If You Build It... Will they come? If you think your invention could be the foundation for a business, here's how to make the leap.

Should you start a business based on your invention? The pros ofstarting your own business are that you can have greater controlover your product's success and greater potential for makingmore money. You'll also be better positioned to introduce aseries of products, respond quickly to market changes and maximizeyour creativity in all aspects of the business.

The cons? This route is the most expensive and usually requiresdealing with investors. It means you have to learn how to run acompany, and it often obliges you to plow all your earnings backinto your company to fuel its growth. If you're stillinterested in starting a company based on your invention, payattention to the following keys to startup.

Money Matters
Financing is a major ongoing concern for an inventor looking tobuild a company. You'll have to fund the beginning stages ofthe company yourself or with the help of investors, friends or acontract manufacturer. Then you usually need to cover operatingcosts as well as initial marketing and manufacturing costs.Basically, you'll have to fund these four stages ofdevelopment:

1. Concept stage: This includes developing the idea andits market potential, and building models or prototypes. Fundingsources for this and the next stage include yourself, family andfriends, a contract manufacturer, or a person in the industry.

2. Verification stage: This includes sellingpreproduction or pilot production runs to actual customers in asmall market. If that's too expensive, this stage should atleast include either trade-show attendance or interviews with 10 to15 potential customers in the distribution network.

3. Initial production runs: Typically, new BIZ Experiencessare more worried about losing a lot of money on their product thanthey are about having a low profit margin on their initialproduction run. Frequently, inventors will use low-cost, temporarytooling for their initial run. Temporary tooling costs only 15percent to 20 percent as much as permanent tooling. It might onlylast one or two runs, but it allows the company to determine if theproduct will definitely sell. Funding sources include outside orindustry investors, contract manufacturers, or possibledistributors of your product. You might also get investments fromfamily and friends, although they'll need significant financialresources to back this stage of growth.

4. Full-scale production: Once you have proved throughseveral trials that the product will sell, you can get moretraditional funding for full-scale production.

Inventors divide their growth into these four stages for tworeasons: It's easier to get investments in small chunks whileyou prove how your product will sell, and it allows you to keep acontrolling interest in your company. Your business becomes muchmore valuable to investors as you complete each step. Investors aregoing to demand a substantial portion of the company if you ask formoney before you've made any discernible progress in themarket. Funding sources include banks and SBA loans, venturecapitalists, larger investors, and contract manufacturers.

Do Your Research
You'll want to conduct thorough research as you'redeveloping your invention, not only to ensure that you're notwasting your money or time, but also to present a strong case toyour potential investors. Your research should start before youspend any money and continue until the product is introduced to themarket. You can expect to go through these stages:

• Initial research: Before starting out,validate your premise, and verify that your product is meeting aprimary customer need. People express many desires, but theygenerally won't buy something unless they actually needit.
• Prototype research: Make sure the productdoes what people want and performs well enough for people to buyit. Also, be sure your product has all the features end users want.Let them try out the product, and get their reactions.

You should make a prototype for both mechanical testing and formarket research. Do this no matter how sure you are that theproduct will sell. Most inventions must go through three or fourprototypes before they are perfected from both a manufacturing anda marketing point of view. In the long run, making those prototypessaves you lots of money and allows you to produce the best possibleproduct.

• Preproduction-model testing: This stageverifies once again that the product works well enough for peopleto buy it and that people believe your product is worth the priceyou're charging. Do this even if you had good research resultswith your prototype. You may have since made changes that seemminor to you but are important to the end user.

When starting out, most inventors should use a contractmanufacturer and concentrate their energies on marketing theproduct. Tooling and other startup manufacturing costs are veryhigh, and manufacturing can be a complex process. Don't diluteyour efforts as you're beginning to sell the product. Once youget your sales going, you can take over the manufacturing processif you choose.

It's Who You Know
Unless you're very well-financed, your most important contactsare people who can help you raise money. Your second-most importantcontacts are industry insiders who are in the distribution channeland can help you launch the product. Your third-most importantcontacts are end users or distributors who can give or help youmake a big sale.

Many companies get initial funding from angel investors-peoplewho might invest $25,000 to $50,000 to help get a product off theground. Angels are more interested in helping new businesses thanin making tons of money for themselves. Some of these investors,especially retired ones, are also willing to mentor you throughoutthe product-introduction process. Make contacts in the industryfirst, and find one or two people who will help you learn themarket. Then look for an angel investor to join your team.

Need a lifeline?
Try some of these helpful resources for inventors:

• BIZ Experiencesship courses at local colleges:These courses can introduce you to all the legal requirements andramifications of starting a business and help you set up youradministrative functions. Many colleges have special programs forbusinesspeople. Your local Small Business Development Center willknow about the courses in your area. Visit www.sba.gov/sbdc tofind the closest center.
• Inventors clubs: Go to www.uiausa.com to finda club in your area. Seek an organization that lists localengineers, industrial designers and prototype builders who willhelp you for below-market rates.
• Manufacturers' Agents NationalAssociation: MANA is your source for manufacturers' salesreps who may want to carry your product. See www.manaonline.org,or contact them at (877) 626-2776.
• The Office of the Independent Inventor:This division of the U.S. Patent and Trademark Office publishesinformation to help inventors better understand and access thePatent Office. See www.uspto.gov.
• Trade publications: Check out the GaleDirectory of Publications and Broadcast Media for a list oftrade magazines, or find trade shows near you with Trade ShowsWorldwide. For more information, see www.gale.com, or call(800) 877-4253.

Security System
As an inventor building a company, you're probably investingyears of your life and much, if not all, of your personal assets inyour product. So you'd be foolish not to get every ounce ofpatent, trademark and copyright protection you can afford. Beforeproceeding very far, investigate the type of protection you canobtain. Investors frequently get a patent attorney's opinionabout the strength of a patent before investing. You should alsoget an opinion from a patent attorney about just how strong yourpatent protection can be. If your attorney feels you'll only beable to get narrow protection, consider either a private-labelsales agreement or a joint-venture introduction to cut your risks.Or you may have to come up with another product for which broaderpatent protection can be obtained.