Jim, that is great information for all Inventors plannning on selling their product themselves. On the other side of the coin my experience talking with Inventors about licensing their invention to a companybrings out another issue. They seem to think they will receive royalties based on the price of the item in the store. When in reality they are receiving a royalty based on the price the company sells the item to the retailer.
Keep up the great work helping Inventors see both sides of this business.

http://www.rogerbrown.net

Jim and Roger
Some time ago, when I approached BBB with one of my products, they let me know that they expected a margin of 50% on non-electric products and a margin of 40% on electric products. So, the box (with no electronics) that the retailer sells for $20 must be delivered to him for $10. That $10 has to cover our cost to manufacture, package and deliver and provide us with a reasonable profit. The box with electronics that sells for $20 at retail gets delivered by us for $12. Now, the $12 has to cover our cost to manufacture, package and deliver and provide us with a reasonable profit.
Bert

Also, I think I read somewhere that in order for anybody to sell a product via TV infomercial, they expect the cost to be no more than one-fifth the price quoted in the infomercial.

Hey Bert…

Yes, those margins are normal and some retailers expect even higher such as 60-65 margin points! It can be tricky to be able to profit from selling your product so leaning on your supplier to lower costs or give you volume breaks is critical for you to achieve profits for yourself.

Infomercials do work on this type of ratio…

Jim

Jim:
This is all good information; however, with all due respect, I must comment on your first sentence. Wouldn’t you want to run the numbers before spending money on patents and packaging? Wouldn’t you want to cost out your materials, labor and overhead as well as any start-up costs and other one-time costs, bring it down to cost per item and compare that to the shelf price of comparable products? That should give you an indication of whether you should even persue the development, patent and packaging.

Perhaps I’m getting a bit detailed here, and CPA’s do tend to pick things apart.

Jim, I have the greatest respect for you, but I truely believe you should conduct a feasibility study first and foremost.

I do agree with the rest of your post.

Yes Cindy and I appreciate your thoughts and great to hear from you…and I always tell people to first gather quotes for all phases of work including patents, packaging, engineering, design, etc before jumping into the pool so to speak. My writings all over the internet suggest this….so hope you have been reading them! I see too many inventors blowing their life savings by NOT doing their homework and not understanding the true costs of developing and selling a product and they need to before they start writing checks.

Feasibility studies or as I call them viability studies are part of what I suggest to all inventors as one of the very first steps in the inventing process – just after doing a patent search to ensure you are not infringing on someone else’s patent. It is important for inventors to get the opinions of people they dont know in order to start to gauge consumer interest and to learn what people are willing to pay, where they would purchase, etc, etc.

Hope this clarifies and enjoy the day!!

Jim

Thank you for the feedback, Jim. Yes, your post does clarify and I am pleased you reinterated it here.

And I whole heartedly agree with getting opinions on your invention. This is an important qualitative step in the development process. I have a patent-pending product. I showed it to friends and family. Of course, they all loved it. However, I felt that they were just being nice and that they didn’t really want to hurt my feelings. So, I approached a stranger in an airport and showed her my portfolio. Just a couple of pictures. She liked it so much that she has been staying in contact with me and is one of my most ardent cheerleaders. I actually think she will be the first to purchase it if/when it goes on the market.

My point in all this is that opinions do count and I have found that they should be gathered from both people you know and those you don’t. Just a word of caution though, be careful how much you devulge regarding your invention.

Take care.

I think what Cindy and Jim have said are key factors.You need to get some objective and favoravble input on an idea to go forward with it.You need to know whether you can get it to the market at a cost to retail at a price that the consumer will buy it,and everyone in the supply chain will profit.
But to ascertain the cost of production before adequate prototyping is difficult,so you must know the aproximate retail price range for similar products,and bear that in mind as prototyping progresses.
If your prototyping strongly indicates that costs of production is eating/will eat into the retail price,it is time to reconsider the project.
Maybe your usp’s are strong,but as people are saying,educating the public hinders sales.
The financials are a real guide and discipline,and can provide inarguable rationals one way or the other for involvement with a project.

There seems to be a real sense to innovation equating with economy-doing something easier,quicker,more efficiently for the same price or less.Seems like a good invention guide.[I suppose if the gains are significant,pricing can be adjusted].

Abacus, you overlooked one option. Before scraping your idea look at the materials used to make your product. Example: Does it really need chrome handles or would wood or plastic work just as well? Is the packaging oversized for the product?
There are ways to trim costs and still keep quality. Consider this; A golden toilet and a porcelain toilet both have one thing in common, they need to flush. Which one would you mass market to the general public?

http://www.rogerbrown.net

You’re right,Roger.You dont want to chuck the baby out with the bathwater.You have to know the cost of the proposed venture,personnally,materially and economically,pay attention and be smart.