Whats my next step?

My name is Stephen. This is my first time at your site so I'll explain where I'm at with my product and hopefully I can get a little feedback on what you might think is the best "next step".

1.) Had an idea for a product and sat down at the work bench and made a working rough prototype right away. Result- "IT WORKS!" and very well. 2.) Enlisted the help of a friend, refined a better prototype made from better materials.
Result - a usable prototype and twice the enthusiasm. I now have an engineer on board. 3.) Secured a patent pending covering the invention and it's offspring which are obvious.
Result - Over 2 grand in debt. 4.) Found a designer who will do the CAD design and get us a manufacturable prototype.
Result - possible 3 to 5 grand more debt, as soon as I say lets go. 5.) Realized this is going to get expensive and I don't have the kind of money it will take to get this to market. Single dad just making ends meet (sometimes). I believe this is such a good product and I can see it selling in huge volumes, eventually moving into so many other areas. Everyone I show it to thinks it's a good product as well. Result - 2-3 Friends want to invest. That is a nervous proposal. Business plan? Marketing? Register a Business? Incorporate? I am going to do this, it's just too good to let go. It's a life changer but my next move is?

Any help you may be able to provide would be greatly appreciated. Thanks, Stephen

In short, build a business plan. Spend some time thinking about and researching what would be needed to bring your idea to market, who your competitors will be, what the market will be, what segments of that market you will address, and a financial plan for doing all of the above. Once you have those answers, it will be easier to understand the next steps. You don't want to raise $25K from your friends only to discover that you will need $1mm to take it to market. Only then to discover that competitors clone your idea and it will take another $1mm to defend the patent.

And you'll need a business plan for almost any of you next steps anyway. Any smart investor, banker, or early stage employee will want to understand your plan.

Also, in an earlier comment you say "I have no competitors that I can find, [in] hours of searching internet and magazines I have found nothing like it." Don't accept that: if you think there is no competition then you aren't thinking broadly enough. Think of the iPad. When it was first released, there was nothing like it. But in Steve Jobs' introduction speech he specifically talked about the competition: smartphones, netbooks and laptops. And why the iPad would have an advantage.

The following strategic planning worksheet was designed for IT companies, but it's really valuable for all kinds of start ups : http://www.strategicmessaging.com/strategy-for-it-vendors-a-worksheet/2011/09/18/. I'd encourage you to fill it out, then build a fiscal plan to allow you to execute on that strategy.

Another good place to start is the SBA's site on creating a business plan.

Your next step should be researching what your competitors are doing (if your product has any competitors that is). It's foolish to release a product whether it be a physical product or online product without the adequate research. I also suggest before taking investment from your friends or anyone you enlist the services of a lawyer, sit down and work out what kind of promises you should be making to your investors, as well as obligations and expectations to your investors as well.

A good idea is good, a working prototype is great but as you said you're a single father only just scraping by, before you go getting into debt or causing yourself legal complications by taking investment money get legal advice and perhaps consider expanding your research circle to include non-friends and family. Friends and family I find are too kind and dishonest when giving feedback, family and friends are rarely ever honest especially if they don't want to hurt your feelings.

By no means this is complete.

But I think this is point to make things clear before moving further.
Like -

• Where is my market ?
  • is it local and/or nationwide and/or international ?
  • who will buy my product ? (age, industry, gender etc.)
  • How do news of about my product reach them ?
  • How does my product reach them ?
  • Do I do it in-house or outsource ?
• What is my production plan ?
  • Do I want to setup production line of my own ? or other options ? (Evaluations go here).
  • What is suitable for 1 year / 5 years / 15+ years of business ?
  • Either way, do I have team for it ?
  • What if demand is unmanageable beyond estimations?
  • What if there is no demand at all for <-certain-> time-frame ?
  • What is the minimum time promised for delivery after accepting order ?
  • Can I make it win-win even if people copy my idea/design/strategy (despite patents) and compete ?
  • any customer-support provisions ?
• What kind of people are required to get going ?
  • what are distinct roles I can't enact ?
  • legal, marketing, production, finance (funding, accounting), decision-makers, mentors.
• what are minimum infrastructure requirements for success ?
• Money
  • what minimum funds we need right away ?
  • what minimum funds we need every year ? (projection for next 2 years ?)
  • How do we raise money before regular sales start / success ?
  • How do we raise money after success ?

As your current question is quite large I would recommend seeing if there are local startup organizations in your area. See if you can grab a meeting with them and do a run through of you prototype and your idea. A one hour meeting with them will really help to push you in the right direction and help with your upcoming decisions.