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Developing Ideas

There are three main stages in developing an idea and they can be summarised as technical, commercial, and financial.

The initial technical challenges are proving that the concept works, protecting the idea, and perhaps building prototypes.

These are soon overtaken by the major commercial challenge of proving the market exists by selling products or services. The third stage is of course running a successful business.

Getting an Idea to Market

The initial stages are relatively low cost but finance becomes increasingly more important as the idea develops.

It is really important to get these checks done first before spending any money on prototypes or business development.

If the idea is not protectable in some way it will be very difficult to raise investment later. If the idea doesn’t work technically then it may be possible to create an alternative solution before going on.

Getting the Idea to Market

If the idea is a product or service then there is a choice between creating the product yourself or licensing the idea to an existing company.

The biggest challenge with most new products is finding a ‘Route to Market’. Licensing the idea to someone who has already solved that problem is usually the best way to go. In return you can expect to receive a licence payment that may typically be between 5% and 10% of the wholesale price. The retail price is never used because the manufacturer has no control over it.
Alternatively you can raise money and invest in manufacturing and sales. The potential rewards may be higher, but so are the risks. It may be unwise to create a business around a single product because it may have a limited life, even if it is successful.