July 2010 Business Planning: The Basics

The basics of developing a business plan was the topic for the July meeting. Two members, Carl Papa and Judie Black, presented the basics of business plans. They used their current projects as an example of what the first section of a business plan should cover.

Inventors invent. But, what to do after inventing? A common question asked by inventors is "what is the next step?"

A good next step is to develop a business plan. A business plan is a document that identifies with broad brushstrokes how a business is run. The business plan focuses on the viability of a business idea by analyzing the marketplace and establishing realistic projections, including financial projections.

Inventors are typically at a crossroads when it comes to profiting from their invention. Should they license their invention to a company? Or, should they be in control of manufacturing, marketing, and distribution and sell their own products? In order to license their invention, inventors should know enough about the business to be able to manufacture, market, and distribute the product themselves. Without the level of knowledge required to know these things, it is difficult to market a patent to another company for a license. So, the first step should be to work on a business plan as if the inventor was going to have a business selling their invention themselves.

A business plan for inventors should have the following sections:

1. Description of the business
2. Marketing plan
3. Project management plan
4. Management plan

Description of the business

The first section includes a description of the business, that is, what type of business is planned and how the business plans on making money.

What type of business is it? Sole proprietorship? Partnership? LLC? Corporation?

What will the business do? License the patent? Sell products?

The invention should be described, along with the products that can be offered based on the invention. The first section should also include a brief description of who the customer is and why they would buy the product.

This section should fit on one page and should read like an elevator pitch. That is, the business description should provide all the pertinent details of the business that can be told in 30 seconds to 2 minutes, which is the time of a typical elevator ride. Imagine you have a captive audience for a short time. Will they want to listen to more when the elevator doors open?

After laying the ground work of the first section of a business plan, Carl and Judie presented their business plans.

Carl invented a golf training aid. Although he had originally hoped to license his invention, he is currently planning on making and selling the product himself. The first section of Carl's business plan says that he has a single member LLC that owns its IP and is responsible for manufacturing, distributing, and marketing its products. His company will sell products at the direct sale level (via website), retail at pro shops, and wholesale to pros, such as golf camps and training camps. The products would be purchased by golfers who wish to improve timing and/or rhythm of their golf swing, golf instructors and/or pros for reselling or as a training aid to student golfers. Another purchaser would be gift givers for a golfer.

Judie has an invention for a 3d maze game that requires physical coordination and dexterity. The first section of Judie's business plan says that she is an independent inventor marketing my invention to other companies, who will manufacture and market products based on my invention. She identifies how the products based on the invention would be sold and who would buy them.

The first section of both of their business plans identify how they plan on operating their business and identifies the products and potential customers. With this information, they can move on to the other sections of the business plan to more completely describe how they will accomplish their goals.

Judie and Carl will discuss Section 2, the Marketing Plan, at the September TIA meeting.