April 2008 Summary

Mr. Steven R. Peabody (president of CMI Engineering and holder of several patents) gave us exceptional, valuable, practical, real-world guidance on how to develop an invention into a product. Here is a summary of his detailed method:

1. Prepare an industrial design.

Once you feel you have a marketable invention:

a) sign a mutual nondisclosure agreement

b) describe your invention to someone (industrial designer, engineer, draftsman) who can give your idea:

• an understandable format (such as an industrial design). Show this to your engineers, marketers, and patent lawyers/agents.
• if the invention is complex, an animated illustration to show how the product works.

2. Consider filing a patent application.

To get legal rights for your invention. Now, or after doing the marketability study of step 4.

3. Have an engineering firm precisely design your invention.

So you can manufacture products.

a) Choose a firm that is familiar with a broad range of products, designs (typically with a computer aided drafting (CAD) program) for inventors, and develops products.

b) Create a prototype of your invention. To verify that parts fit and that the invention works.

4. Do market research.

To find out if people will buy your invention.

Use a resource such as the University of Wisconsin Innovation Service Center (Sandra Beccue, marketing research manager).

5. Find out how much money you need to bring your invention to market.

Get itemized price quotes for:

a) Manufacturing and assembly.

Take your engineering files from step 3 to a manufacturer. Your engineers, a contract manufacturer, or Alibaba may be able to help you with this. A manufacturer should assign a product manager to help ensure that your product has the correct specifications and satisfies testing requirements. Use a factory that already complies with your testing requirements, audits, and quality control procedures, so you can share testing costs with other companies using the factory and so you can be sure your product satisfies test standards.

Consider using assembly shops such as Goodwill Industries.

b) Testing (if your product must be tested).

Use a testing lab certified for the industry through which you plan to market your product.

Also, get a copy of relevant test standards, find out when your product can be tested, and get an itemized price quote for product liability insurance.

c) Packaging (including tooling and set up charges).

Different industries have different requirements.

Find a packaging house that can work well with your marketing team to package your product correctly and with your manufacturer to coordinate packaging for final assembly.

d) Distribution and warehousing.

Consider using a fulfillment house (such as Millenium Group) that offers a complete system of distribution and fulfillment - inventory, warehousing, distribution, a full line of required reports, situated in strategic parts of the country.

e) Marketing.

Find a good marketing firm that has experience with your market segment and that can do PR work. Your marketing research report from step 4 will help the firm understand your market.

f) Accounting.

Find an accountant who can provide complete service: balance sheets, income statements, monthly reports, profit and loss data, general data that helps you manage your time, keeps you compliant with the IRS and with your bank, connects you with those who can finance your work.

6. Now that you know how much money you need and the details of what you will do, write a business plan.

SCORE can help.

7. Get the money you need from:

a) Banks.

SBA loans are good. Banks usually do not fund a start up company unless it has equity. A bank will want to see your business plan and a list of your assets.

b) Individual investors.

Show them your business plan. For large investments you will also need a registered private placement memorandum (PPM).

c) Angel investors and venture capitalists.

Realize that their terms may not favor you.

8. Hire:

a) Manufacturers, assembly shops, and a testing lab.

b) A packaging house.

c) A fulfillment house.

d) A marketing firm.

e) An accountant.

While you are doing all this, think about how to sell your product. Ideally, a buyer would give you a purchase order for your product before you hire a manufacturer.

Thank you for this very helpful presentation, Mr. Peabody!