Product development as part of the business plan.
Entrepreneurs have many questions regarding the business plan. Some of the common questions are: do I need a business plan? Why do I need one? In which stage should I write it? Should I let someone else write it for me? How do I start? What is the business plan goal?
The main reason for those questions is the lack of knowledge regarding the importance of that ‘tool’ known as business plan/ in this article I’ll describe why I used the word ‘tool’ to describe the term business plan.
First, it is important to clarify that the business plan is intended mainly for the entrepreneur, and only then for its presentation to other relevant entities in the project. The business plan is a plan containing all the data needed to evaluate a project (or a company) according to its current state, future goals and current future value.
The business plan goal could be seen from two different perspectives: the entrepreneur/company perspective and the potential investor’s one.
The business plan from the entrepreneur/company perspective:
The business plan’s goal is to outline a way of action, goals and time schedules for the processes in the project development stages. The plans will show the fact from different points of view, such as the character of the competition in the market, existing competitors, relative advantages and disadvantages, goals and land marks for development, expected expenditures and incomes, budget allocation, current company value, expected company value etc.
Analysis of the business plan will enable the entrepreneur/company to analyze strategic action and the character of penetration to the designated markets in a rational, balanced, fact based way. Additionally, determine goals, time schedules and progress tracking will be done professionally, and will enable control over the budget defined in advance.
A thoroughly built business plan will take into consideration and will be based upon four key factors:
I. Strategic planning: choosing strategic action, product character and target audience.
II. Patents: search after existing patents, analyzing them and analyzing loopholes for registration, patent registration as part of the development process.
III. Market surveys: qualitative and quantitative – will indicate audience opinions and expected penetration percentages regarding the cost for the consumer
IIII. Engineering design: designing the system according to the conclusions drawn from the patent search, chosen strategy, market survey findings and the mission of the product in development.
Combination of the processes of the four factors mentioned, and how they applied as part of the development process can be seen in www.b-focus.com under the title ‘processes for entrepreneurs’.
The business plan from the potential investor perspective:
An investor will examine the business plan from a business perspective only, with one goal in his mind: how do I make money from this investment, and when.
After it was presented to the potential investor, the business plan goal is to answer him on as much questions as possible before he determines whether or not to invest his money in the project. Some of the questions an investor will ask will be: how much money is needed? for what purpose? In which stages will the entrepreneur/company need the money? What are the land marks and goals? What is the project’s current state? What is the project’s current value, and what will be his value at the end of the investment? Who are the competitors in the market? What are the relative advantages? Is there a patent defense? Has the patent defense been properly performed?
Quality business plan needs to give answers to as many questions as possible and leave as less as possible question marks open – eventually giving the potential investor information regarding the levels of risked taken by him in return to the money he invests.
It is important to remember that accurate and based data will reduce the potential investor’s worries, while questions marks will increase them and influence the way in which he relates to the risk he is about to take. For example: if there are no market surveys, the potential investor will ask what do the assumptions that there are buyers to the product based upon? Upon what do you base penetration percentage? If there is no patent, he will want to know whether there is a patent already registered for this product? Is there is a risk of a lawsuit? What are the existing legal defenses? If the plan doesn’t show development to a certain stage, the investor will ask what the manufacturing costs are; what is the cost for the final consumer? Etc.
A scheme describing the character of integrating business plan building with patent processes can be seen in www.b-focus.com under the column ‘processes for entrepreneurs’.
To sum it up: the investor looks at the business plan as a source to question he will want to get answers to before taking the decision to invest or not. Entrepreneur/company that will build a business plan synchronized with the patent processes, market surveys and professional design, will give the potential investor a quality source that will answer most of his questions and will increase the project’s chance to raise capital for investment.
** This article is not to be regarded as counseling, guidance or advisement