How to Make a Business Plan for Commercializing Your Invention
Business plans can fuel business development and is correlated with enterprise growth. In a recent study, a national survey of more than 800 who were in the process of starting businesses, the researchers found that writing a business plan significantly increased the probability that the business would actually be created. The correlation amounted to a plan writer being two and a half times more likely to actually begin their business.
There is no right way to write a business plan, though there are conventions about what information should be included and how the sections should be organized. Broadly, there are four main things that should be made clear to readers:
- The purpose of the business and the void it fills in the market;
- The proposed product and its anticipated clientele
- The goals and objectives you plan to accomplish short- and long-term; and
- The financial state of the business.
Depending on what the plan is used for, other sections may vary in detail, or may be included or omitted selectively. However, the plan should always cover the above basics.
When to begin thinking about a business plan
Many inventors believe that their invention needs to be patented before any commercialization steps can be taken. While a patent is certainly important for ensuring that your rights are protected from unscrupulous competitors, the patenting process can take several years. Waiting until you obtain a registered patent before you check the amount of market interest for your product, the potential avenues for funding or the scope of the competition in the field can result in taking on significant expenses for an invention that was not commercially viable in the first place.
A business plan can make answering these questions significantly easier. By compiling all relevant information into a single document, you will be able to streamline your business’ goals, resources and challenges. Investors, start-up accelerators, and funding sources will commonly familiarize yourself with your business through asking you for a business plan before requesting any further information.
As such, inventors should start thinking about a business plan immediately upon deciding to commercialize their invention. While a business plan should incorporate intellectual property assets, whether current or anticipated, large portions of it can be written before the patent application process is even commenced.
The elements of a business plan
While there is no one set way to write a business plan – its structure is dependent on your goals and audience – there are a few standard sections that readers expect to see.
The first is an executive summary, which provides the concept, mission and purpose of the business, a summary of relevant financial information, and any significant achievements that the business has accomplished to date. If the plan is written with an “ask” in mind, make sure to summarize the value proposition and the financing needs to the reader.
Further, an executive summary is often requested as a stand-alone document by investors and venture capitalists. It is key to ensure that it is well-written, concise and informative to peak the readers’ interest and secure a request for the rest of the plan.
The next section is a business overview. Here, it is crucial to provide a description of both the industry in which your business will be situated and the particular niche that your invention will be filling. The structure of the business operation – wholesale, retail, direct-to-buyer, etc. – must be explained, as well as the business’ support systems, channels of distribution, and legal form (i.e., corporation, sole proprietorship, etc.). This section needs to also give the reader a clear idea of how your business is (or will eventually) be profitable based on the novel invention that you are bringing to market.
After providing an overview of how the business will function, address the people that will run the operations. This includes providing an overview of yourself and your co-inventors, if relevant, giving details on the number of full- and part-time employees that will be working on the project (including information about any that are already hired), and specifying which tasks, if any, will be outsourced. Often, investors and other stakeholders care as much or more about who the people are behind an invention rather than the potential of an invention on its own – it is well-known that people are responsible for much of business success.
Another important element is establishing the target market for your invention. To do so, you need to first establish which groups are most likely to use and benefit from your invention. Then, segment that group further to outline whether any preferential marketing will be conducted (e.g., while both men and women use razors, Venus markets preferentially to the female market). Explain what specific marketing efforts will be used to highlight the product’s usability to your target market.
Next, provide an analysis of the competition. This needs to include both the broader competitors within the industry and the narrower group of competitors that sells a product that solves the consumer problem that you have presented. When assessing who your competitors are, make sure to not only focus on businesses that offer something very similar to your invention, but also the other ways that consumers could go in solving the problem that your invention addresses. For example, if your invention is a new way to make coffee at home, focus not only on assessing other companies that produce coffee makers, but also coffee shops and sellers of other hot beverages like tea and hot chocolate. If relevant, provide details on how you plan to price your product in a way that would give you an advantage.
In this section, give the reader an understanding of what differentiates you from the competition. This is often done through a strengths and weaknesses analysis of your competitors, or through clearly explaining how your proposition is so different that it cannot be matched by the currently existing market.
Finally, you need to provide comprehensive information about the financial state of your business. The three key documents readers will look for are an income statement, a cash flow statement and a balance sheet. Together, these documents will provide the reader with an idea of your business needs, the current assets and liabilities, and the financial outlook in the near and medium-term future. Although it may be tempting to provide estimates for future expansions of the business or other numbers that are not concrete, sticking to concrete financials that can be backed up by numbers may be best. On top of the three documents above, which are crucial to include in any plan, you may want to provide a costs of production statement (if you have inquired about how much it would cost to produce a commercial version of your invention).
Highlighting your intellectual property assets within the business plan
Both assets which you already have ownership of and assets you are hoping to register should be included in your business plan. Intellectual property assets provide your business legitimacy and show that you are serious about its long-term future. They also present an effective deterrent from competitors that may try to replicate your invention and immediately decrease the profitability of your enterprise.
Importantly, addressing intellectual property in your business plan is a strong indication to readers that you are not infringing on the property of others because you have done searches or assessments during your own registration process.
Intellectual property assets are not limited to patents; trademarks, domain names, copyrights and industrial designs applicable to your business should also be included within your plan. Nor should your portfolio be limited to registered assets only. Copyright subsists in creative works as soon as they are created – registration is not necessary to ownership. Common-law trademarks, or unregistered trademarks that have been used in business for long enough to obtain consumer recognition and goodwill, may be eligible for a narrower scope of protection and should also be noted. Assets that are in the process of registration should also be listed. Make sure to clarify within your portfolio the status of each asset; that is, whether the asset is registered, in the application process, or unregistered, as well as which jurisdictions or regions the assets have protection in.
Further, address whether your business strategy will be relying on any intangible assets owned by others, such as through getting a patent licensing agreement for a current invention as the baseline for your modernized invention.
The biggest part of this section should be explaining what role the intellectual property assets will play in the commercialization of your invention. Here, specify whether you will be commercializing the invention by yourself once it is patented, licensing it to interested parties, or both. It is key to also address other potential stakeholders in the invention – was it developed in combination with other individuals? Have those individuals waived their rights to it either automatically through an employment contract or in a separate agreement? Finally, elaborate whether your enterprise will be working on developing other assets or only commercializing the intellectual property that you have already developed.
Making effective use of your business plan
A business plan can be invaluable to you if used as a tool for research and communication with interested stakeholders.
When writing your plan, do not cut corners. The information within your business plan, while aimed at other readers, can help you keep yourself on track and figure out the viability of your commercial plan. While it may be tempting to finish the plan quickly by providing only rough estimates, or by focusing only on the best-case scenario to the exclusion of others, this approach is not going to be of benefit. Instead, approach your business plan as a guide to the information that is essential to running your enterprise and do your best to ensure your research is thorough and substantiated.
When drafting your plan, it is key to have in mind the audience which will be reading it. Do you intend to pitch your enterprise to investors or accelerator programs? Is the plan intended to attract talented employees to your company by giving them a look into the goals and objectives of the enterprise in the long-term? Or is it for internal use to aid with tasks such as marketing, securing suppliers, or guiding talent acquisition?
The intended audience should guide the plan’s structure. When dealing with busy investors, emphasize the financials and provide a concise executive summary. For potential employees or co-founders, clarify which types of skills are necessary to advance business goals and what long-term benefits exist for key members of the team. As such, while the basic plan can remain the same for different readers, different sections will need to be highlighted or modified depending on the audience.
Finally, remember that, while a business plan is a useful tool, it does not bring value or progress on its own. Once you identify goals to attain and tasks to perform, make sure that you follow through with the timelines and solutions that you have outlined. Your invention is a valuable asset, but without taking steps to commercialization, it is very unlikely to give you the profitability you desire.
If you are set on commercializing your invention and bringing it to the market, you should consider obtaining patent protection for it. Contact us for a complimentary initial telephone appointment to learn more about your options.