Making It To Market

Traveling the long road from new product concept to final deal completion

Whatever it is, you are convinced the idea will impact the industry and create a name for your company.

The problem is, how do you get this idea out of your head and into the marketplace?

Every successful pool product developer has walked this path, and it’s not a straight line as much as a series of rights and lefts, according to Thomas E. Mosley Jr., author of Marketing Your Invention (Upstart Publishing, 1997). “But for all its difficulties, there’s no feeling like seeing your dream come to life,” Mosley says. “Once your product is out there, you forget about all the work that you put into getting your item out before the public…until the next time.”

You won’t get any arguments from companies such as Smokarra Technologies in Salt Lake City or Crystal Clear Pool & Spa in Brantford, Ontario, Canada. While getting new products ready for the pool and spa market, both firms recently overcame a variety of obstacles, ranging from concept creation to finding initial customers.

Tom Smokoff remembers the day in spring 2000 when he and his two associates first dreamed of developing a new copper-based alternative sanitizer.

“We had helped a friend with another company develop a product, and got shoved to the side after landing a couple of good accounts for it,” says Smokoff, co-owner of Smokarra Technologies along with Tony Gamarra and Terry Ring. “The three of us were sitting in the garage sulking because we had been knocked out of the loop. We decided there was no reason we couldn’t develop our own product….We knew the right people to talk to; we had the capability. There was no reason we couldn’t try to better what was out there.”

Of course, first you have to research to see what else exists out there. For Ken Breau, president of Crystal Clear Pool & Spa, that meant hours spent at the library, on the phone, on the Internet and in discussion with pool/spa industry professionals.

“Most inventions come from necessity,” says Breau of his company’s mineral-based algicide, first envisioned in 1994. “In about 1998, we starting taking a good look at the marketplace for what else was out there, how much it would cost to make this and whether we could make money with it,” he recalls. “We thought the numbers looked good.”

But money-making potential isn’t the only thing to ponder. A small business needs to consider the role it wishes to play in production and marketing of a new product because this choice determines the dollars and hours spent — and who will spend them. Smokoff says his company could choose to manufacture its product, subcontract the product to another firm, or license the technology to a manufacturer.

As a manufacturer, Smokarra Technologies would control its product from start to finish, including development and marketing, says Smokoff. But all of the financial responsibility would be theirs, too. “It’s a high level of business risk,” he says. “We’d need our own production plant and a lot more capital resources, which would probably mean less money for research and development. We’d also have to come up with our own access to distribution.”

In a subcontracting agreement — in which a second party handles production and distribution while Smokarra Technologies tackles research and development issues — Smokarra would maintain some control of the product’s quality. They would also benefit from the immediate brand awareness of whomever the company works with, Smokoff says. But there’s still heavy business risk, and access to the pool and spa market is limited to whatever contacts the production company has, adds Smokoff.

Initially, Breau went the subcontracting route, hooking up with a small independent manufacturer in Buffalo, N.Y. “It was a fair deal to me,” Breau says. “He already had the equipment in place to manufacture the product, while I had the money and persistence to go through the necessary regulatory hoops.”

Smokoff says his firm chose the approach that provides lower financial risk, an experienced manufacturer at the helm and brand acceptance. He and his business partners licensed the technology to a manufacturer, who controls product marketing, production and distribution, then pays residuals to Smokarra.

But patent infringement is a potential problem in any such setup, as are the constraints of a long-term contract and loss of quality control. “When someone gets your product, you’re tied into a 5- to 10-year agreement,” Smokoff says. “You’d better be happy with what they do with your product during that time.”

In bringing a product to market, the amount of money needed depends on the type of product. This could mean tens of thousands of dollars, says Smokoff. There are registration fees, product development costs, testing needs and rework efforts — and that’s before the item is actually mass-produced. “We’ve spent close to $50,000 so far, and we’re not completely finished,” Smokoff says. “The three of us were fortunate enough to be able to do it all out of pocket…but from this point, we’ll probably have a private stock offering among friends to raise additional funds.”

Fund-seekers have several options. The more conventional methods are pulling it out of the bank or borrowing against the house or business — recommended only if you truly believe in the product, Mosley says. “If there’s any doubt at all in your mind, don’t do it,” he says. “If you realize and accept the risk, go for it…but not until.”

Another option, says Mosley, is seeking out venture capitalists — individuals or groups who loan money for enterprise projects in exchange for a portion of the product’s eventual profits. Many venture capitalists will take a gamble on the next wonder product, but be careful what you agree to, he warns. Some may want almost all profits or total control of the product after a set time.

“We considered using them,” Smokoff says. “But they pretty much want both arms, both legs and your first-born child to help you. We’re not willing to give them that.”

There are good, fair venture capitalists out there, but finding them requires doing some homework. Search sites on the Web include businesspartners.net, fundingpost.com and vcsearch.com.

A third option is canvassing an existing manufacturer for product development, but Mosley again urges caution. Occasionally, a manufacturer may be so impressed by a concept that it will happily pay for all testing and development — and the right to market the product, upon the approval of the Environmental Protection Agency (EPA). Unfortunately, there’s also a chance that the manufacturer may ultimately cut you out of the picture if you’re not careful, Mosley says.

Any company that wants to develop a new chemical product will need access to a laboratory — its own or that of a specialist — for various rounds of chemical testing required by agencies such as the EPA, the U.S. Food and Drug Administration, and state environmental health departments. Smokoff says his company’s search could have been very easy if it merely wanted someone qualified to test the product’s bacteria kill rates. “But we decided we’d rather have an EPA-approved lab,” he says. “It might cost more initially, but we’d save money in the long run because we wouldn’t have to do the testing again for other agencies.”

Considering that the first round of tests alone cost his company about $8,500 and that future tests range from $200 to $2,000 each, avoiding any sort of test duplication is a smart move, Smokoff adds.

When finding a laboratory, Smokarra Technologies did its search the old-fashioned way — via the Yellow Pages. “We made about 15 or 20 calls to labs nationwide until we found an EPA-approved lab that actually did the testing we needed,” Smokoff says. “It turned out we were lucky enough to find a local one.”

The biggest headache can be the EPA, which approves the wording that can be used on your product’s description. Just about anyone who has gone through the process will tell you it’s no picnic getting the terminology straight. “We spent hours on the phone with the EPA just about labeling,” Smokoff says. “There’s a fine line on what can be said. You can’t call it a ‘sanitizer’ if it’s not approved as one…unless you want to risk the EPA one day asking you to pull everything off the shelves and have it relabeled.”

It’s possible to hire people to produce your entire EPA application packet, complete with research, test results and material safety data sheets, Breau says. But he took the advice of an EPA representative and did it himself. “If you don’t do it yourself just once, you’ll never know what’s involved,” Breau says. “It probably took 8 to 11 months to create a 2- to 3-inch-thick binder with everything needed to support the application, and it meant working a lot of hours in the evening to get it done. But in the end, you appreciate all the work that goes into one of these items.”

When you’re ready to submit the EPA paperwork for approval, it never hurts to have an “insider” — someone who knows the ins and outs of dealing with the government agency, Smokoff says. “Someone who is used to working with the EPA can knock on the door in Washington or Denver and present the material, then work to get it approved,” Smokoff says.

Expect approval, or additional requirement notices, within 90 to 180 days, a bit less with an insider’s help. Then get ready to “do it all over again at the state level,” Breau says.

Stories abound throughout the industry about how every state’s regulations are different and how certain states — California, Florida and New York — are the toughest in which to get new chemicals approved for sale. But Breau says he’s learned “not to take anything for gospel.”

Breau says he had often heard how California was “the state to avoid” when registering pool chemicals for sale, due to its high number of requirements, expensive fees and long approval times. “On a whim, I called the California Department of Pesticide Regulation and asked what was involved, and it didn’t appear to be that difficult,” Breau says. “We had a few snags, but overall, the cooperation was fantastic. It totally blew away any preconceptions that I had. The state realized what we were trying to do and it helped us get it done.”

Ironically, the cooperation level in California was better than in his native Canada, Breau notes. “We submitted a Canadian application the same time we did California’s. California took about seven months, while the Canadian application was almost a year,” he says. “I went to every possible [Canadian] channel and got no help whatsoever. It got to where I contacted my member of Parliament to question why I was approved to sell the product in the U.S., but not in the very country the business was based in.”

MORE INFORMATION
Letter of the Law
These resources may come in handy when you bring a new product to market.