Business plan. The roadmap for inventors.
The business plan is the document that defines the strategy for launching and growing a business. In its usual structure, it includes market analysis, competitive advantages, business models, a technological development plan, a sales strategy, and a financial plan that certifies the economic viability or not of a business.
Depending on the current state of a project, there are two types of business plans, useful as roadmaps for inventors. It is important to understand that these types of business plans pursue different objectives, therefore, their structure and form of preparation also varies.
Types of business plans useful for launching an innovative product.
Business plan for start-up:Business plans for launching an innovative project have one sole objective: Learning. The launch of an innovative product or invention is conditioned by an environment of extreme uncertainty.
It is not possible to guess what is the best way to develop a product and much less, guess how customers behave when faced with a new invention. Business plans useful for starting a business, are experiment plans that document the actions planned by the inventor to create the product, as well as the tests necessary to learn about customer behavior towards new inventions.
Business plan for business growth: Business plans for the growth stage are documents that allow defining internal improvement objectives in the company to achieve improvements in the productivity of a business. These plans are more rigorous and extensive; the objective of these business plans is not to learn, but to propose a guide of actions that respond to the inventor's growth strategy.
Utility of the business plan
The initial business plan serves as a guide for experiments to learn about the business opportunity and the technical feasibility of the invention.
Business plans for growthare useful for improving business productivity and organization. These business plans only make sense when the inventor has learned enough about his business model and there are no doubts about the technical viability of the new product.
Business plan examples based on project status.
Let's imagine that we want to create a product that can diagnose the state of a cultivated field in real time. The product is installed in the field and connected to the internet to transfer weather data. This way, farmers will be able to check the state of the land and take action on the crop without leaving home.
It is apparently a great innovative solution that will save thousands of trips for farmers, who worry every day about climate variations and their impact on their land and crops.
- Is this a good idea?
- Can we be sure that it is a successful product?
- What will the patent be worth?
- Will the invention be profitable?
You'll probably get questions like these from the moment you have an idea about an innovative product that you haven't found on the market. Precisely, with the types of business plans mentioned above, you'll be able to define a step-by-step guide to clear up the main hypotheses.
It's a huge mistake to start without a basic business plan. It's also a waste of time to write a big 100-page business plan at such an early stage.
The first step is to write a business plan for the start-up. With this plan we cannot try to determine the economic profitability of the invention, it is too early for that. The objectives of the business plan at this stage are:
- Define the technical feasibility of the invention and the best way to build it.
- Aprender sobre el comportamiento de los usuarios o potenciales clientes.
Following the thread of this example of an innovative product, the structure of the first business plan will be:
- Identify the customer profiles for whom you solve a real problem.
- Document the alternatives available to customers to solve the problems you intend to address with the innovative product.
- Document how you envision the product and what features are critical.
- Develop the basic engineering project of the invention.
- Document the response of potential customers when you present the solution.
- Document the costs you might incur in this first stage of learning.
It is impossible to know the costs of the final product at such an early stage. It is also impossible to predict how many units you can sell and what the economic margin of the product will be. It is important that you do not lose sight of the objectives that are key in this first stage. I insist that the objective is: to learn.
Example of initial business plan structure.
- How do farmers go about analyzing the state of their crops on a daily basis?
- How much time do you spend on this analysis and what is the economic cost of that time?
- What is the target market size that we have within our reach?
- What other innovative products are available on the market?
- What are they failing at?
We recommend purchasing existing solutions, using them, and documenting failures.
- Define innovation objectives.
- Define the customer interview plan.
Innovation objectives are defined in a list of improvements that we want to improve, no matter what. For example, in this case, speaking with farmers, we discovered that there are already products that allow farmers to know the state of the land through a mobile application. However, these solutions do not avoid the farmer having to travel because what they really need is to observe the changes in colour in the plants. These colour changes are what define whether the crop is at risk or not.
Having taken these preliminary steps with a group of planned experiments, our vision of innovation changed completely. Initially, our inventor client wanted to make a prototype to measure climate parameters and save them in an app. However, what was really important was to analyze the changes in the color of the crop, in addition to the rest of the parameters. This is how we learned that it could really be a competitive advantage.
Once the innovation objective has been updated in our start-up business plan, we activate the engineering project. The engineering project is the process where the product is actually defined. We choose the technical solutions that guarantee its viability while we take care to define components that are democratized in the market, so that from this very early stage, we can already minimize the manufacturing costs of the future gadget.
From the engineering project, we obtained a small non-functional model, but useful to show the farmers what we intended to build as an innovative product. With this model, we were able to study the production prices of the prototype, as well as obtain clear responses from the farmers about the real usefulness they attributed to the future product. All the commercial tests to learn about the opinion of the customers were previously defined in the start-up business plan.
As you can see, in this first business plan, rather than trying to predict the future success or failure of an innovative product, we aim to plan actions that clear up key errors for its acceptance in the market. Not having this roadmapwould have led us to build a product similar to existing ones, while lacking what really complements the necessary solution for farmers.
The initial business plan should be a simple document, no longer than 10 pages. It is important that it is a living document, where we will collect the responses of potential clients and the product objectives that really respond to latent problems in society.
The business plan for business development.
The initial business plan, as you may have seen, did not focus on the profitability of the product, nor did it include a marketing plan or sales plan. This document only includes the business opportunity, the basic engineering project, and the commercial tests that we intend to carry out to learn about customer perception. By completing these steps, hypotheses that are decisive in knowing whether or not it is interesting to continue with the project will be isolated.
If the answer is yes, as in this example, it makes sense to write up a business planfor business development. This document is more extensive. It covers objectives and actions in all areas of a business. From the marketing strategy, product development strategy, intellectual property protection plan and above all, a financial plan that reveals the investment needs to create the product and sell it on the market.
Business plan structure for business development.
Chapter 1 – Business opportunity.
- Analysis of customer profiles and validations achieved in previous tests.
- Market size.
- Competing products.
- Competitive advantages.
- Timing: Why is it the right time to launch the product?
Chapter 2 – Business model.
- Definition of sales channels.
- How will customers be charged?
- What will the relationship with customers be like?
- Team. What kind of team should we have for business development?
Chapter 3 – Roadmap.
The road map in the business plan is divided into two types of milestones: business milestones and product milestones. It allows investors and business partners to understand the quantitative and qualitative growth objectives, not only of the business, but of the product itself.
- Definition of business milestones and product development milestones.
- Define the quantitative data that define the achievement of each milestone.
- Set deadlines for achieving objectives.
- Define the financial needs to achieve each of the milestones.
The road map is one of the most important sections of the business plan, it explains the inventors' strategic vision to achieve business growth.
Chapter 4 – Marketing Plan.
- Market positioning objectives, according to the 4C's of Marketing.
- Communication plan.
- Definition of sales channels.
- Corporate brand image manual.
- Definition of actions, including the deadlines and economic needs for each one, as well as the objectives that are expected to be achieved.
Chapter 5 – Technological development plan.
- Definition of functions necessary to improve the product.
- Definition of other products that may belong to the family.
- Definition of the technical needs as well as the product development team or engineering team that will act as a partner to develop future versions of the product.
Chapter 6 – Financial Plan.
- Sales analysis differentiating each of the active channels in the business model.
- Definition of the revenue structure at different stages of business development.
- Analysis of marginal profit for each sales transaction.
- Analysis of expected cash flows on a monthly basis, at least for the first 3 years of the business.
Chapter 7 – Investment plan.
The investment plan is a key section in the business plan for launching a new product on the market. It is almost unlikely that the inventor will be able to face all the investments necessary for the full development of an innovative product. The creation of any product is time- and capital-intensive.
It is essential that the investment plan meets the following requirements:
- Consistency with what was set out in the financial plan.
- Consistency with the road map approaches.
- Consistency with business development objectives.
- Consistency with the costs associated with Marketing actions.
The investment planbusiness planmust define the financial needs at each moment, it should be raised as a relay race, this will help minimize the friction of entry of new investors at each moment. Planning to raise all the necessary capital at a single time can be a financing strategy with little chance of success. If the financing needs, for example, amount to $ 200,000, it makes much more sense to plan 2 rounds of investment than just one for the total financial need. This strategy will minimize your loss of control in the initial stages.
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