Have good product idea but no business experience

ang1170 said:
Funding is unlikely to be a problem for something that has proven potential.
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No, but funding from EI, which is the best type you can get, could be.


ang1170 said:
Patents are now expensive to get, and offer little practical protection against anyone determined to enter the market with a similar product (specific products such as pharma excepted). Despite this VCs (and EI) love them: if you deal with them you might have to go down that route, but I'd be slow to do it.
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I strongly disagree with this. Large distributor and manufacturer are very risk adverse when it comes to the chance of being sued. Just the threat of legal action can stop a distributor dealing with a potential competitor. We had the same problem when getting a product to market and used the same argument to keep the competition out on another product in the same industry. As the OP’s product will be sold to schools and other educational bodies it is likely that a government body will do the purchasing. They will also be easy to scare by waving a lawyer at them.
It is also a very tax efficient way of generating income.
 
Purple said:
No, but funding from EI, which is the best type you can get, could be..
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I'm not sure I understand this. If you're expectation is that all your funding will come from EI, then yes, it will be a problem. They don't do that. The only point I was making was that on the list of things to worry about, funding shouldn't be near the top: there's plenty of funding available for the right opportunity.

Purple said:
I strongly disagree with this. Large distributor and manufacturer are very risk adverse when it comes to the chance of being sued. Just the threat of legal action can stop a distributor dealing with a potential competitor. We had the same problem when getting a product to market and used the same argument to keep the competition out on another product in the same industry. As the OP’s product will be sold to schools and other educational bodies it is likely that a government body will do the purchasing. They will also be easy to scare by waving a lawyer at them.
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OK - point taken. I'd agree in the circumstances you describe, it would be useful OK. My own experience is more international, where trying to stop a US or Chinese company from marketing a product in competition with you on international markets by waving patents at them has little effect.

They are expensive though, and a lot of time and effort can be swallowed up in getting one.

Purple said:
It is also a very tax efficient way of generating income.
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Here's where I strongly disagree: patents do not generate income! Getting a patent is a costly business and will have a negative impact on your bottom line. Royalty payments from licensed technology (which may or may not be covered by patents) generates income (as do product sales which incorpotate patented technology). Personally, I'd rather spend time and effort on sales than chasing patents.

I've seen too many cases of people (particularly from academic backgrounds) spending time, effort and cash in getting a patent thinking it's the key to a sucessful business. It's not. It can be a help OK, as in the example you describe, but it's certainly not mandatory and you need very careful evaluation before deciding whether it makes business sense or not.

I'd agree that they are a tax efficient way of collecting revenue, at least for the time being.
 
ang1170 said:
I'm not sure I understand this. If you're expectation is that all your funding will come from EI, then yes, it will be a problem. They don't do that. The only point I was making was that on the list of things to worry about, funding shouldn't be near the top: there's plenty of funding available for the right opportunity.
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OK, point taken. But I do think that it’s important to have the cash to get through the initial phases and getting EI to buy into your idea will give you more than just funding.

ang1170 said:
OK - point taken. I'd agree in the circumstances you describe, it would be useful OK. My own experience is more international, where trying to stop a US or Chinese company from marketing a product in competition with you on international markets by waving patents at them has little effect.
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Not if you hold a patent and licence the manufacture/ distribution of the product to a larger company. They will then spend the money protecting their product and by extension your patent.

ang1170 said:
Here's where I strongly disagree: patents do not generate income! Getting a patent is a costly business and will have a negative impact on your bottom line. Royalty payments from licensed technology (which may or may not be covered by patents) generates income (as do product sales which incorpotate patented technology). Personally, I'd rather spend time and effort on sales than chasing patents.

I've seen too many cases of people (particularly from academic backgrounds) spending time, effort and cash in getting a patent thinking it's the key to a sucessful business. It's not. It can be a help OK, as in the example you describe, but it's certainly not mandatory and you need very careful evaluation before deciding whether it makes business sense or not.

I'd agree that they are a tax efficient way of collecting revenue, at least for the time being.
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I agree that they are not the be-all and end-all and that they should not impede getting the product to market but I think that any start up trying to manage their sales and distribution channels in house for a product that needs high volume and low unit costs is nuts. In this context a patent gives you slightly more chance of keeping control of your product.
 
Purple said:
Hi ciano6,

Do you have a patent registered? If not then get one.

.
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Thanks for the advice purple
A patent proabably won't be an option as it will be a variation on US and UK products that exist already and a simplification of equipment used in Industry.
Your other advice is great.
 
ciano6 said:
Thanks for the advice purple
A patent proabably won't be an option as it will be a variation on US and UK products that exist already and a simplification of equipment used in Industry.
Your other advice is great.
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So what's to stop anyone else undercutting you in year two?
If you can't protect your product then talk to a solicitor or someone in EI about how you get a manufacturer to make and distribute your product under licence without cutting you out of the loop. Also, don't rule out some sort of IP or related protection. Copy right or even trademark protection may be an option (anything that implies legal protection). It's cheaper as well.
 
ciano6 said:
A patent proabably won't be an option as it will be a variation on US and UK products that exist already and a simplification of equipment used in Industry.
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So where does your advantage come in?

To give yourself a shot at a market like this, you really need some element of unique Intellectual Property, or unique access to a market, or something that'll create a barrier to others following you.

I'm playing devil's advocate a bit here, but it's the kind of question investors and EI will ask.
 
ciano6 said:
Not at all CCOVICH. To tell you a little more, I know that in two-three years time, almost 50% of Leaving Cert Students will need this product or something similar for a mandatory experiment. At the moment, if you were to buy a similar product from a US or UK supplier it would cost between €300 and €500 for a group of three students. We could do it for about €20.
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Hi ciano6. 60,000 students do the leaving each year, and only a fraction of them do either Physics or Chemistry, which are the main subjects requiring experiments (if it is mandatory, the likelihood is it is specific to one subject or the other).

So at a push, probably less than 20% of LC students will do this experiment, which is 12,000. You say your product would do three students, that's 4,000 units needed. You say it could be sold for €20 - that's a total market of €80,000 (and that is provided you get 100% of the market).

Strip out your costs, and you have to wonder is this thing viable for the two of you at all?
 
I'd agree.

It all depends on sales price.

It's the same point I made before about having to be careful in doing comparisons between the sales price of an item and the cost you think you can produce it at.
 
ang1170 said:
I'd agree.

It all depends on sales price.

It's the same point I made before about having to be careful in doing comparisons between the sales price of an item and the cost you think you can produce it at.
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I thought about that one as well, that's why I have been asking if it can be marketed internationally.
 
The bottom line on this is that the OP should prepare a comprehensive business plan, which should determine if there's a business there or not.
 
ang1170 said:
The bottom line on this is that the OP should prepare a comprehensive business plan, which should determine if there's a business there or not.
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Or as Tony O'Reilly put it, "There might be a gap in the market but is there a market in the gap?"
 
Purple said:
I thought about that one as well, that's why I have been asking if it can be marketed internationally.
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No hope of marketing it internationally. The practical will be Ireland specific, as are the internationally available ones. But not being a business person, I don't understand why a one off sale of a large amount of one product (even through a supplier) isn't a valid way of making a small amount of money? We (a) don't want to be millionaires, (b) don't want to set up a big business that will last forever, (c) don't mind how much of our own spare time we invest in it. If I wanted to make alot of money, I could be getting €100 an hour giving honours leaving cert maths grinds. I get asked an average of 60 times a year for them.
 
There's a danger you could loose cash, which is why it's important.

Very briefly, your gross gross profit is (sales volume x unit price) - (manufacturing cost). Don't forget the manufacturing cost is the cost of the units you build, not the number you sell (you'll probably batch build, and you mightn't sell them all). You have no guarentee you'll sell any (unless you sell before you build, which is quite tricky).

Out of this gross profit has to come:

- tooling and other maufacturing setup
- product approvals
- product development: R&D, prototype build and test etc.
- sales and marketing costs
- warrenty costs
- professional fees (accountancy, legal etc.)
- insurance
- general overheads (premises, light, heat)
- etc.

That's before you pay anyone, least of all yourself.

You need to have a good idea of what all these figures are (hence the business plan). If they add up, you're in business. If they don't, you may as well flush your cash down the drain: it'll be over a lot quicker and be less painful.
 
ciano6 said:
No hope of marketing it internationally. The practical will be Ireland specific, as are the internationally available ones. But not being a business person, I don't understand why a one off sale of a large amount of one product (even through a supplier) isn't a valid way of making a small amount of money? We (a) don't want to be millionaires, (b) don't want to set up a big business that will last forever, (c) don't mind how much of our own spare time we invest in it. If I wanted to make alot of money, I could be getting €100 an hour giving honours leaving cert maths grinds. I get asked an average of 60 times a year for them.
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I wouldn't have the business experience to comment as Ang1170 and Purple have, but I'm used to commercial environments and through association, know indirectly of the often protracted development paths for new products. No matter how confident you may feel about the product, I could almost guarantee that there will be many unforeseen technical and financial hiccups - which may not always be absorbed by grants or other support.

It seems to me that for you, this venture is really a hobby which if it had a profitable aspect, would be a bonus? Which of course is fine - but you might find that you would need to invest a lot more time/money than you might have envisaged, purely to keep yourselves out of debt.

If, as you seem to suggest, you are not in it for the long haul, this is especially relevant.

I suppose I'm just saying; be sure that you know what you are letting yourself in for.
 
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