Proof of profit the way to avoid prototype pitfalls

WORLDWIDE, more than $100 billion worth of counterfeit products, from Louis Vuitton handbags to Rolex watches, are sold every year.

WORLDWIDE, more than $100 billion worth of counterfeit products, from Louis Vuitton handbags to Rolex watches, are sold every year.

I have developed a great idea, which will allow shoppers to check the authenticity of the product by using their smartphone before they buy. It will add only a fraction of the cost of the product for the manufacturer, who will be more than happy to pay this little extra cost to protect the brand and increase sales. However, I do not yet have a working prototype, which requires significant investment. I do not know how and who to approach for venture capital funding. I am so confident about the success of this idea that I feel like selling my house and investing in this technology. Your advice will be very much appreciated.

In life, there is no shortage of money, however, there is a shortage of opportunities. So if the product works as well as you say, there will be no issue with getting the money you need.

Let's be clear here. Everyone thinks they have the answer to something and most people think their big idea is going to make them rich. Many people overrate what they have and turn their lives upside down to make it happen. I'm not saying that's the case with you, but venture capitalists cannot deal with every dreamer.

If your idea is truly the best thing since sliced bread, you need to be able to prove it. An idea doesn't have to be life changing in order to get funded it has to have a business plan that shows it has the ability to be profitable. If I was a venture capitalist and you were putting forth this proposal, I'd want to know why I should believe you. Where is the proof and how will it make money?

Your idea is reliant on the fact that makers of global luxury brands will find your proposition irresistible and they will have to have it. But what happens if they don't? Then what will you do?

What about their customers? If someone is shopping at a credible retailer, they are probably confident that their purchase is the real deal. If they are shopping off the footpath, or out of a briefcase, it's likely they are very aware that they're about to buy a knock-off. So what is your product proposition then?

I know this may sound harsh but it's a good lesson for you because the questions I'm putting forward are exactly the ones that you'll be asked by anyone looking at funding you.

Before concerning yourself with the prototype, you need to have a long, hard look at your proposal and all the potential pitfalls and obstacles you may face along the way.

If your evidence shows that what you say is possible and profitable, then the money will be easy. But no one will waste time on your proposal otherwise. Passion is an admirable trait but proof of profit is what investors will want to see.

My best advice to you is this - don't go selling your house or quitting your job until you have an airtight business proposal that can get you over the line.

Mark Bouris is the executive chairman of Yellow Brick Road, a wealth-management company and small business adviser that sells products and services for home loans, financial planning, insurance, superannuation, investments, accounting and tax. His advice here is intended as guidance only.

Mark Bouris will be hosting his Secrets to Business Success seminar on May 30. For details, go to

If you have a question for Mark Bouris, email it to Max Mason at

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