Now days people are more impatient than ever. You should be able to write instructions in 3 easy steps and count on no one ever reading them. It should be mostly intuitive whenever possible. I know it's not always possible, but count on it being more difficult to license when it's a more complicated product because the company will have to invest additional money training the consumer about your product. Hopefully you'll have at least done a preliminary patent search at this point to see what else is out there.
Prototypes are the final phase before creating an inventory.
This is exactly what the product will look like when mass produced. Most people won't have the money to invest with an engineer to make a prototype. Depending on the scope of your product you should get as close to this as possible though. When I went to my manufacturer the first time I had a cut up barrette and a hanger along with some stick figures to make my point. Together we made a prototype by creating a one cavity mold and refining it until we had it right.