A business plan Put simply, a business plan is a company's vision for its future. It presents a company's goals and plans for achieving them.
If you wish to market and sell a product that you have developed through research, but require additional investment or other assistance, a business plan can help. It introduces people to your project, organisation or business and explains what you need to move forward.
If you are looking for new investment for your venture a business plan really is necessary. And don't forget, it can be used to make a case for an allocation of internal resources, as well as attracting external ones.
This guide to business plans is aimed at small and medium-sized enterprises (SMEs) and researchers who wish to bring products developed through research to market.
Who are your customers? Your customer base, or target market, will be the main source of revenue for your company.
This group should be identified and described in your business plan. You also need to justify why you think they will be interested in your product.
If you are aiming your product at a specific geographic market make sure you state this and explain why.
Ideally, you will have already engaged with potential customers to get their feedback on your product,
or to help you with its development. You should outline
the results of any customer research and how you have,
or intend to, act on it.
Who's on your team? Potential investors and collaborators want to know who they will be working with.
You should provide details of the key members of your team and discuss your organisations area of expertise, outlining any particular skills that you have.
Many products are developed through research conducted by multiple organisations. If a consortium is involved in your product, make sure you mention any previous business partnerships between the various organisations.
This is also a good point to discuss any necessary skills that your team lacks and any additional resources that are needed to cover this.
Economic and financial information Potential investors need to understand your product's market potential and expected revenue. They are likely to walk away if they do not.
If possible, you should discuss current revenue and what your company has achieved so far in terms of product development, market share and clients. If this isn't possible, you can use “letters of intent” to provide some first reactions from potential customers.
You need to be careful not to incorrectly calculate or overstate your market potential.
As a bare minimum, financial information should include current or predicted revenues, gross margin and earnings. You should also include a budget to cover anticipated costs and incomes at key milestones.
It is also good to set financial objectives and outline your plans for achieving them. The best way to do this is by setting 'next steps' and 'key milestones' at each stage.
Set a price for your product While this should depend on development, production and distribution cost, to ensure you make a profit, it should also be linked to “customer value”.
As the name
implies, customer value is your product’s worth to your customers. This
is related to the cost of their problem or need compared to the benefit
they get from your product.
Understanding the customer value of your product is important, as it will be the main driver of price. If possible, you should speak to potential customers and test their acceptance of different price points.
Competition To remain competitive in business, it is important to understand your competitors: who they are, what they are offering and how you fit into the market.
Most innovative products have a competitor (for example when the first scooters were launched they competed with bicycles). Which products will yours compete with?
It is not always easy identifying competitors. A good starting point is the customer need you are addressing. If your product wasn't around how would customers satisfy that need? What product (or products) would they buy?
Make sure you think a little outside the box and don't just restrict yourself to obvious competitors. For example, a sandwich business will be in competition with other companies that make sandwiches and similar items, such as baguettes and bagels, but if they forget about other portable food items, such as pasties and burritos, they will miss potential competitors.
The competition and you To help with long term business planning, you need to define your position in the market by comparing yourself with your competitors.
A simple tool for this is a SWOT analysis. It helps you understand your strengths, weaknesses, opportunities and threats (SWOT).
Broadly speaking, strengths and weaknesses can be defined as what your company can and cannot do. They are internal factors that you can influence. Opportunities and threats, however, are external factors that could affect your business. With sensible planning, these can be exploited or mitigated.
Know more on this subject:
SWOT analysis guide
Your market value Your business plan should include an estimate of your market value, based on current market size and potential for market growth.
Market trends can give a good overview of market value, but for real accuracy it needs to be linked to the volumes you are realistically likely to produce and sell.
Don't forget to factor in the cost of selling your product to the target market, including staffing requirements.
Once you have identified your business sector, market trend reports are often available from reliable sources, like sector associations, business incubators and the EU.
Learn more about this:
European Union Open Data Portal
European Data Portal