How to Value the Commercialisation of Your Idea by Smart Idea Store

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In order to make decisions about offers of investment or about licence or assignation agreements from potential project partners, you will need to work out how much progress you have made in turning your idea into a commercial product.  This progress can then be converted into a value so that you can decide whether or not to accept the deal or deals that you have been offered.

An investor will require a competition report and a market report to determine whether your idea is a worthwhile investment for them.

A Warning Note

Too many inventors overvalue their idea, meaning, at best, that they are uninvestible and, at worst, that they may have damaged their reputation and may not get meetings with potential investors, licensees or assignees.

It is understandable that you believe in your idea and put a high value on the work and effort that you have put in to develop it this far.  However, investors and other project partners are more concerned about potential markets and the risk that they are exposing themselves to by going into business with you.

The more progress that you make and the closer you take your idea to a marketable product, the more you reduce the risk of failure.  Having said that, the majority of the risk is in sales and marketing in most business sectors and there is nothing that can be done to affect this, meaning that you will have to manage the manufacturing, sales and marketing if you want to keep a large share in the profits made from the business.

 

Examples

High Definition DVD (HD-DVD) discs originally did better that Blu-Ray DVD discs but the release of the Playstation 3, which had a Blu-Ray disc player, and the adoption of an anticopying system meant that studios chose to release their movies on Blu-Ray and withdraw the HD-DVD format.

Amazon developed and launched the Amazon Kindle; a portable electrical device for reading digital books and periodicals.  They ensured that there was a vast selection (88,000 titles) of digital books to download when the Kindle was launched and that there was exclusive material and launched Kindle Direct Publishing to help publishers and authors to independently publish their books through the Kindle store.  This would have been a very time consuming and expensive process but it has proven to be very lucrative with the Kindle taking almost half of the 12.8 million worldwide sales of e-book readers.  Amazon initially kept 65% of the revenue from all ebook sales for the Kindle but changed to a program that gave 70% of the revenue to the publisher to compete with Apple’s App Store.

It is only because Amazon has the financial capital and business reputation that they were able to fund the development and protection of the Kindle and develop the ebook market to create a library of digital books and sign-up major publishers and authors, such as Stephen King, that encouraged people to buy the Kindle and resulted in ebook sales to outsell hardcopy books.  This has not come about without litigation with customers suing Amazon for $150,000 for removing the ebook of 1984 from their Kindle when Amazon found out their publisher did not have the rights to the book, breaching the contract between Amazon and the customers.  There is also an outstanding patent infringement claim from Discovery against the Kindle patent, which could result in substantial compensation for loss of revenue and damages.

It is the cost of patenting, development, regulatory compliance, manufacturing and sales and marketing  that determine whether an idea is successful or not.