You hear it all the time from inventors. They proclaim with utter certainty that “everyone is going to need to buy their invention.” Less grandiose, but certainly no less confident, proclamations may go something like this: “There are nearly 320 million people in the United States. If only half of them buy my invention that is 160 million sales!”
Inventors are understandably very excited, and if you spend enough time working on an invention it does become “your baby.” It is easy to lose objectivity. But at the intersection of pride and greed many an inventor will become unrealistic, which is the kiss of death if you are trying to do business with anyone reputable.
There is nothing wrong with dreaming, but there is an extremely important cautionary tale to be told about the tremendous harm that can be done to opportunity when inventors exaggerate the market size for their invention.
First, let’s start with the obvious. No product or service is ever going to be purchased by everyone, period. Remember, less than 36% of America watches the Super Bowl, about half of the people in the U.S. do not file or are not counted on a federal income tax filing, only 79% of Americans know that the earth revolves around the sun and only 76% of Americans know that we achieved our independence from the England/Great Britain/UK. See Gallup poll. So 100% is never achievable.
If you are serious about determining the size of the market you will research publicly available information and dig through the data to see what realistic and plausible assertions you can make. You could hire experts to provide a market analysis, but going through the effort of trying to realistically figure things out yourself is a very important step, and the only cost you will incur is the time you invest. In exchange you will gain critical insights into all aspects of the market you are seeking to enter. If you are going to succeed in business knowledge must be your friend.
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To give you an idea of how you may be able to make use of freely available data, consider the data provided by the Census Bureau. Let’s take for example a baby product aimed at children learning to walk. You could quite quickly learn from the 2010 Census data that there were 20.2 million children under the age of 5 in the United States at the time of the Census, which was an increase of 5.3% when compared to 2000. See Table 1. But many children under 5 already know how to walk, and still others in the under 5 category are too young to learn to walk. That would suggest that your potential market is some fraction of those 20.2 million children, certainly not all of them.
Since we are talking about trying to come up with a plausible estimation based on factual information with reasonable assumptions, let’s say that the invention would be appropriate for use with children who are between 9 months to 16 months old. If we were to assume an evenly distributed population, that would suggest 13.3% of those 20.2 million children are the target market, which corresponds to approximately 2.7 million children.
But will the parents of all 2.7 million children purchase your invention? No. It is important to always remember that 100% adoption of the target market is unobtainable. So there will be a much smaller subset of potential purchasers. For example, according to the United States Department of Agriculture, in 2013 only 80.5% of households with children under 18 were food secure. Now we are starting to compare apples to oranges a bit because we don’t know for certain that we are dealing with an even distribution with respect to households with children under 5, which is where we obtained our base data, and households with children under 18. Nevertheless, the point here is that it would seem unrealistic to expect all households with children to purchase a particular invention when nearly 20% of U.S. households with children have difficulty finding enough money to buy the food they need for the household.
Notice also that we haven’t started to consider how many multiple child households there are in the United States, whether the invention is one that could be resold or passed on once used, or the price point of the invention, which could weed out a great many potential purchasers. For this reason it is generally considered difficult to achieve even 5% penetration within the realistic potential market, at least initially.
So let’s be generous and say that your invention is both revolutionary and appropriately priced to be accessible to a large percentage of the potential market. Even if you do achieve 5% market penetration in the first year that means you are looking at 135,000 sales, which is probably far fewer than you would have thought prior to going through this endeavor.
While you may be disheartened by an appropriately estimated market it is important not to despair. Spending the time to realistically approximate the size of the market is useful for at least two different reasons. First, the market size may wind up being so small that pursuing the invention just doesn’t make sense, which frees you up to work on whatever your next invention will be, and there will be a next invention if you are an inventor.
Second, if you spend the time to realistically figure out the market size you will be viewed very differently than the inventor who can’t be bothered with such research and just assumes that everyone, or nearly everyone, will want to purchase the invention. Whether you are seeking a licensing agreement, or you are looking for investors or partners, those who engage inventing in a business responsible way will be viewed differently and ultimately have a disproportionate chance of succeeding.
People with money or those who control distribution channels don’t usually prefer to do business with those who are not professional. They also don’t appreciate exaggeration because it screams that you are unrealistic, which means you will be difficult to work with in the long run. Nobody enters a business deal with someone when they think they will only create a headache.
For those seeking additional reading on the basics of inventing I recommend:
- Inventing Strategy 101: Laying the Foundation for Business Success
- Inventing 101: Protecting Your Invention When You Need Help
- How do you know if you have a licensable product?
- Inventing to Solve Problems
- An Introduction to Patent Claims
- There is no such thing as a provisional patent
- First to File Means File First! The Risk of Not Immediately Filing a Patent Application
- Understanding Obviousness: John Deere and the Basics
- Describing an Invention in a Patent Application
- When should you do a Patent Search?
- Plausibly estimating the market for your invention
- Every invention starts with an idea
- Patent Drafting: Identifying the Patentable Feature
- The Importance of Keeping an Expansive View of the Invention
- Patent Application Drafting: Ambiguity and Assumptions are the Enemy
- Getting Your Invention to Market: Licensing vs. Manufacturing
- Obtaining Exclusive Rights for Your Invention in the United States
- Completely Describe Your Invention in a Patent Application
- The Successful Inventor: Patenting Improvements
- Protecting Ideas: Can Ideas Be Protected or Patented?
- When is an Invention Obvious?
- How to Find Valuable Invention Services
- A Better Mouse Trap: Patents and the Road to Riches
- I Can’t Find Prior Art for My Invention
- Keep Your Money In Your Wallet Until Proof of Concept
- Invention to Patent: Pitfalls, Perils and Process
- Turn Your Idea into an Invention with a Good Description
- Financially Responsible Inventing: Prototype Basics
- Patent Searches: A Great Opportunity to Focus on What is Unique
- The Business Responsible Approach to Inventing
- Inventing 101: Protecting Your Invention When You Need Help
- The Top 5 Mistakes Inventors Make
- Keeping a Good Invention Notebook
- Inventor Pitfalls: Causing Irretrievable Patent Damage
- Patentability Overview: When can an Invention be Patented?
- Invention Services: Finding Valuable Services & Avoiding Scams
- When Should a Do It Yourself Inventor Seek Patent Assistance?
- One Simple Idea: Turn Your Dreams into a Licensing Goldmine
- Moving Forward Responsibly with Your Invention Idea