In our previous e-newsletter, we spoke about Creating a Business Plan and Pitch Deck, Step 6 of our 8 Step Product to Market Guide. Today we want to talk a bit about Step 7 of this guide – Funding Development through Production. Keep reading as we take you one step closer to bringing your product idea to market. Happy inventing!
Before we go into Step 7 of our Product to Market Guide, it would be remiss of us not to acknowledge what is going on in the world right now as it relates to the dreaded and deadly coronavirus pandemic. Over the past few weeks, COVID-19, also known as the coronavirus, has become a global topic of concern. Here at Envision, we are following the recommended precautions and guidelines and we hope you are doing the same. Stay safe…we are all in this together!
Having a great product idea, but no way to determine if it’s marketable and how you could get onto shelves can be stressful and confusing. We understand, so we’ve compiled a list of 8 steps to help you take your product from mind to market. In the first 5 steps, we discussed Knowing your “Why”, Establishing Marketability, Avoiding Patent Infringement, Performing Market Validation, Confirming Manufacturability and Creating a Business Plan and Pitch Deck. In this article, we’re going to discuss the next step in bringing your product to the market, Funding Development through Production.
It’s important to embrace the fact that your potential multi-million dollar idea may take from tens, to hundreds of thousands of dollars to patent, develop, test, market, package, produce, and ship. For a basic product with a few moving parts, be prepared to initially fund no less than $25,000 to get started with patent research and filing, functional “alpha” prototype design and development, engineering, and production estimations from any reputable firm or collective entities.
- This 1st round investment will typically secure “patent pending” status, validate your idea can function, validate that it can be affordably produced and that it is (or is not) indeed marketable.
The second round of funding can often range from $25,000 – $75,000 and will typically be applied towards “beta” prototype phase, which includes product refinements, production of a small batch of trade show/sales quality beta prototypes, product testing, initial package design, branding, artwork, pre-sales marketing materials, and sales events.
- Tip – The “beta” phase is a good time to strategically license, partner, or secure third round funding (noted below). If you are diligent and fortunate enough, you might secure a volume production purchase order from a reputable buyer.
- A volume purchase order for a 40’ shipping container of average size product can often recover all investment, and position you for future orders that will then return ample profit margins, essentially and ideally the “tipping point”.
The third round of funding is typically applied to pre-production preparations, production molds/tooling, packaged finished goods inventory, and shipping, and can range from $50,000 to $250,000 depending on the cost of goods.
- If you are able to secure a volume production order, ahead of tooling and inventory funding, the above funding costs can often be absorbed in the initial order transaction.
If you are unable to self fund Development through Production, you will need an investment strategy that leverages your Business Plan. Tune yourself, tune your mind, tune your pitch, stay positive, seek and you shall find. Like any other step on this journey it’s important to have an investment plan that identifies:
- The type of investor you are seeking
- How much capital you need (with cushion)
- What you are willing to give up for the capital
So now you know what it might cost to produce your product. If you’re not prepared to put up these costs yourselves, it’ll be important to use your business plan and pitch deck to get investors on board so you can begin the production process. At Envision Product Development, we can help you out with everything from patent testing to securing production, simply give us a call. Our team has decades of experience in new product launch strategies and we invite you to take our product viability test to see how we can bring your product idea from mind to market! Look out for the final step in our product to market guide in our next newsletter.