Profit Estimating

 

Predicting future profits includes market analysis. Some of the questions to ask are:

-Is there a small percent of the world’s population exceeding 6 billion that might buy the invention?

-Are the manufacturing costs via mass production going to allow a price lower than the ideal sales price? If manufacturing costs are high, can those costs be reduced over time as enough sales come in to cover more research?

-Is the invention safe? If not, can it be innovated to incorporate safety?

-Can the marketplace understand the simplified version of the invention? The detailed invention features can be learned after the basic concept is understood. People need to understand it before they will buy it. Patent rights and research might be complex, but it is the final product that needs to sell itself.

-Can one think up of a good trade mark to name the invention?

 

Some of the financial issues might be as follows.

Estimating total profit for all partners per year. The estimate can take into account the following:

-Consider the demand, and how many units may be sold to a portion of the world population which reached 6 billion back in 1999, and is expected to be 7 billion in 2013.

-Determine an approximate wholesale price.

-Calculate a possible 5% royalty.

-Multiplication: Number of units sold times the Price times .05 (royalty) equals Total Projected Profit per annum.

First Example:

0.0001 Billion units are sold a $800 each earning .05% royalty). This brings royalties of four million per year. The four hundred million is the total royalty if one out of 6,000 people in the world bought the product each year. Over ten years the total royalty would be forty million dollars.

Second Example:

0.1 Billion units are sold a $80 each earning .05% royalty). This brings royalties of four hundred million per year. The four hundred million is the total royalty if one out of 60 people in the world bought the product each year. Over ten years the total royalty would be four billion dollars.

Notes on Examples:

-These are purely theoretical scenarios. You realize there are high chances that an invention will not succeed. Only one of the inventions you work on needs to prosper, to intern reward you well. There’s the famous quote stating, "nothing ventured nothing gained".

-Even a fraction of the above possible royalty might make one very happy.

-Realize that products often need to be replaced either due to wear and tear, or because new versions have more bells and whistles.

-Patents are valid for approximately 18-20 years.

(C) World Patent Rights 2001