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Carrying Out a Commercial Assessment on Your Invention

By: Dan Lockton - Updated: 24 Aug 2012 | comments*Discuss
 
Invention Inventing Inventor Product

Assessing the commercial viability of your invention is important early on in the development process to save you wasting time and money and to help direct your efforts in the best direction to make the most of the inventions potential. An assessment of how viable your invention is as the basis of a business will also help you when negotiating and arranging finances (such as writing a business plan or applying for a loan).

Paying to have an assessment done by a company is one option — although be careful — but it’s entirely possible to do it yourself.

Invention Assessment Services

A number of companies offer invention assessment services. With a few exceptions, it is prudent to avoid these: they may not all be ‘scams’ as such, but rarely offer the inventor much of value in return for fees running into many hundreds of pounds. A typical ‘assessment’ will predict great success for the invention, and talk vaguely of interested companies, to lure the inventor into parting with more money for the next stage of the process.

There are, however, some companies offering more useful forms of invention assessment — more realistic, honest and transparent. Initiatives such as Trevor Baylis Brands, which offers a fixed-price evaluation of new inventions and whether it’s worth taking them, further, are vastly preferable. The disappointment of being told your invention has little commercial potential is far better than the disappointment of spending thousands of pounds for no results.

Doing it Yourself

The first part of doing your own invention assessment should be a thorough patent search — a number of articles on this site explain in detail how to go about this. Then, assuming that your invention has not already been patented, or that you are confident about developing it in a way to overcome existing patents or prior art, the next step is to attempt to assess the value of your invention, as a product, in the marketplace.

Find a similar, existing product (your invention possibly won’t have any direct competitors but there will most likely be items which are sold to the same kinds of customers in the same kind of way), and attempt to work out how much that product is worth. Note the normal retail price and knock off 40% as the store’s margin, and 30% of what’s left as the distributor/wholesaler’s margin, if applicable, to leave 42% of the retail price — say 40% to be conservative.

Dismantle the product apart and look at the materials. Are they in similar proportion to what you’d envisage using in your product? Injection-moulded plastic parts are very cheap individually, but the set-up costs are large and these must be amortised over each unit. Assuming that the product is profitable for the manufacturer, that 40% of the retail price represents the manufacturer’s production costs (materials, labour), whatever it is choosing to amortise on each unit (e.g. tooling, rent, equipment costs, management salaries), and the profit, which then gets split to pension fund, dividends, cash at bank, and so on. Can you compete with this?

If your costs for material, salary (if any), rent and money set aside for loan repayments come to less than 40% of the retail price of a competitor, then you are doing very well. Even if they don’t (and it’s likely they won’t), then assuming the retail price would still be realistic (multiply your cost figure by 250%) then you may still be in the game, because an innovative product may be able to sell for more than an established one. But if you’re nowhere near, then you need to consider reducing the production costs of your product. Can you use cheaper materials? Can you use fewer parts to achieve the same function, e.g. by combining functions into a single part? Can you design your product to be quicker or simpler to assemble?

This kind of invention assessment is vastly superior to the ‘boilerplate’ assessments offered by many ‘invention advice’ companies: you can actually work out how to improve the design of your product as well as reducing the costs.

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