This is Part 5 in a series that discusses the drafting of an effective business plan for use in promoting a scientific idea or start-up company to the business community. Each month, a different section of the business plan is discussed. This week, we discuss the product plan--the part of your business plan that describes the science meant to be commercialized.
Many scientists place too much emphasis on the section describing the scientific breakthrough, invention, or discovery that is the whole raison d'être of the company. Typically, scientists will have a huge section devoted to the company's product--including reams of scientific data, a history of the events leading up to the discovery, and even a list of contributors. Because they love the science so much (or are so immersed in it), they almost treat this section of the plan like they would a thesis or book chapter. But there is a huge difference between a thesis and the product plan incorporated into a business plan--this is usually due to the different audiences for which each is written.
A product plan should be concise and written in businesslike, nontechnical terms. Of course, this section will probably be the most technical of the plan anyway--many technical details can't be helped--but it's much better to write this section for the layperson with a good understanding of science, rather than for the Ph.D. in your own field. The person reading your plan will likely be science literate, but will almost never have a Ph.D. Leave the more elaborate discussions of science to the investors that specifically ask for it.
What Is Your Product?
Even without all of the technical data, there's a lot of stuff that needs to go into your product plan. First, you should describe your product, even if you don't have one yet. For example, if you're trying to be a drug discovery company, and have no lead compound yet, describe the target of that compound and your technological basis for finding it. This description should also include the potential purpose of your product, if this is not self-evident from the rest of the product description.
Part of this section should also explain what makes your product unique--assuming that it is, in fact, unique. If it's not, then explain why there's a need for more than one product in your market.
The "Technology Platform"
The term "technology platform" is used a lot in the venture capital industry. Basically, it refers to a technology that has the potential to spin-off more than one product--for example, if your technology platform is Internet security, it can be used in products involving internet casinos, banking, or content. If your technology involves programmed cell death pathways, your products may include treatments for cancer, hair loss, or Alzheimer's disease.
Explaining your technology platform, as well as your product, is key, because the investment community is a strange one. Although they like to see very targeted, goal-oriented companies, they also like to hedge their bets by buying into companies that can branch out into multiple products should their initial research fail.
What Is the Current Stage of Development?
If you're just starting up your company, chances are you don't have a product yet. Even if you do, it's bound to be a beta, or a prototype. It's important to state exactly where you are in the product development cycle. What stage of development are you at? This includes explaining two things. First, what steps have you done so far and what successes have you had to date? Second, what's left to do before you can start selling your product or service? Often, the easiest way to summarize this section is in a timeline, where both the historic timeline to date and the anticipated future steps needed before bringing the product to market are outlined. Be sure to include TIMES on your timeline--it's not enough to say that you have to do more tests; you've got to commit to how long each step is going to take you.
These future goals are referred to in the finance community as "development milestones." It is important to define these milestones accurately and realistically from the outset. They will be used to determine the success of your company.
Intellectual property (IP) refers to the various ways used to protect a company's nonphysical assets. IP is extremely important in a technology-based business, because without it any competitor could simply copy what you have and sell it themselves. Investors want to know that what you have will remain yours. In this section of your plan, be sure to include all the patents, trademarks, licenses, or copyrights you might own. Include expiration dates, a description of the extent of what's protected, and what is in the process of being protected.
One thing an investor wants to know is that the company owns the IP, and not the inventor or (even worse) the university the inventor used to work for. Be sure your IP position is clearly determined and incorporated into your plan.
Part of the product plan should describe the licensing deals you have in effect. Have you licensed any technology in order to make your product? Do you anticipate licensing your technology to someone else to do the marketing and sales, once you have the product? Questions like this help the reader determine what chunk of the profits are the company's, and what chunk needs to be paid out to third parties. It also helps the reader determine what kinds of other companies might be interested in your product. For example, if you've got an agreement with a major pharmaceutical company to manufacture, market, and sell your product, that means that the company in question recognizes the value of that product--a good thing. However, it also means that you'll have to share profits with that company. Generally, the advantages of a licensing agreement will outweigh its disadvantages, if the agreement was fairly negotiated.
Manufacturing and Supply
Yes, I know you don't have a product yet. Doesn't matter. You still have to be thinking about manufacturing and supply. After all, even if you've got a billion-dollar product, if you can't lock up a supply of the materials you need to make it, you're out of luck.
Manufacturing and supply get more and more important as your business matures. In a very early, research-oriented company, you shouldn't spend much time detailing this section. But as your product gets to be more determinable, a brief outline of who you have supply or manufacturing deals with will be paramount--especially in these days of Good Manufacturing Practice standards.
You may be surprised by what you need to write in this section. Most scientists are--they usually concentrate on their science, and feel the rest of the factors described here are "incidental." Though the science is important, these incidentals are key to the success of any business venture--so keep them in mind, not only when writing this section, but when designing your business strategy in general.