everyone else because that was the only way they were going to be able to compete. But what they found out is the same thing many companies are finding out, you lose a lot going to China. You lose control of the manufacturing process, quality can suffer, knowledge transfer occurs so you lose any protection you thought you had. and now the cost of metal is a world-wide price, and skilled craftsmen in China are getting paid more than before - which means they are losing their labor charge advantage as well. With minimum shipments of half or whole container loads - a small business may not be able to afford to come from China. It is actually cheaper to make the products in the home country and have distribution locally.
We decide we are going to make our crado from commercially available parts currently in the market. We calculate all the parts costs, the costs of the assembly labor per unit, time to completion, storage costs of incoming inventory and outgoing inventory, the rent, utilities, all of our labor charges, unemployment insurance, transfer costs, banking fees, all the costs we can compile as well as legal and licenses and tax stamps. We know how many we can make in an hour, a week a month, a year. Now how much do they cost per each to make at one shift, two shifts and working 24/7.
We now can decide how much they will cost in the market. Looking at other crado types of products in the market, we find they have as much as a 100% gross profit built in. That is if a product costs the retailer $1, they will be selling it for $2. Our crado, if that is applied, will still be a decent purchase price in the market. Some other products may be expected to have 2 times that amount of value due to losses in inventory (food products that age for example). or clothing. Other products may only be able to garner 15-20% gross profits but may turn twice a week. You must do the investigation to find out where the product you are selling will fit.
The point of all of this? You just did a business plan start to finish - and you did it on paper. The paper cost you less than a dime. The ink, even less. The information you garnered - invaluable. If it allows you to move forward into selling these products - and you can do so with a plan and make money, fantastic. If it makes you rethink your plan because with the information you learned it doesn't make business sense, how valuable was that?
We'll explore how to market that new crado in our next hub. Until then, keep thinking about that next opportunity.