The vast majority of the companies in the Fortune 500 started out as small business enterprises, many created to bring one specific new product idea or design to life.
We live in the land of Thomas Edison, who by his own admission failed a hundred times more often than he succeeded.
But when he succeeded – oh boy! He hit the bulls eye with such ideas as the phonograph and the electric light bulb.
Not a day goes by in the U.S. that a new consumer product is not introduced – often hundreds are announced in one day…more than 50,000 new products are introduced each year.
And although many new products never realize their projected sales volume, there is nothing to prevent your great business idea from making you a fortune.
Ten Keys to Turning a Product Idea into a Fortune
1. Determine the demand for your type of product.
Market demand to a large extent determines whether a new product lives or dies. So, your first step after the next greatest idea pops into your head is to carefully consider and write down every group of potential customers you believe will find a benefit in buying your product idea.
2. Understand how your type of product is distributed to customers.
Once you have identified one, two or three large groups of potential customers, you must ask and answer one key question: How do each of these groups of customers now buy products similar to mine? For example, do they most likely go to a large discount chain store to find the product category? Or a catalog? Or an online purchase? Or, do they use more than one way to buy?
This is known as identifying the "distribution channel", i.e. how the product category gets from the factory into the customer’s hands.
Why do you need to know the distribution channel? Because then you can figure out which specific product distributors are interested in pushing your new product into the market. For example, trying to convince a fabric and sewing notions chain to carry an automotive accessory is probably foolhardy.
3. Determine how many might be purchased.
Find out what potential unit volume a product like yours might sell the first year (you may only have a year or two to the be the only one to offer your product). This will help you research the manufacturing, packaging and distribution costs per unit, which are all highly influenced by unit production volume.
4. Find out who makes the product.
Identify at least one existing company that makes a product category similar to yours. Why? Because it is usually too costly for a new entrepreneurial company to be able afford to buy and furnish its own factory. The alternative is to use what is known as "contract manufacturing". For example, the Dove ice cream bar was first mass-produced in a Vienna Sausage plant!
5. Be honest in your answers.
You’ll notice that I haven’t talked about patents yet. Why is this? Patent research and filing is expensive, often to the tune of $5,000 and up. I would never suggest that a prospective entrepreneur invest $5,000 or more without some heavy research first.
So, you need to understand several important characteristics of your intended product category:
- Who buys the product category now? How often do they buy and how much do they buy at one time?
- What does a unit of product typically sell for? What is the typical cost to produce one unit of product? Is the profit produced attractive?
- Who distributes the product? Are they huge, medium-sized or small businesses?
- Who might manufacture such a product?
6. Get legal protection.
If you can answer the questions in point 5 positively and with honest enthusiasm, then you should consider some legal protection. Legal specialists, known as patent attorneys, work with product inventors to determine how unique the product design is, and if there is an existing competitive product, how close its key design features are to your product.
It’s possible to file for and receive what is known as a "provisional patent" which provides you with some legal exclusivity of your product idea for one year, without you having to make public many design details. There is, of course, some chance that you may not be granted a full design patent when you later file, but this is a much lower cost way to get some legal protection from the federal government.
7. Seek a design expert.
There are many very talented self-employed design engineers around the U.S. They are not cheap to work with, but often worth every penny you pay them, because their knowledge and experience can result in the most cost effective way to mass-produce your product.
8. Get the plans, then the identity.
It is perfectly acceptable to use a temporary "made up" name for your product while you are in the research and design stages. But once you have production blueprints, it’s time to work on the marketing side of your business by brainstorming product names. You need a catchy name, particularly if your product is likely to be sold on a self-service basis at a big-box store.
Once you’ve selected a name, it’s time to bring in another legal specialist – a trademark lawyer.
Apply for federal trademark status and receive preliminary approval before you start to use the product name publicly and certainly before you hire a designer to work on creating the product packaging.
Because packaging design often demands many details be included, it can be costly. You don’t want to have the packaging designer spend time on your project, only to have you change the new later because of legal problems.
9. Get some samples.
Known as "prototypes", these samples are close enough to what you want to see as a finished product so as to be pretty darned convincing to a retail chain or catalog merchandise buyer.
This can be an expensive step to take, so look around and get competitive bids on doing the work.
10. Sell before they will buy.
The buyers at large chains such as Wal-Mart are presented hundreds of new products each week. They have only a short amount of time to make a "go, no-go" decision.
A good way to get their attention is to make a few of your products and figure out a way to sell them yourself, such as through your website, or via an ad in a specialty magazine.
The best proof of customer demand for your product is to get some folks to plunk down their money to buy some!