In the era of high-profile designers, it’s easy to forget another creative archetype: the inventor. The unique breed with the spirit of an entrepreneur and the design sensibility of an infomercial, who wants nothing more than to swim with the chum in Shark Tank and get a new product onto the shelves of your local Target.
Tom Gray is an inventor. Originally from Australia, his Kansas City business the Handy Camel launched in the United States with a snack bag clip that sold over 100,000 units, and now, Gray has products in Sherwin Williams, on QVC, and in Walmart; he was finalizing details with Home Depot on an order of 1.2 million garden irrigators when we spoke. What did we speak about? His other passion–mentoring inventors who are trying to bring their own creations to market.
Here are four big mistakes Gray has made (and seen others make), when bringing products to market. Consider it a cautionary tale to would-be inventors.
Everyone knows it’s vital to patent an invention. However, the how and the why might surprise you. Gray’s advice is to get a patent written by a reputable law firm, but to understand that you’ll probably never take it to court.
First, the why: You want a patent in case a bigger company rips off your idea. That’s no guarantee that you’ll be protected, of course; years of litigation could still sink your business. Gray recommends pursuing a patent in court only on high-ticket items–serious technological IP–or when your invention is the core of your entire business, from which many spin-off items form a larger brand that you imagine having major staying power.
For most cases, a patent serves as a deterrent. “Patent pending” status will keep the swarm of copycats at bay for a critical period that allows you to launch your product. “What I’ve found is . . . when people think there’s a patent on the product, or patent pending, they may stay away. If there’s not a patent pending, it’s a free-for-all,” he says. Secondly, if you want retail shelf space, you’ll want that patent, too. “Large retailers want you to have a watertight patent, because they’re investing very heavily,” says Gray. A good patent is, in essence, less an insurance policy than the price of invention.
As for how to get one: Many people who approach his company write their own patents, Gray says. Some services insist that you can easily patent your idea without legal representation, but Gray cautions against it. “The problem is, if your product becomes successful, that patent, if you’ve written it yourself or done it on the cheap, is often worth very, very little,” he says.
Even “watertight” patents don’t protect you indefinitely–that includes ones that haven’t expired. “Virtually every product I’ve launched or been involved with has been copied at one stage or another,” says Gray. “It’s completely common now. If you’ve had any bit of success, or you’ve been in negotiations with a company and they fell through, they can copy it instead [of signing with you].” Even big retailers know that since you’re unlikely to take them to court, they can circumvent you and go right to the factory making your goods.
Going from invention to market takes time–from 18 months to two years. After that, you’ll still be hustling from trade show to trade show to create buzz, and you’ll want a coordinated social media campaign and commercial spots. All in all, you need years of runway to launch a successful product.
“The capital needed is pretty extensive,” says Gray. “We spent $250,000 on our first product launch. That was great. It got us in the eyeballs of retailers.” In other words, a startup’s marketing budget is as important for catching retailers’ eyes as it is for consumers.’ And big-box retailers recommend that, even when a product is on store shelves, major budget goes to promoting it on social media and television–Gray’s heard the figure of $1 million to $2 million over the course of the first nine months to be pretty common for anyone who hopes to be in thousands of stores.
“The hardest part by far–once you do get placed on the shelf–is marketing the product to the nation and getting it off the shelf,” says Gray. “With a new invention, no one knows it exists.”
But what about disruption? What about the world of Kickstarter and Indiegogo, when all you need is that core invention, and troves of people will show up to throw you their life savings if it’s good enough? That’s largely an illusion, Gray argues, and it takes a lot of cash to sustain it.
“To get noticed on those platforms, you need to invest, too,” says Gray. “Between videos and the huge push on social media, I know some success stories who are spending $1,000 to $1,500 a day–$50,000 to $60,000 can be soaked into that first month just for marketing.” Gray points to his friends at Trident Design who regularly make such investments to secure successful crowdfunding campaigns, and has heard similar numbers from consultants. Suddenly, $100,000 in Kickstarter funding doesn’t look like very much.
In any business plan, it’s always tempting to hike up the price of your core product or service. All those zeros just seem to balance things better. The problem is that consumers don’t give a crap about your business plan. They only see your product and what they believe it’s worth. And that’s what they’re buying. As a result, you need to keep your pricing competitive.
“It’s hard, early on. You don’t own much of the supply chain. The sales force, the warehouse, the relationship with the big-box store. There are so many people in the middle that you have no choice but to set your price reasonably high to get your money,” says Gray. “You have a product. It should be $20, but you have it at $29. That can be the killer every time, and the product does not move off the shelf.”
Of course it’s unsettling to rely on the scale of a hit product to make decent margins, but pricing a product too high has its own costs. Most retailers will now do a small-scale trial run on your product, in just a few dozen stores, before taking it nationwide. If it’s priced too high, it might flop, and you’ll lose the chance to have them carry that product again. Furthermore, retailers can often send the product back that doesn’t sell. That’s easily five to six figures in inventory–products you have paid for–that arrive back on your doorstep and still need to be sold by someone.
Having so much of your own cash tied up in stagnant inventory has costs of its own, creating a financial hole that you can’t easily dig out of.
Gray repeats something I’ve heard before: “They say 97% of new products don’t get to retail. Two fall off shelf in a year. One is a success. So you have a 1% success rate and a huge amount of rejection,” says Gray. “In my experience, this is pretty much true.”
All entrepreneurs know to thicken their skin for wave after wave of rejection, but that’s not what’s going to make you a success, Gray argues. It’s important to know why you’re getting so many “nos” if you expect to get a “yes.”
“People don’t ask why they’re getting rejected,” says Gray. “[For the rejector], the human mentality is to say ‘no’ and move on. If only people could ask why, they’ll tell you straight out: ‘We’ve had three that never succeeded’ or ‘we know what it costs to manufacture this product and you’re being too greedy.'”
Gray’s advice in this regard is simple–just say you need honest feedback on why you’re getting rejected. More often than not, you’ll get it, and it can be invaluable information in saving your invention. In Gray’s experience, he was pitching the Handy Camel to retailers, confused why he was getting rejected. Then he heard from a few contacts that there was nothing wrong with the product: He was pitching shipping that product in boxes of 20 rather than the standard box of just six. For Gray’s business, shipping Walmart 20 clips in a single box would save him a lot of overhead in postage, but for Walmart, it meant that, logistically, they’d be stocking 20 units on the shelf at a time between restocks (which would, in turn, eat into their shelf space for other products).
“No one told me that!” says Gray. “Not learning from those rejections is a big thing.”