Product Success Often Means Moving Slowly and Being Wise With the Money You Invest.
PART TWO
By James F. Riordan
The wise investor never invests a lot of money in a new product or technology before being reasonably sure that the "perceived value" of the product, in the eyes of the buyer, will cover or exceed the cost-of-goods-sold, cost of rep and sales commissions, and profit margins for all parties involved. In addition, the wise investor never invests in any new product or technology without searching applicable patents, trademarks, etc. (to be sure they will not be infringing on anyone else), BEFORE funding the project.
If you are a new product developer, you must remember that your time is a major investment which must be considered just as carefully as you would consider investing dollars. As the old and true saying goes, TIME IS MONEY. The enthusiastic entrepreneur or inventor who blithely sweats unending hours of thought, toil, etc (uncounted) to reap a meager harvest might (if he could count better) flip hamburgers at the local burger stand and come out ahead because he's really laboring for nothing or less than nothing. Finding out such facts is just one of the rewards of evaluation BEFORE the game is over.
NOTE: If you're a product developer and you're looking for investors, before approaching any lenders, venture groups, etc., put down in writing the following information:
* What you need the money for (an itemized list. Get three firm quotes for each item)* How much you need
* When you will need it (Develop a monthly and yearly cash influx schedule)
* When you intend to pay it back (with dates)
* How you will pay it back (out of what funds)
* What you're willing to give up in return for the money (equity, percent of net profit or interest rate, etc)
* Your business plan, cash flow projections, balance sheet, etc.
As soon as your business plan is complete, you can begin beating the bushes for possible lenders and investors. A great source of revenue for new product developers is the private investor. These people are usually business persons who have made money in their own business and are willing to gamble some money on the chance that a product will be a success. The best way to reach these individuals is by placing an inexpensive ad in local papers, in the classified section, under the headings "investors wanted," "business opportunities," "investment opportunities," etc. Your ad should be simple and to the point.
NOTE: Some states have "Blue Sky" laws which are enforced by, among others, the Securities and Exchange Commission, and these laws make it illegal to offer investors a percentage of profit in return for investment funds. You may be able to offer them a percentage of ownership of your patent, which can work out to be the same net result. Be sure to ask your attorney how to structure your offer in the states in which you will advertise.
The above article was taken from James F. Riordan's classic book, HOW TO EVALUATE THE POTENTIAL FOR SUCCESS OF A NEW PRODUCT OR TECHNOLOGY. Riordan's highly-acclaimed, 36-point system is a valuable tool for inventors, product evaluators or anyone interested in the invention process. Each section is followed by a comprehensive questionnaire that can be used to evaluate your product.
The highly-recommended book can be ordered through the Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501. The phone number is (310) 328-1925.
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