It makes patenting easier Prior to 1880 you actually had to have a prototype built before it could be patented. While it's not required now, a prototype is a great way to show that you built it first.
Smooth out your concept or invention's design Once you build your idea into a prototype, now you can actually test it in real life situations and look out for design or concept flaws.
Prototypes determine the manufacturing process Prototyping helps you determine what manufacturing processes will be required. Will it be injection molded, ultrasonically welded or die cut?
Determine the right price It's the best time to analyze the design and find ways it can be changed to meet a better cost of manufacturing.
It makes it easier to license or sell
With a prototype ready, you'll not only be able to explain what the features and benefits of your invention are, but also be able to get into the numbers to explain the costs of manufacturing, how it will be built, etc. This shows professionalism and companies respect it.