Know-How Exchange : Strategy

Hi, Vicki, welcome to MarketingProfs KHE!

You have a very common problem - I work with start-up entrepreneurs all the time. The first place to begin is where you landed - marketing. And marketing is the process, not "advertising" or "selling" as is how the term is used in common language. By this, I mean you must know who your customers are and what their needs are. Also, you have to know their "influencers" - the words and images that move them emotionally to a "buy" decision. You have to know your competition and how they satisfy the customers' needs - and more importantly, where they don't. And please don't say, "I have no competition because the product doesn't exist today!" Great situation if it was ever real, huh? It's not. You ALWAYS have competition. Either someone supplies the exact product, a substitute product, or you customers take care of the need on their own versus buying (or they don't know they have a need - which means you have to educate them on the need then on your product - that's a long selling cycle). You have to know where your target customers go to find out information about your product - i.e. what media influences them. With all that in place, then you can develop your strategies - brand strategy (and even if you're not going to promote like P&G - you still need to define your brand strategy or you will lose control as your customers define it!), product strategy (rarely is ONE product enough long term), and so forth.

When you are doing the analysis above so you have data to build the strategies, you need to remember that if you want to know what your customers thing, ask them! In your case, as you asked people in the field general questions and they came back categorically with an opinion of "Yes, it's sellable," keep in mind that perhaps they aren't the ones buying, first, and second, it's easy for them to say this if they aren't asked to separate themselves from their money to answer the question! "Is is sellable" is different than "Would you pay $1000 for this?"

With respect to the product, focus on emotional and functional benefits versus features. People buy on emotion, not features. If their pain isn't enough to want to separate themselves from their money to fix it, then your product fails.

For manufacturing, you mention that the materials aren't easily procured. If that is the case, you will need to establish the pipeline for the tough-to-procure materials. You even may have to buy that material yourself and supply it to manufacturers.

Controlling manufacturers' quality is an easy matter. You clearly define what you want and how to measure it and contractually hold them to the standard as a criteria for them being paid for product. In these cases, you are a "purchasing agent" and a "quality engineer." You need to know the parts or get someone to help you so you are able to fulfill this role.

There are many roles you have to fill as you start your company. You are the COO, the marketing manager, the manufacturing manager, the finance manager...and you are the workers under each manager too. All these roles have to be defined with responsibilities and measurements for you to be successful. Initially, this serves as a checklist for you to keep things straight. Later, you can use this to bring on people to help you. You will work IN your business - purchasing stuff, making stuff, selling stuff - all the activities that net you revenue. You also have to work ON your business - someone has to manage the business and measure it. You have to set goals and standards and make sure everything is happening in a controlled fashion. And then you have to work FOR your business - you have to spend some time thinking about where you want this business to go in the future and what you get out of it. Good balance of these three is key to NOT going belly up within five years - as 75% of all businesses historically do.

If you need some more help, feel free to contact me - click on my name beside "posted by:" and you will see a link to my website. On there, it has contact information. As I said, this is what I do for a living - help entrepreneurs to be successful.

Good luck! I hope this helps.

Wayde

Vicki,

Intellectual property protection is always a good idea to protect yourself. Additionally, confidentiality agreements for anyone you discuss this idea with.

With respect to how you put a price on an idea - the question that is more appropriate is how do you derive money from this idea. You can take this a couple ways. First, you can patent it and try to sell it to a company. With enough tries and some luck, you might find someone who will pay something. However, this is not the way to get the most money out of the idea. The most is gained from developing a business that proves the idea visibly, gain a significant foothold in the market, and then sell the company. You can do that a couple ways. First, you can raise the needed money yourself with your own money. This can be augmented with loans from a bank or friends and family. You can, instead or in conjunction with, go for government grants. Presuming you could raise enough capital this way, you totally own the company and all money derived is yours. Second, you can seek venture capital or angel capital. The disadvantage is that you will lose an appreciable part of your company. But, if you can't realistically raise the money, your company will starve instead of thrive. Without the money, you'd own ALL of something very small instead of part of something very large.

That being said, your first task is to start where I recommended in my previous post. You start with the market and in particular, the value proposition and "pain" you will fix. The credibility of your case depend on the strength of this. Based on this critical point, you build a business plan. This business plan serves as your model and guide for building your company. The business plan should be chalk full of detailed action plans to push things along and measure against. When you have this plan, then you sell the plan. Like with any selling, you have to build rapport and trust and then meet the needs of the investors.

Either way you go - sell the idea to another company, build a company with your own assets, or with investors' capital, the marketing work up front leading to a good business plan is a fundamental place to begin. Sure, intellectual property protection makes sense, too. But IP without marketing effort and resulting business plan will keep you from understanding and realizing the worth of your idea.

Wayde

Vicki,

Jay and Carol bring up so very good points with respect to intellectual property. I spent a good number of years working with IP as an engineering manager - and worked closely with IP lawyers. A good IP lawyer will make the patent as broad as possible so that people simply can't tweak the design and rip you off. However, patents are country specific. So, if you seek a US patent, you aren't covered in Europe or China or India or elsewhere. Broadness is only one aspect. Global coverage is another. If you haven't dropped by the USPTO site, it pays to read what they have: https://www.uspto.gov/

Patents are stronger if you have actually made the product versus just came up with an idea. Taking your idea to a point where it exists is critical. If you can't do this on your own, you need a partner who can - who understands the engineering and manufacturing aspects and can create detailed drawings of the item. You can bind them with a non-disclosure/non-compete agreement - drafted by a good IP lawyer.

A patent in itself is not very expensive and anyone can do it. However, a good IP attorney will provide you with a good patent search to make sure that your idea already is not patented and also to help make your patent stronger (usually wider in scope). That's one expense. Then, there's the expense of doing that in every country of interest.

The other side of the story is a patent is NOT worth anything unless you are willing and able to prosecute for infringement. In fact, if you know of an infringement case and you DO NOT prosecute, everyone else has the right to infringe and you have no recourse. This aspect will require deep pockets, especially if the infringer is a big company!

What this means is that chances are, unless you have a pile of cash sitting around, you need to pursue the business plan and find some investors for the cash to take this idea to fruition.

Wayde