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Archive for March, 2007

The Most Common Mistakes Entrepreneurs Make and Why Markets Tolerate No Shortcuts

Wednesday, March 7th, 2007

by: Geoff Ficke

The question I receive more often than any other is: “What is the mistake you most frequently observe inventors or entrepreneurs making?” The answer is an easy one. Most unsuccessful entrepreneurs try to get to market by taking shortcuts.

We live in a commercial maelstrom. The marketplace is constantly churning, changing, adapting. Successful marketers are constantly adjusting, anticipating, re-inventing. Opportunity for product launches entering this market has never been greater, but there is zero tolerance in this highly cluttered environment for half done, distorted product or service offerings. The commercial markets will simply spit out these otherwise, potentially powerful possibilities.

How do we define a shortcut and why does each definition disqualify the product from successfully positioning itself in the contemporary marketplace? Here is a list of some of the most basic shortcuts we see entrepreneurs attempt to circumvent.

  • No Patent, Trademark, Copyright Filing

Typically the cost of filing and utilizing a patent attorney is the principal deterrent. Many entrepreneurs attempt to fill in the blanks on a template available from bookstores or the inter-net and self-file. We have never, never seen this avenue succeed. There is a reason that patent lawyers practice no other type of law. This is the classic specialty practice. Investors, partners or licensees want to know that the idea they are reviewing has protection.

  • Amateur Prototype or Design

Professional quality, shelf ready prototypes are an absolute requirement when seeking to place, sell or license a product opportunity. The 3-dimension CAD art is also crucial in patent submissions and creating the cost of manufacturing the product. Occasionally the inventor has the skills and equipment needed to successfully create this absolutely crucial design element. However, we usually see amateur attempts to avoid the cost, time and research necessary to properly render the features and benefits of the product or service. This is an opportunity killer.

  • Fictional Sales Model

Inventors are passionate about their creations, and passion is important. However, they often do not properly research the size of their target market, competition and create a sales model that is supportable and believable. What is a sales model? A sales model is a quantified, qualified, well-researched formula to extrapolate the realistic sales potential for an opportunity. Knowing the dead net cost of goods is absolutely essential in establishing a believable sales model. What is the demographic for the product? What is the competitive overview? How does the new product differ in features and benefits from competition?

During year one, two, three, how many store openings will realistically be obtained? What will be the annualized turnover per door? Will there be international sales, kicking in when? A fictional sales model is tantamount to opportunity murder.

  • Let’s Guess the Cost of Goods

It is amazing that learning the absolute cost of goods (COG) receives such short shrift. This number is to a product as blood is to life. If COG is too high, a product has little chance to compete. A low COG, with uncompromising product quality, is essential for success. Each element of a product or service needs to be included in a supporting Bill of Materials with costs extended to fractions of pennies. These are then totaled. Then add costs of freight, customs and duties (if offshore production involved) to obtain a dead net COG. Dreaming, wishing and hoping that COG is accurate is a dead giveaway that the inventor has taken deal-killing shortcuts.

  • This Opportunity Does Not Need a Business Plan!

These are famous last words. No modern home is built without an architectural drawing. A cell phone is designed around highly technical engineering models and art. Retail stores are painstakingly designed and planned. And yet, entrepreneurs, all too often, either will not recognize, or will not commit to writing a customized business plan. Again, an inter-net template is a waste of time. We receive hundreds of Business Plan submissions annually. We are still waiting for the first exciting, comprehensive plan that would be a candidate for funding, license or sale that came off an inter-net download template. This route screams shortcut and lack of serious commitment.

These are only a few of the most common shortcuts we see entrepreneurs regularly take. Most disappointingly, the shortcuts taken will kill otherwise excellent start-up opportunities. There are thousands of new opportunities chasing a limited amount of new enterprise funding dollars. Matching invention and success will not be achieved, no matter how revolutionary the new item, without presenting a fully researched and vetted package for market consideration. No Shortcuts Allowed!
Continue reading “The Most Common Mistakes Entrepreneurs Make and Why Markets Tolerate No Shortcuts”

The Anatomy of a Product: From Idea to Reality

Wednesday, March 7th, 2007

by: Geoff Ficke

What does it take to turn an idea into a product? How can I realize financial gain from my idea? Where do I start? These and many other questions swirl around would-be inventors and entrepreneurs as they seek to bring new products and services to market. The process can seem daunting for anyone making a first attempt and confronting the typical hurdles and roadblocks the marketplace utilizes to cull the field.

I look at hundreds of products each year and have done so for almost 30 years. The ideas that succeed invariably consist of the same basic elements.

One, an entrepreneur with passion, a realistic view of the opportunity they have created and a flexible attitude to the inevitable critique and changes the original concept will undergo. The world is full of dreamers. Successful entrepreneurs work non-stop in pursuit of their well-designed goals.

Two, a new product or service concept that fills an identifiable market niche. The niche can be a completely new product category (think Windows, XM Radio, E-Bay) or a small piece of a vast, mature market segment (Sam Adams Beer, Coach, George Foreman Grille). The Unique Selling Proposition is the element that enables the product to be positioned as an advance, offering different, improved features and benefits. The world doesn’t need another mousetrap, unless, you can prove a method to catch more mice.

Three, before running off to a Patent Attorney, display or discuss the opportunity with family, friend’s, co-workers you trust. Would they buy if available? How much would they pay? What don’t they like about the widget? Any improvements they might suggest? This is a form of micro-test market. Also, search the inter-net, United States Patent and Trademark Office, visit stores and diligently study the competition. If you feel confident that the market is not offering anything like your concept then you potentially have a significant commercial opportunity and should seek copyright, patent and trademark advice.

There are many ways to proceed. You can attempt to self-market your idea. There are numerous reputable consulting firms that can offer comprehensive services. Many colleges and state and local governments offer small business incubators and can be an excellent resource. A caution, though. The late night infomercial selling patent services that will make you rich is always a fraud. Ask for references and products currently on the market as proof that you are dealing with professionals, not charlatans.

The hardest question for many inventors to confront: How to harvest financial benefits from their invention? Licensing, self-marketing the product, funding, partnership, strategic alliance or outright sale of the opportunity are among the options to be considered. Typically, the inventors background, experience, interest and financial realities make the choice more obvious. It is usually good to have professional guidance when weighing appropriate strategies for harvesting income from a project.

A working model or a production quality prototype of the piece will be essential in researching manufacturing, costing production and for presentations. Do not cut corners here. Be as professional and thorough as possible in displaying the unique performance benefits and features of the product. You only get one chance to make a strong first impression.

A customized Business Plan or Offering Document will be crucial in successfully presenting the product for consideration. Decision-makers typically see many, many products each year. You need to stand out and that requires an exciting plan. Do not buy a Business Plan template off of the inter-net and fill in the blanks. It will not be read. Make the document as exciting as your product.

The steps reviewed above typically result in a thinning of the new product herd. In order to successfully place a service or product in this very aggressive, cluttered marketplace no shortcuts are tolerated. Inventors, entrepreneurs and small businesses are an amazing breed and a valued national asset. The wealth created and generated by this group of idea pioneers is the American economic difference maker. There has never been a greater time or place to launch that needed new product, and the rewards have never been greater.