2. We hope this presentation will help
you through the process of
developing and marketing you
product. If you need further
assistance NIRDCO’s contact
information is available by selecting
the Contact Us button in the lower
left hand corner at any time.
3. Introduction
Welcome to Invention 101
In this course we will cover the steps necessary to
getting your product to market.
4. Preliminary funding
3. Non-Disclosure Agreement
5. Prior art
6. Provisional patent
7. Design
8. Prototype
2. Name and Records
9. Debug
10. Pro forma
1. Start a company
5. Starting a Company
Chapter #1
Somewhere during your initial product design
we highly recommend you create a business for
it. We recommend you do this for several
reasons before development.
• Everything you spend on your idea could be tax
deductible.
• It allows you to open a business bank account
makes financial expenditures easier to track.
• It provides you some measure of protection
against lawsuits.
6. Starting a Company
Chapter #1
• It lets potential investors know you are serious
about what you are doing.
Registering you business is relatively easy to do
once you have settled on a name.
Each State has its own registry process available
on line. Their search engines allows you to verify
the name you have chosen is not in use by another
company. Usually less than $100 you can start an
LLC (Limited Liability Company).
7. Starting a Company
Chapter #1
LLC’s are the easiest to set up and still provide you
with the structure and coverage needed in any
business a single person or group of people require
to do business.
There are of course other more complex structures
you could pursue such as; C-Corporations and S-
Corporations. But we will not be covering those
here. Once you have the IEN number you can open
a bank account for your product.
NOTE: Keep track of ALL your expenditures.
8. Name and Records
Chapter #2
Sounds kind of silly but without a name how
will you refer to your invention.
Give it some thought because this name will be
used throughout the life of the invention. If it’s
your only idea you will be using it for
everything from the name on you NDA, to the
logo design and perhaps even the name of a
website to help advertise your product.
Try to keep it short enough to use as your logo
9. Chapter #2
and make it something that will be catchy enough
to make it memorable. You will thank yourself
later if you spend time on it now because all your
artwork will hinge on this name.
Imagine having to go back and change things once
you have decided to change this name because you
thought of a new one further into your project.
The other thing which should be discussed is
Name and Records
10. Chapter #2
record keeping. It is very important to keep good
records as you progress through your project. Big
companies do it and you should be no different.
Get yourself a loose leaf folder to keep track of
everything that pertains to your idea. We
recommend at least a 3” binder to retain all your
information. Also pick up a package of dividers to
organize your data into categories.
You will want to put everything in this folder from
Name and Records
11. Chapter #2
Name and Records
your copy of the NDA to; Business EIN number,
Emails, Drawings, Parts, Artwork, even Notes of
changes you thought of to improve the product.
Do these things now and you will be glad you did.
12. Non-Disclosure Agreement
Chapter #3
The first thing to remember with any new idea
is to protect it.
Too many people have gone to someone with a
great idea only to have that idea stolen by others
who do not have your best interest at heart.
Obviously the best idea is to consult a Lawyer on
the subject and have a Non-Disclosure Agreement
drawn up that you can use whenever you talk about
your project. However, many people can not afford
the cost.
13. Non-Disclosure Agreement
Chapter #3
There are fortunately other ways to protect
yourself.
• Companies who are upfront with their intentions
will have their own NDA and offer to sign it
before talking with you about your project.
• There are sample NDA’s also available on line
that are very comprehensive and can be
customized to meet your individual needs. All
that is needed is for the Inventor to add in their
name, address,
14. Non-Disclosure Agreement
Chapter #3
the product your are discussing, and the name of
the company you are talking with. Have each party
sign and date it and you can talk freely without
worry.
Rumors are out there that if you put your idea in an
envelope and mail it to yourself that this will add a
certain amount of protection. This is false!
Don’t forget to put this NDA in you folder.
15. Preliminary Funding
Chapter #4
Initial money to fund your project can range in
cost from a few hundred to thousands of dollars.
Funding is a difficult issue for many inventors and
is usually the reason a lot of ideas never get past
the idea stage.
There are several reasons for this. From having the
people you ask say “No” to they don’t think it’s a
worthwhile idea and don’t want to invest money in
it.
16. Chapter #4
This is very common but with the right approach
you have a better chance of getting a “Yes”.
• If your not excited about your idea how can you
get someone else, who you are borrowing
money from, excited enough about it to invest
their money. Before you approach them make
sure you have an outline of a plan to succeed.
Point out the need of the product, who you plan
on selling it to, how you will sell it and most
importantly what kind of return they will get for
their investment.
Preliminary Funding
17. Chapter #5
Before you go on this mission of showing the
world your idea make sure it’s not already out
there.
The government has a site setup for you to search
and see if your product is unique.
https://www.uspto.gov
Go to the Patent section and under that select
‘Search for Patent’ video to learn the best way to
look for you particular patent idea.
Prior Art
18. Chapter #5
Here it will teach you how to wade through the
millions of patented products out there in the
market to see if your idea is worth pursuing.
Once you have determined that your idea has not
been taken it’s time to protect it. This will be
discussed in the next chapter.
Preliminary Funding
19. Chapter #6
Now that you have determined your idea has
not been previously produced it’s time to protect
it.
There are several types of patents that are accepted
by the patent office. The one we recommend for
the person on a budget is the Provisional patent
which will protect your idea for 1 yr. This should
give you time to build your prototype and prove
out the concept. At that point we recommend you
proceed with the full blown patent of which there
are two main types; Utility, Design.
Provisional Patent
20. Chapter #6
Utility patents are the most used version and offer
the broadest coverage against competitors trying to
copy your idea. It protects the functionality of the
products which is more desirable than protecting
the appearance in most cases. They are good for up
to 20 years with maintenance fees due at 3, 7 and
11 years. These patent will take between 2-3 years
to be approved. In the interim however you can add
a ‘patent pending’ to your product to discourage
patent infringement.
Provisional Patent
21. Chapter #6
Design patents offer the broadest coverage for
situations where the look of a product is more
important. It protects the aesthetics of the products
which is more desirable than protecting the
functionality in some cases. They are good for up
to 15 years with no maintenance fees. These patent
will take between 1-2 years to be approved. In the
interim however you can add a ‘patent pending’ to
your product to discourage patent infringement.
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22. Chapter #7
Your idea at some point will need to be put
down on paper in a formal manner.
Eventually someone is going to have to build a
working prototype of your idea. You will at this
point need to provide drawings. These drawing will
need to be done in a professional manner pointing
out such thing as dimensions, tolerances, type of
material, how it goes together and parts list. Most
prototype houses require that you provide them
drawings done to an industry standard.
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23. Chapter #7
At this point you will have several choices to make:
• What type of material is required?
• How will it be put together?
• Is it easy to assemble?
• Is it easy to repair should that option exist?
• How much of the design consists of off-the-shelf
parts?
• How much of it will need to be custom made.
• Who will build it?
• Is it safe to operate?
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24. Chapter #7
• How will it be finished?
These are just a few of the things you will need to
consider when designing your product. Other things
will come up depending on the type of products you
are developing.
• Electronics
• Hydraulic
• Pneumatics
• Etc.
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25. Chapter #7
Just to name a few. This stage of your idea will help
you figure out whether you design will be cost
effective or whether you will need to rethink the
design approach.
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26. Chapter #8
This is where the real fun starts.
Now that you have the product design completed
you are ready to have one built. If your not
building it yourself you will need to start looking
for a prototype business that will be able to build it
for you. This can be frustrating to say the least but
it is also rewarding at the same time.
Most prototype businesses will provide the material
for the project themselves they just add it to the
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27. Chapter #8
cost of the prototype price. You will need to
provide the drawings and be available should they
need any questions answered.
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28. Chapter #9
This part of the project requires you to place your
product into the actual environment where it will
be used. The debug is a critical part of your design.
Think about it!
When a customer buys your product, takes it home
and starts to use it and it doesn’t work as advertised
they are not only unhappy with your product but
they are going to tell their friends about the
problems with it also.
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29. Chapter #9
We recommend you spend enough time on this
portion of the design to insure you have worked out
all the potential issues with your product. You need
to ask other people to test it also as you may have
developed what we call tunnel vision when it come
to your idea.
This means that you have worked with it so much
that you tend to understand how it operates and
therefore don’t try and perform operations with it
that you know don’t work.
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30. Chapter #9
The other critical part of the debug process is to
examine the overall feel and function of your
design to determine if you could make changes to
improve it.
This is the point where you would work out all the
problems the design has.
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31. Chapter #10
Now is the time to work out your game plan on
how much you can sell the product for versus
what it cost you to build.
The Financial Pro forma is what we are referring to
here. It will provide your potential investors a
estimated snapshot into your financial expectations
for you product. You can present this to you
investors to help them understand where their
investment will payoff. This information is an
estimate but should be close to expected.
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32. Chapter #10
To develop this Financial Pro forma you will need
to do some research.
The Pro forma financial statement is not for the
weak of heart. It requires a lot of background
research on what is required to develop one that is
acceptable to investors. It includes the following:
• P&L
• Cash Flow Statement
• Balance Sheet
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33. Chapter #10
• Breakeven
• Investor Performance: IRR, ROI, and NPV
IRR
Internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability of
potential investments. Internal rate of return is a discount rate that makes the net present value
(NPV) of all cash flows from a particular project equal to zero.
ROI
A performance measure used to evaluate the efficiency of an investment or to compare the
efficiency of a number of different investments. ROI measures the amount of return on an
investment relative to the investment’s cost.
NVP
Net Present Value (NPV) is the difference between the present value of cash inflows and the
present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of
a projected investment or project.
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34. Chapter #10
P&L
A Profit and Loss statement (P&L) is a financial
statement that summarizes the revenues, costs and
expenses incurred during a specific period of time,
usually a fiscal quarter or year. These records
provide information about a company's ability to
generate profit by increasing revenue, reducing
costs, or both.
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35. Chapter #10
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Cash Flow Statement
The Cash Flow Statement (CFS) allows investors
to understand how a company's operations are
running, where its money is coming from, and
how it is being spent. Cash flow is determined by
looking at three components by which cash enters
and leaves a company: core operations, investing
and financing.
It is a combination of Accounts receivable,
Depreciation, Inventory and Accounts payable.
36. Chapter #10
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Balance Sheet
The Balance Sheet is a statement of the assets,
liabilities, and capital of a business at a particular
point in time, detailing the balance of income and
expenditure over the preceding period. It states
these assets, liabilities, and owners' equity usually
over a 12 month period.
Breakeven
With any new product there is what is known as a
break even point.
37. Chapter #10
This is the point where the profit from the sale of
the product you are selling finally pays for the
design cost required to develop the product. At this
point you actually start to make a profit from the
sales.
Cost of material, Engineering time, Revisions,
Testing, Packaging etc. all go into determining
where that point is.
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38. Chapter #10
Investor Performance
This is the section of the Financial Pro forma that
the Investor will be most interested in. The
formulas for calculating IRR, NPV and ROI can be
found online.
The tendency will be to pad you calculation to
make things appear to be better than they actually
are. In our opinion honesty is the best policy when
working out these numbers. People that are in the
investment industry are pretty savvy and can tell
when things look on paper better than they are.
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39. Chapter #11
It’s now time to find customers who can sell
your product for you.
Obviously you have given this some thought at the
beginning of this adventure. Now is the time to get
serious about who is going to represent your
product to the public. There are several things to
consider when approaching this subject.
• Do you want to go after the Wholesalers?
• Do you want to go after the Retailers?
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40. Chapter #11
• Are you going to sell it yourself?
• Are you going to hire a Sales company?
All good questions. Each involves its own
challenges.
Approach them logically. For instance; if you are
going after just Wholesales think about where your
product will eventually end up and work
backwards.
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41. Chapter #11
i.e. assuming you have a new idea to apply paint.
Who will be using this product? Painters! Right!
Where will painters go to get this product; Paint
stores, Hardware stores, Big Box stores. Who
supplies the chain store with their product. How
will you reach these suppliers.
It is at this point you should have some sort of idea
how much you are selling your product for both
wholesale and retail
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42. Chapter #12
Production funding is probably one of the most
difficult things to acquire for most people. For the
most part you are talking of between say fifty
thousand dollars for limited production to millions
of dollars, depending on the complexity of your
product.
There are a couple of approaches you can take
when preparing to produce your product.
• Domestic Manufacturing
• Overseas Manufacturing
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43. Chapter #12
When dealing with manufacturers its best to do as
much background research on the companies you
are interested in as possible. There are literally
thousands to choose from both domestically and
overseas.
Domestic Manufacturing
Dealing with domestic companies has advantages
and disadvantages as you will find out. These
companies offer easier access, high quality and
better legal recourse should it be necessary.
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44. Chapter #12
However the cost to manufacture goods is high and
product volume requirements can be limited.
Overseas Manufacturing
These companies are less costly, can produce
higher volumes of goods and offer many more
manufacturer choices. However, there are
communication issues, theft concerns, shipping and
custom issues and of coarse legal drawbacks.
Both choices have their pros and cons as you can
see. Do the research as we said, there are lots of
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45. Chapter #12
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sites out there that discuss the subject in depth.
They have dealt with manufacturers of both
types and can guide you in the right direction.
46. Chapter #13
This is the point which you work with the
manufacturer, double checking your design to
insure that your product is designed properly for
production. You will want to do this to make sure
the product is being made as cost effect as possible.
In all likely hood the manufacturer will have
suggestions as to how things can be put together
more simply making it easier to produce the parts
and to assemble your product.
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52. Dennis Kaiser
CEO
40900 Woodward Ave.
Suite 111
Bloomfield Hills, Michigan 48304
O (248) 605-2005 x4
C (248) 343-2932
E dennis@nirdco.com
W www.nirdco.com
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