IYou’ve just come up with a brainstorm, a million dollar idea!
Why hasn’t anyone thought of it before? It is so simple, but everyone will want to buy it! All you have to do is just get it out there and you’ll be a millionaire!
Ah, if it was only that simple.
Do you have a million dollar idea? Maybe. There is a long, tortuous path from taking a raw, promising idea and turning it into an invention, then doing prototyping, market testing, creating a practical product that is packaged and can be sold. Only a tiny fraction of new ideas result in product that cross the finish line as a successful product in our competitive market-driven world.
But, the first step is to critique your idea, assess whether or not it could have legs as a successful consumer product. How do you assess your product?
An excellent criteria for success can be found on the free website asktheinventors.com:
If your invention meets all or most of the following criteria, you probably have a winner!
- The chances of obtaining a good, strong patent are excellent.
- There is a huge market for it. Millions of people will want to buy this product.
- The benefit of your product is obvious; minimal advertising cost to educate the public about your product.
- It will be inexpensive to produce. The company to whom you license your invention would already, ideally, have everything they need already in place. It would not require a lot of tooling up expenses.
- The spread between the manufacturing cost and the selling price is great. The rule of thumb is that your product must be able to sell for at least four to five times the cost of manufacturing. For example, if it costs $1 to manufacture your invention, it should sell retail for, at least, $4-$5.
- The item gets used up. That will increase your market dramatically if it is something that is consumable, that has to be purchased again and again.
- The manufacturer already has the distribution channels in place. Their sales personnel already have shelf space allotted to their company and can easily add you product to their planogram (map of the shelf space in a store).
Patentability is widely misunderstood by the public. The average person tends to believe if they have not seen something for sale at retail or on websites and catalogs, then it is not patented and is theirs to pursue.
The reality is very different. There are over 8 million issued patents in the U.S. Many common consumer items may have 50 or even 100 patents that in some way describe their functionality. Since only about 5% of all patent holders profit from their inventions, most patented items never make it to store shelves. So, the ability to obtain a strong patent is important and a patent attorney or agent can help you assess this.
Developing a product that has a huge potential market is the ideal situation. There are successful niche market products, but the path to success is very challenging for a niche product. If your product has a huge market, you can have lucrative royalties by tapping even a small percentage of the total marketplace.
The benefits of your product should be obvious and require little or no explanation. Why is this so important? In our technology-driven, uber busy world, we as consumers are bombarded with messaging and information. Our attention spans are short. If a new product doesn’t hit us within 10 seconds, it is forgotten, we have moved on to something else. Retailers, therefore have little interest in items whose benefits are more nuanced, they just won’t sell well.
Your product should be inexpensive to produce and should not require special tooling. Most new products fail within 90 days. A new product that is more expensive to produce becomes even riskier to manufacture, distribute and market.
Your product should have a 4X to 5X mark up from manufacturing cost to retail price. This may sound high, but it is not. If your product costs $4 to manufacture and it sells at retail for $20, everyone in the wholesale and retail chain can profit. The retailer might pay you a wholesale price of $9: if your markup is only 3X, your profit is only about $2.50 – a very narrow profit margin. With a 5X mark up, your wholesale profit is an attractive $5.
Your product gets used up or consumed and must be repurchased frequently. Not every product fits this situation, but if yours does, your market becomes much larger and more lucrative. If you have a product that is used up in 3 months, it must be purchased 4 times per year. This is like having 4 times the market of a product that is purchased only annually.
The manufacturer already has solid distribution channels in place. If you manufacture and distribute your own product, you will have to work extremely hard to build, step-by-step your own distribution channel. It could take you 6 months or 1 year to just get into one major retailer. If your product were instead licensed to a large ASOTV distributor,for example, they already have connections with every large retailer. They can immediately distribute the product into all major retailers.