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THE ONLINE INVENTOR -- May 2001
(c) 2001 Market Launchers, Inc.
http://www.marketlaunchers.com
Publisher: Paul Niemann
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FAMOUS / INFAMOUS QUOTES …
"Inventing is 1% inspiration and 99% perspiration," -- Thomas Edison
"Not knowing how to do something has never stopped me from setting out to do it," -- Marketing Consultant Dan Kennedy
"Oh, I see they've got the Internet on computers now," -- Homer Simpson
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In this issue:
Article # 1: "Manufacturing your Idea," by Mike Marks of InventionCity.com
Article # 2: "FIRST IMPRESSIONS: What Your E-mail Address Says About You," by Paul Niemann of MarketLaunchers.com
Article # 3: "Two Methods of Increasing Your Chances of Licensing Your Invention," by Paul Niemann of MarketLaunchers.com
BONUS ARTICLE: What our Clients are Saying about the Benefits of Having Their Own Invention Web Page, by Paul Niemann of MarketLaunchers.com
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Article # 1: "Manufacturing your Idea," by Mike Marks of InventionCity.com
PUBLISHER'S NOTE: The following article is by Mike Marks, President of one of my favorite inventor web sites: InventionCity.com (http://www.InventionCity.com). It contains some excellent information for inventors.
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The difference between an idea and a product is manufacturing. A great idea makes no money until it is produced and sold in multiple units. Understanding the options of how your idea can be manufactured can put additional money in your pocket. The knowledge can make it easier to license your idea. It can enable you to get a higher royalty. It is invaluable for finding investors. As your idea is engineered for manufacturing, you may find new ways to patent and protect it. Finally, knowing the manufacturing process for your invention can help you increase your idea's chances for market success.
OUTSOURCING:
Manufacturing doesn't need to mean setting up your own factory. You can do what Fortune 500 companies have been doing for years: outsource. A simple product such as a paper clip might have a single source. Most products, however, use multiple sources. When a product uses multiple sources, one of those sources may even agree to put all of the pieces together for you and possibly even warehouse inventory. The brand name selling a product may have little to do with who's making it.
Manufacturing sources tend to specialize. Our PowerShot(R) staple gun uses zinc die cast parts, plastic injection molded parts and stamped steel parts. Zinc, plastic and steel represent three different technologies and three or more different manufacturers. Specialization can go quite deep. The steel parts might come from various fabricators that specialize in using different machines that form steel in different ways; finish coatings on those parts can come from still other sources. Doing your homework to find out how much it would cost to make a product requires communicating with each source.
DESIGN ASSISTANCE:
In order to communicate effectively with manufacturing sources you will need a set of manufacturing drawings and/or a well made prototype. Unless you are an engineer or an industrial designer, you will want to hire someone to help you. Two great resources are:
Thomas Register: Found at most libraries and on-line at http://www.ThomasRegister.com, the Thomas Register lists firms specializing in engineering, prototyping, industrial design and manufacturing.
IDSA, Industrial Designers Society of America: Most industrial design firms are members of IDSA. The on-line database at http://www.IDSA.org is a good way to find a design firm in your local area.
Before disclosing your idea to engineers, industrial designers and contract manufacturers, it is good business practice to ask them to sign a non-disclosure agreement. Part of that agreement should specify that any idea they have while working on your idea becomes your property. They should also agree to help you in filing patents that might emerge from the work they are doing on your behalf. (Please note that while engineers and industrial designers commonly sign strong non-disclosure agreements with provisions of this sort, large corporations that might license your product generally do not. Corporations will typically ask you to sign their own disclosure agreements. Corporate disclosure agreements commonly say that the corporation agrees only to respect your issued patents.)
DESIGN INPUT FROM SOURCES:
It is helpful to visit manufacturers before a design is complete to try and learn alternative, lower cost, higher quality ways to make your product. This must be done with the utmost respect. Manufacturers tend to be very linear in their thinking. Ask them to make a widget that looks like a widget and they'll give you a clear answer based on precisely what you are showing them. They will not tell you that if your widget looked like a wodget it could be made for 1/2 the price (you might be equally happy with a wodget). They will probably not tell you about the new manufacturing process a competitor is using that could make your widget for less money. This is not because they are bad people; they are simply very focused and work on tight margins.
Manufacturing sources tend to have little time for conjecture. However, if you are well prepared with a good prototype, you may be able to get some manufacturers to answer questions that begin with the words, "what if...?"
As you learn more about the best way to make your product you may discover additional things that can be patented. Protecting the way a product is manufactured and assembled, perhaps a notch in a wall that holds a plastic plate, may be the only patent protection you can get. It may give you long term protection on the lowest cost way of making your product. It could give your product the advantage of higher quality.
EXPLORE DIFFERENT METHODS FOR MAKING YOUR PRODUCT:
Different manufacturing processes may meet the same goal but have very different effects on a budget. For example, you believe that the market for your new widget is 50,000 pieces a year. Someone tells you that the way to go is to make it in ABS plastic in an injection mold. Now, if you invest in a 4-cavity high production steel mold it could cost you $50,000 and the parts would cost $0.25/unit. A simple one-cavity aluminum mold might cost only $10,000 but the parts would cost $0.40/unit. For the first five years, the total cost for mold and parts for each option in this example is as follows:
Steel Mold ($50,000) + Parts (50,000 X $0.25 X 5 years) = $112,500
Aluminum Mold ($10,000) + Parts (50,000 X $0.40 X 5 years) = $110,000
Direct Savings from Aluminum Mold = $ 2,500
The savings from using the aluminum mold is, in fact, greater than $2,500. With the aluminum mold you
have the benefit of earning interest (or other investment income) on the $40,000 you didn't spend in advance! Even though the unit cost is lower with the steel mold, you save money by using an aluminum mold. Beyond that, the odds are good that soon after production begins you'll have an idea for an improvement or two and want to change the design. Scrapping or modifying the aluminum mold is far less expensive than scrapping or modifying the steel one.
Remember, however, that our assumption was 50,000 widgets per year. If we assume 500,000 widgets per year, the math changes:
Steel Mold ($50,000) + Parts (500,000 X $0.25 X 5 years) = $ 675,000
Aluminum Mold ($10,000) + Parts (500,000 X $0.40 X 5 years) = $1,010,000
Additional Expense from Aluminum Mold = (- $335,000)
In this case, using an aluminum mold for full-scale production would be an expensive mistake.
On the other hand, it may be that the market for your widget is less than 1,000 pieces per year -- maybe it's used in a medical application. In this case you might want to explore casting technologies and possibly even consider using a different material such as aluminum.
FORECAST THE QUANTITIES YOU MIGHT NEED, AND WHEN:
In seeking sources for manufacturing, it is important to know what quantities you're expecting to sell in the beginning stages and what volumes you anticipate selling if the product is a huge success. In addition to learning the costs you should be sensitive to lead times. A small one-cavity injection mold might take 10 weeks. In addition to the lead times for getting the first sample parts, you should consider that, invariably, something goes wrong. The 10 weeks for one injection mold will almost certainly become 16 to 20 weeks. If you have multiple parts that must fit and work together, the problems are compounded and the lead times get longer. As a basic rule, relatively simple products with multiple parts like a PowerShot(R) staple gun, take about one year to get into production from the date when the design has been finalized.
SOURCES OVERSEAS:
I love the USA and aspire to make all of our products here. However, one of the greatest assets to the world of inventing and product development is the country of Taiwan. In the past, Taiwan earned a bad reputation for copying patented products. (Even today, as I write, two of WorkTools' products are being knocked off illegally in Taiwan - we're working with the legal system to stop them). There is no country in the world with such a large population of eager and entrepreneurial small businessmen. A good Chinese partner is hard working, loyal and trustworthy beyond the imagination of most western business people. WorkTools has benefited from such a relationship: at one point our Taiwan partner lent us $300,000 on trust; we had nothing in writing until many months after the money had been spent! Companies in Taiwan are comfortable working from prototypes and can put together all of the sources for getting a product made. The costs for engineering, tooling and labor are lower in Taiwan. If a Taiwan manufacturer believes in your product, he will often volunteer to become your partner and may invest his own money in the necessary manufacturing tooling.
In Asia, relationships are said to be everything. If you have a friend who has a friend who knows a manufacturer in Taiwan that is trustworthy, you may wish to use those relationships to make inquiries. But relationships are not the only thing. WorkTools met its Taiwanese partner by sending out 30 blind letters to a list of manufacturers obtained through the equivalent of a Taiwan Ministry of Trade, an agency officially called the Coordination Council for North American Affairs. A better way to find a manufacturer in Taiwan is now available on-line. Go to
http://www.AsianSources.com. As in the USA, it is a good idea to have a signed non-disclosure agreement before sharing your ideas.
Today in Eastern Europe, in countries like Slovenia and the Czech Republic, companies similar in spirit to those in Taiwan are emerging. China, too, is becoming more and more accessible (however, the best way to access China at the moment is probably still through a company based in Taiwan or Hong Kong). In the years ahead, India seems poised to become an excellent source country. Surprisingly,
Mexico has yet to become a great source for new companies making new products.
BENEFITS TO MADE IN USA:
There are minuses to having a product made far from home. The lead times for everything are longer. Additional costs for freight and duty are incurred. Made in USA products tend to command a premium at retail, both in the US and internationally. Communication can sometimes be difficult (not just because of language and culture but also because of time zones). And consistent quality control is harder to maintain.
CONTROLLING QUALITY WITH GOOD DESIGN SAVES MONEY:
Maintaining quality is a large factor in the long-term success of a product. No matter how good the idea, if the product quality does not meet a customer's needs or expectations, the product will die. Quality begins with design. A good manufacturing design allows for some errors and reduces the likelihood of other errors occurring in the first place. Parts that can tolerate errors also cost less than parts that need to be perfect. For example, automated manufacturing machines such as plastic injection molds and metal stamping dies will produce parts of varying thickness with varying surface properties depending on how fast the machines are run. Running the machines faster means that the parts cost less. Unfortunately, running the machines faster also means that the parts will have more variation: they will tend to be thicker or thinner or sharper or less flat than ideal. If your design can tolerate variation from what is considered ideal, more money will be available for your pocket!
Likewise, if your product is easy to assemble, the opportunity for error is reduced and labor costs are lower. In the same way, if it is easy to inspect your product for quality problems, costs are lower.
PROFITS BEGIN WITH YOU:
It is tempting to think that by licensing your product, all of the manufacturing issues become someone else's problem. Unfortunately, this is not true. The selling price for your product is ultimately determined by the market, and not by how much it costs to make. If your product costs less to make than competitive or alternative products, then more money is available for your royalty, whether through a higher royalty rate or increased sales (through lower prices and/or a bigger budget for marketing).
Finally, knowing how your product can be made helps to give you control over your own destiny. You add value to the product you bring to a licensing negotiation and possess the knowledge that, if negotiations fail, you can move the project forward yourself.
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Mike Marks is President of Invention City and has been active in the field of product development since 1987. In conjunction with his other company, WorkTools, Inc. (http://www.WorkTools.com), he has brought numerous products to market directly and through licensing agreements with others, including the PowerShot(R) staple gun, the
SqueezeDriver(R) rotary screwdriver, PowerShot(R) forward action staple gun, Gator-Grip(R) universal socket, StormCutter(R) windshield wipers and Hip-Clip(TM) bottle holder. WorkTools, Inc. produces prototypes for their inventor clients and brings some of those inventions to market.
Inventors seeking help may also submit their ideas to Invention City for possible financing, licensing and other forms of development assistance. Invention City features an on-line product evaluation form that helps an inventor evaluate a product's potential for success.
To go there, visit http://www.InventionCity.com
and click on "Market Research." To submit your consumer product to Invention City, go to their site and click on "How to Submit an Invention."
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SERVICE PROVIDER:
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[email protected]
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Article # 2: "FIRST IMPRESSIONS: What Your E-mail Address Says About You," by Paul Niemann of MarketLaunchers.com
With more than 650 inventors who subscribe to our newsletter, I often notice the different e-mail addresses that people choose. For example, many of the addresses are the name of the person, and this is fine. Some of the addresses are named after a product that the inventor has created, and this is OK, too. Some of the addresses convey a positive message about the person, such as [email protected] and this kind of descriptive name can be beneficial.
But some of the e-mail addresses are downright silly or goofy, which does absolutely no good. The question to ask yourself is: "What kind of impression do you make when you send a message to a prospective licensee or business contact if your address is something like [email protected] or [email protected]?" Would you take either of these persons seriously?
Other e-mail addresses are totally meaningless or appear to have been chosen at random and, as a result, are nearly impossible to remember, such as [email protected] or [email protected]. Other than the person who owns the e-mail address, is anyone else going to be able to remember it? Probably not.
Then there are addresses with an underscore ( _ ) in them. This is not a good idea, either, because the underscore gets confused with a hyphen, plus it gets lost when the entire address is underlined when it is written as an e-mail link.
I use [email protected] for 2 reasons: First, it gives me a chance to reinforce my name to those who have never met me and, second, it is fairly easy to remember. When people ask why I use the number 7, I explain that I'm the 7th kid in my family -- and that is something that's easy to remember, too.
While your e-mail name alone isn't going to make you succeed, be sure that it doesn't cause you to fail.
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SERVICE PROVIDER:
At CPO Direct our name conveys our mission … cost per order. We are a direct response media management agency specializing in planning, negotiating, buying and back-end analysis of short and long-form DRTV, radio, newspaper, magazine and Internet advertising. Strategic services include complete direct response campaign development and execution.
Contact Joyce Cusack at (312) 396-8748 or e-mail her at [email protected]
http://www.cpodirect.com
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Article # 3: "Two Methods of Increasing Your Chances of Licensing Your Invention," by Paul Niemann of MarketLaunchers.com
I receive hundreds of calls and e-mails from inventors, and one of the most common comments that I hear is, "I'm hoping for some big company to come along and buy my patent from me." That comment has 3 things in common with hoping to win the lottery: One, the chances are very slim, as approximately 2% of all patented products ever produce a profit for the inventor. I've never done the research on this, but I would assume that a great majority of that 2% was accompanied by work rather than by hope. Two, "hoping" -- unless it's accompanied by effort -- does absolutely no good at all. And three, it can be very frustrating and nerve-racking WAITING and HOPING for something to happen, especially if you do little or nothing to MAKE it happen.
Obviously, you can't do much to improve your chances of winning the lottery -- other than spending more money to buy more tickets -- but you can do something to improve your chances of having a company license your invention from you:
1. If you're able to produce a limited number of units of your product and sell them yourself, then you can begin to build a track record of success for your product. Companies want to buy a revenue stream when licensing in new products, and the more you do to turn your product from an unproven idea into a success -- a future revenue stream for some company -- the more appealing it will become to potential licensees. When I worked as a Product Scout, I paid more attention to products that were already selling well, because it eliminated so much of the risk that is inherent in most new products.
2. If you're NOT able to produce a limited number of units of your product and sell them yourself, then you can try to establish a track record by doing your research on members of your target audience, with a target audience of potential end-users. Get a sample or at least a prototype or a drawing of your product and go survey a number of potential end-users and find out the percentage who are likely to buy your product if and when it becomes available at that particular price. Survey at least 10 or 20 potential end-users. Then record your results, along with their comments, so that you can show your results to prospective licensees.
Either way, whether you produce a limited number of units of your product and sell them yourself or you research members of your target audience, you'll gain a much better understanding of what type of market exists, if any, for your product. If the results are positive, then this information will help you when you approach companies. If the results are negative, then maybe it's time to cut your losses and move on to your next invention.
If you're able to establish a track record with your products, you'll greatly improve your chances of having a company license your product from you, which is more than you can do to improve your chances of winning the lottery.
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BONUS ARTICLE: What our Clients are Saying about the Benefits of Having Their Own Invention Web Page, by Paul Niemann of MarketLaunchers.com
Testimonials from Inventor Customers who have an Invention Web Page on the MarketLaunchers.com Web Site:
"Well, Paul, it's a done deal! Today I signed Bollinger's license agreement. Kim and I also worked out the distribution of royalties between Kim's company and my company. Thank you for your help in making this deal work for everyone involved, and a special thanks to you for your continued interest in my products. May the power of your web site work for other inventors as well as it worked for me."
-- Harry Dantolan, Inventor of the Tolanizer exercise device
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"The web page looks great, I can't wait to see the response I get from it ... Thanks for the great job you did on my web page, I showed all my friends and family, they think it's great. I can't wait to start hearing from potential buyers, but until then I thought I better start soliciting them first."
-- Kris Maddalena, Apache Junction, AZ
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"You can't get any better exposure than this. I know people are looking at my web page. What you've done for me has been a great help."
-- Floyd Cartwright, Lake Charles, LA
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"My name is Richard Adamson and you presently have our invention on your website. We are happy with your service and would like to know when the renewal date is so we can be with you for the next year ... Thank you very much for your great service."
-- Richard Adamson, Bountiful, Utah
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"I have an invention on your website called "Heated Diaper Wipes." The best contacts I have received have been from your website and I am very grateful."
-- Carolyn Wright, Toledo, Ohio
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"The photos came out great! Thanks again Paul. Coming to MarketLaunchers.com was the best move I could have made for my product. Keep up the great work and the best of luck to you."
-- Cindy Mayfield, Arlington, TX
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"Your service is great! Keep up the good work. Thanks."
-- Kevin Delcarson, Bedford, TX
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"Those were some of the best dollars i ever spent to get on your data base. thanks"
-- Dan Rodlin, Oceano, CA
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"Market Launchers did a great job with our web page! We are very pleased with the layout and how fast it was up and running. Thanks Again,"
-- Tony Devlin, NY
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SERVICE PROVIDER:
Gary Kellmann is looking for new products created by individual inventors in the hair-care and beauty industries:
Concepts should have utility patents pending, applied for, or issued. To submit your product for consideration, please fill out the form at http://www.marketlaunchers.com/garykellmann.html.
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Copyright 1999 -- 2001
Market Launchers, Inc.
All Rights Reserved
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Click here to read the April 2001 issue.