If you have not done so already, please see Inventor's First Steps/Developing a strategy.l
There are a number of steps involved in putting together a good business plan. It does take time and a lot of work to put a plan together. While a business plan is not a guarantee of success, it is one of the best mechanisms available to plan for changes, to address any need for additional finance and as a way of avoiding possible pitfalls.
In your business plan, you will need to consider your invention from the following points of view:
Follow you planned procedure with determination, but keep an eye out for changes in your market and competitors. Abort if your invention is superseded or becomes unprofitable.
The planning process also puts you in a better position to ask the right questions of advisers and other interested parties. The following is a quick checklist of how to approach your business planning and what should be included:
Implement strategies to monitor progress and achievements in relation to the plan, and; Always keep the planning process alive in response to product and market changes.
See also www.iptoolbox.com.au
To develop your invention into a business, the invention development process involves moving through the following phases.
Each phase requires careful consideration and there may be impacts on subsequent phases that will require revisiting some of the earlier phases. Further, there may be emergent conditions that require a re-think of the basic assumptions, direction and conclusions.
Cameron Gibbs supplied the following information from www.openii.com.au. Openii supplies Innovation Development Services. The information is supplied without guarantee or warranty of any kind and is only permitted to be reproduced by the Inventors Association of Australia (Federal) Inc.
For inventors to be successful they will have to develop an understanding of each of these phases. There is a lot to learn here and some areas are more involved than the average inventor would imagine. For example, many inventors consider themselves to have great concepts but without having gone through structured Research and Evaluation and Concept Refinement stages, their concepts are often lacking. They move out into the world trying to get attention and often they encounter a front of apathetic listeners. Concepts must not only be refined but also their concept communication needs to be structured for maximum effect. An inventor's concepts need to connect with real people in the real world and be useful.
Research and Evaluation involves assessing the invention for its feasibility but also for its commercial potential. There is a lot to this. Here I recommend getting help from your local Inventors Association. It is never a good idea to assess your own inventions or to get advice from friends, family or those with a vested interest in telling you that your idea is great. Some businesses will charge a lot of money to tell you that your idea is fantastic but not deliver any real benefit.
When getting an assessment you may be directed to consider things like "Why hasn't this been done before." There are many possible reasons to consider here and some of the answers to this question surprise many inventors. It is rarely because nobody has thought of it. Few inventions are completely novel. Most are adaptations, modifications or coincidental inventions. In other words, someone HAS thought of it before. This is one reason why I encourage inventors not to worry too much about novelty and securing Intellectual Property (IP) protection. Instead, think more about delivering a product or a service to a ready market. Having a market is more important than having a completely unique idea. Do not disregard novelty and IP protection but be mindful that the value of IP protection must be viewed in context. IP protection is a tool of business that is used to secure a commercial advantage. There are sometimes other ways to secure this advantage. This should be discussed as a part of the Business Planning stage.
Concept Refinement involves taking all of the feedback that has been given to you during the Research and Evaluation stages and using it to modify the invention. Modify the invention to improve features and function, to improve the ease of manufacture and to include features and functions that would be valued by an end user. Remove any feature or function that would not be valued. Here you may need to repeat the Research and Evaluation stage and again Refine until you get it right.
Business Planning is a whole area of study that is well covered by a number of government departments supporting small business so I will not go into detail here. I will only say that Intellectual Property (IP) protection is something that needs to be considered strategically as a part of a business plan. AGAIN, IP protection may not be necessary in some cases if there is a better way to achieve a commercial advantage. To learn more about business planning, in WA the Small Business Development Corporation can help. In other states there should be an equivalent small business centre offering free advice.
Project Finance may involve self-funding, borrowing, finding partners with money, finding partners to invest services and materials, venture capital, starting a company and selling shares etc. The types of finance required should be considered as a part of the business plan. Each form of capital raising requires a different business strategy but always you want to look at how the investment is going to be returned. Whenever you are looking at using someone else's money to develop your invention, there are rules that govern how you can raise that money and how you can use it. You may want to consult a professional to find out what these rules are. For some free advice, please consult the Australian Securities and Investments Commission. Please note that there are rules about asking for investors in an advert or by soliciting members of the public. There are legal dangers here that you must navigate.
Raising capital is often about creating a good pitch. In other words, you have to sell the business concept to an investor (as mentioned above, please keep in mind the laws governing how and when you can do this). A good investor pitch will cover all areas of a business plan, be aesthetic, entertaining and it will build confidence in the project and in the team that is assembled to develop it. There are specialists who can help you to create a good pitch.
Prototyping: Here you want to learn things that you could not otherwise have predicted during the design stages. Prototyping is not just about making one that instantly works. Expect to build at least 3 versions of your invention. Here you should learn about Research and Development (R&D) methods.
Manufacturing: Issues of machining, tooling, process manufacturing etc. all need to be considered. These issues actually need to be considered during the Prototyping stage. One stage leads into the other. Get advice from some qualified and enthusiastic Engineers.
Distribution is about the delivery of the product to the end buyer. You may wish to sell the product yourself, use a website, get your product into a mail-out catalogue or build a distribution network. Remember that all involved in the delivery of your product will want to make money out of doing so and it is only fair that they do. Things to consider here when building a distribution network are Recommended Retail Price, Wholesale Price and the Manufacturers Price. With each price, you will have to work into it the costs and a fair profit margin for each. Remember that your Recommended Retail Price has to be one that your customers are willing to pay. So you will have to keep the cost of manufacture and wholesale down to ensure that it all fits into what your customers will pay.
Sales involve considering issues at the point of sale. These issues may be worked out by the distribution method selected but there may be some surprises to come. As an example, people like to hold onto their money and so making a sale can involve a bit of psychology.
Something that a lot of inventors do not consider is after sales support. If your product has defects and needs to be returned, how will you manage repair or replacement? In Australia, you are required to offer this support. The Department of Consumer and Employment Protection can guide you on the laws required.
There is a lot more to write here but as I think you can see, inventing is a whole lot more involved than most inventors suspect. But the good news is that there is a structured path of learning here and it can be navigated successfully. I have seen many successes. In fact, they are all around us. Everything you bought has come to you because of people who have got this right.
For more information, please consult the committee members at your local Inventors Association.
Based on a talk given by Andrew ...... Centre for Innovation SA
You should put as much effort into marketing as you have to develop the product. Unfortunately, many, or most inventors don't follow this rule.
What is the market?
What is the product?
What is the price?
Most professionals would say that marketing is the same for all products, but you do have to change style and focus to suit different products.
(Presented with the assumption that our Members are at an early stage of developing their product.)
Regarding Intellectual Property, a lot of attention is paid to patents. Patents are usually extremely expensive and are only as good as the money you have to defend them (A personal sticking point of Andrew's). Generally, a patent is seen as a useful marketing tool when selling to investors. Know how (secret knowledge) in a product is very important, yet often under-rated. Most successful organisations Andrew has worked in have sold their products on know-how. Venture Capitalists ask, "Do you own the IP? What if somebody infringes on your patent?" Therefore, you, the inventor, have to be willing to take that risk. So, when developing your invention it is very important to keep it clean and simple as possible; and the ownership straightforward, to avoid messy situations. Google is his favourite tool by far, his "best friend" where he can find information about any product, for example, anything existing that is similar; and this can also lead into marketing.
It can be surprisingly simple to do a "desk assessment" to find out if it is commercially viable. Try to determine how many you can sell; Adelaide makes quite a good proxy world market. Start with the approximate Adelaide numbers, then multiply by 13 to get the Australian market, and multiply by 50 to get the estimated world market. Entrepreneurs ask for this kind of information. Assess the price compared to its value in the market.
Factor in the competition and what percentage of the market you think they will take. Know them inside out. Talk to the users. Identify the most sophisticated companies that are likely to use the product – they most likely will know all of the products on the market. Over a couple of hundred such interviews, Andrew has found they would all see him if they thought he had something of interest or was very good. By talking to the usersundefinedwho are often happy to talk about the product and bring up problemsundefinedyou will come to know what people want.
A business plan is essential; Andrew has seen business plans that make the 2 – 3% success rate actually happen. You need to be ready when the chances arise.
How much can one trust the confidentiality of government departments? Andrew is happy to sign confidentiality agreements; but usually adds a time limit, of two years. Howard Schulze mentioned that it was recently judged illegal not to have a time limit; it became "unlimited restriction of trade". The Centre for Innovation and potential investors get confidential information most days, and must be conscious of their own ethical standing.
Andrew has noticed that a lot of success stories are down to technique and applying brains to a topic. Two local uni chaps had an idea for a new way of looking at websites. That developed into an international company called www.maximine.com, which can manage your website in a management assessment type of role. Sometimes there's a flourishing product with interests held by a group of people who sometimes split up, resulting in a very uncomfortable situation, often bad enough to destroy the product. So it is best to start with a proper partnership agreement; that helps make the situation more manageable.
NETWORKING WORKS – people get to learn things and make new contacts. Try to get together with different people, who between them will cover the skills you don't have. Tony Rossiter's setup for "BackAssist Technologies" is a good example of such a structure. When an idea is obvious, its success depends on your implementation skills, such as getting it to market quickly. Howard Schulze gave 2 examples to show that it's surprising how often the important breakthroughs come from someone who is "outside the trade". One is a simple device for watering trees is the "Waterwell". Secondly, a radiographer who stepped out of his own area of expertise to invent the best energy-saving device in the last 100 years. It is very difficult for aficionados to think broadly. A major characteristic of entrepreneurs is a quality of "unreasonable persistence" – remember the 2% inspiration, 98% perspiration parable.
Andrew said, "It takes about 10 years to be an overnight success."