Inventions – Combining Your Business Plan Development With Your Product Development to Minimize Risk

Introduction We have seen many people come up with an idea and then try to make a business out of it. Some people have failed and some of gone incredibly well. What’s the difference between those who succeed and those who fail? Well we can’t tell you that it is the basic idea. We have seen some strange product go well. We have also seen some products that we thought were pretty good do very poorly. Some of the projects that went poorly left people in debt up to $100 000.

Does that mean that it all about the ability to sell a product? Do you have to be able to sell ice to the Eskimos? We don’t think that’s the case either. Every product that went well had a strong, although sometimes surprising, demand. But we often thought that the failed products did too. So what was the difference?

The integrated development strategy The difference we noticed between those who went well and those who didn’t was in the way they developed their products. They didn’t come up with a completed design, start manufacture and then hope that someone would buy their product. Instead, they took a series of steps that were integrated with the rest of their business model development process.

They combined the product development process with their market research, business plan development, and sometimes their financing. This article will document this process so that if you follow it, then you should be able to do the same.

Step 1 Concepts The first step after coming up with the idea is to get a few pictures (or 2D renderings) of different concepts showing how the product might look. You could get this done for less than $1000 if you are prepared to scan the internet for small foreign design houses. They might be foreign, but they still understand the style and fashion of other parts of the world because they can use the internet to quickly research it. The key is to ensure that you communicate as much about the product’s requirements as possible: all the way from style to function. So for the kind of money that you would put on your credit card you will have some product concepts.

Step 2 More market research The next step is to now do some more market research. You should have already done a bit when you bounced your idea off a few people at the start. Now that you have some professional looking product concepts you will be able to get higher quality market data. With these documents you can do three things:

You can speak confidently with people who you plan to work with – distributors and such
You can get a more accurate indication of what people will pay
You can produce a more stimulating and understandable business plan, which can get you funding for the next stage(s)

Speaking with potential partners When you have professional concept drawings you are no longer relying solely on your ability to communicate your idea. You also now have a talking point so that the focus needn’t be on you all the time. This provides two advantages that you should fully exploit:

You don’t feel as stressed about speaking with strangers.
You can ask others for their opinion, and get some very informed feedback.

So take your concepts to possible partners, such as distributors and retailers, and feel confident that you have something serious to talk with them about. When you do talk with them, ask them to look at the concepts and tell you what issues they see and any ideas that they have. Note: People love to give their opinion so you will get plenty of good feedback. Even better, if they have given you some advice on how to improve your product, then people will have a sense of ownership. They will be very interested in seeing you succeed, because it is now partly their idea. Go back to these people as your business gets closer to starting; they will likely help you or want to work with you.

Accurate information on value It is much easier for people to gauge the value of something that they can see. Simply show the concepts to people from the target market and ask them what they would be prepared to pay for it (don’t give them some numbers to choose from; ask them to pick the number). This gives you some excellent data for your market research and your business plan.

The business plan A business plan for a product based business really comes to life when you have professionally drawn concepts included. It makes it clear to the potential investor what you plan on selling. It also makes it easier for the potential investor to understand the value of the product. This will increase your chances of getting further funding for the next stage. Especially if you have included your recent findings on what potential customers would pay. Remember at this time all you need is funding for the next step. This could mean money from friends or angels. It could also mean funding from a venture capitalist, but as an option to have the first right to invest in later stages. There are various ways you could do this. The key is to realise that by this stage the money need not be your own.

Step 3 3D rendering With advances in modern CAD systems it is possible to create near life like 3D images. These, like the concepts in step 1, allow you to better gauge the value of your market and speak more confidently with other people. They also allow you to produce an even better looking business plan.

Note 1. Before you get the 3D renderings done, you will need to choose a particular concept (if you were presented with a number of them). You will also need to communicate all of the recommendations that were given to you by the people you spoke with. Of course, that is only the recommendations that you think are worth acting upon.

Note 2. A good design house will do some preliminary engineering when they produce a 3D model for rendering. So ask before selecting the one that you will use.

Note 3. If it will help, then have the renderings include the environment in which the product will be used. Including a representation of a person also helps show size. This will better communicate the reality of the product to others.

Note 4. Some companies can also do animated 3D presentations. This might be your step 3. Or maybe step 3b if you find that the renderings do not communicate the function of your product well enough.

Step 4 Improved market research A rendering is so much better than the initial concepts for communicating the proposed nature of a product. Therefore, step 4 is the same as step 2, but more serious. This time when you speak to potential distributors, ask them how many units they think they could sell. Ask potential end users again about what they would pay; this time it should be more accurate and consistent. All this data can be used to update and improve the business plan, which can be used to get funding for the next step.

Step 5 Engineering design and prototyping Hopefully, some engineering design was done when the 3D renderings were done. Therefore, at this stage you only need to pay for finalisation of the engineering drawings and a prototype. At the end of this step you should have a fully functional prototype and quotation based on the engineering drawings for full manufacturing. Note. Some products will go through a middle stage where a sample (looks functional, but is not) is first produced. This is used to confirm the design before incurring the cost of a functional prototype, if such a prototype is very expensive.

Step 6 Acquire orders, complete your business plan and get your funding With a prototype you can show people a real life product. You can confirm orders and price. You might do this at trade shows and such or you might have made enough contacts in the earlier steps to find people to make the orders. In either case, if you followed the previous steps and altered the design based upon the feedback, then you will have no trouble getting orders. Once you have the orders and the quotations for production, you can complete your business plan. With such a well founded business plan funding is practically assured, and you will be able to start your product based business.

Closing The above strategy allows you to move steadily forward and to use the development process to optimise your design and business plan. It is these iterations, based on market feedback, that ensure you have a strong business plan and a saleable product. Therefore, you must ensure that you get as much feedback as possible, take all feedback seriously, and act upon it as required. Also, you must be prepared to drop an idea if the business plan doesn’t stack up. This is where external investors are ideal; they will be more pragmatic about your plan than you. Try to get such investors in as early as possible so that you don’t take a poor idea too far.

Six Keys to Developing a Successful Business Plan

“To build a successful business, you have to begin at the end.”

Creating a clear business plan is an essential task for every leader who wants to operate a successful, smooth running, self-sustaining company. While it takes time and effort, having such a strategic roadmap will enable you to view your business from a higher plane and to quickly evaluate its strengths and inefficiencies. It will also empower your employees by freeing them to accomplish your company’s goals and to fulfill its mission and vision without your constant, hands-on involvement-which also frees you up from the day-to-day work, or, as we call it, “Doing the do.”

I have identified six key elements every successful business plan should include. The first three encompass what we call the organizational “Culture,” while the second three comprise its business “Systems.” Lacking these business elements almost inevitably leads to employee confusion, conflicts and other workplace problems that undermine product quality and business performance-and makes it almost impossible to remedy them. Since most businesses do not have a clearly defined culture or defined systems, by taking these steps you will gain an immediate advantage over your competition. Below is a brief description of our Six Keys:

CULTURE

1. Vision
A one-sentence statement that defines the ultimate impact your business is going to make on the community. It should state what you want to accomplish in terms of an almost unattainable goal or dream. A good vision statement makes the connection between your business’s passion and its purpose. My rule for Vision is: “People will work harder for a vision then they will for a paycheck.” Your vision statement should inspire, motivate and excite your employees, clients and the community where you do business. It should be short, concise and easy to remember.

Remember, a vision is not merely a large goal. It differs from a goal, in that you almost never quite achieve your vision-it is a virtually unattainable ideal that motivates your employees to meet and exceed your company’s practical objectives. In other words, goals are used to measure systems and processes, while vision is the fuel that ignites people to go beyond goals to excellence. A company’s top leadership has the responsibility to drive its vision. Without the support and encouragement of upper management, your vision will fail to have the impact the company needs to outperform your competition.

Example-“Estrada Strategies: “Creating an Opportunity for All Businesses to Succeed”

2. Values
Core Values are the rules of conduct in your business: a clearly defined set of standards that describes your organization’s approach to relationships. It is a written code of conduct defining how all stakeholders will treat people internally and externally, including other workers, clients, vendors and the community.

Without defined rules of conduct, people have little or no direction as to what constitutes acceptable behavior in your business. In the absence of such values, individuals will create their own rules. Experienced employees will default to values acquired outside the company in prior work environments. Some may have a positive impact, others may not. With no defined values, managers have a difficult time leading people, whether it means handing out accolades or taking disciplinary action.

Your business’s core values are non-negotiable within the company environment. When they are broken, swift disciplinary action or termination is usually in order. When management fails to uphold written values, employees soon figure out that they mean little or nothing-they become token values that everyone winks at and no one takes seriously. However, if core values are upheld, the company can use them to guide every aspect of the business.

Example-“We believe in frequent, open and honest communication.”

3. Mission
A short, concise declaration of the four essentials of every business:
1) What you do, 2) How you do it, 3) Whom you do it for, 4) Where you do it.

Your company’s mission statement is truly the roadmap for your employees; it is also a management tool to communicate how your company will operate in the community.

A mission statement is not a long dissertation, like those from corporations in the 1970’s and 80’s. Those lengthy proclamations were often viewed as unrealistic, empty rhetoric aimed at impressing bankers and the like. Today, they are used to guide the company’s overall direction, as well as its daily business activities. Beyond providing essential guidance to your employees, it empowers them to make swift, effective decisions by establishing critical boundaries. Without a clear mission, a company will often become paralyzed whenever it encounters a new situation as it attempts to figure out what to do.

Example-“Our Mission is to lead our small to medium-sized clients to greater success. Our
Method is to bring about behavior modification through business training, one-on-one
coaching and business monitoring. We Advance our Vision by being the business example
for our clients.”

SYSTEMS

4. Growth

A well-thought-out plan for growing your business that clearly defines these four elements:

1) Your target market;
2) How to market your product to the target;
3) An advertising strategy;
4) Brand creation that establishes a unique visual and emotional identity.

The rule for growth is, “You are either green and growing or you are ripe and rotting.” Without growth, a company will likely fail. A growth plan is the lifeblood of your organization. It includes your company’s sales process, marketing, advertising and branding systems.

1) Sales-the entire process that defines the demographics of your future clients (your target
market or “suspects”), as well as the foundational activities that drive new relationships and will
lead to future opportunities, sales, customers and referrals.

2) Marketing-the activities in your company that create visibility, credibility and demonstrated
ability in the marketplace. Low cost/high impact is a critical element of this process, which
communicates to your market who your company is, what it does, where it does it and how it
does it. Marketing supports sales, but must not be confused with sales. Remember, marketing
is about visibility, credibility and demonstrated ability. These elements build trust and branding
in the marketplace.

3) Advertising-Systems in place that bring potential clients through your doors, make the phone ring and create leads. Advertising is all about making sales. It is the promotional aspect of growth, and concerns how your company attracts its customers. It also tracks where and how
your customers discovered your company. Ultimately, advertising is all about return on
investment (ROI).

4) Branding involves the processes that create product or name recognition in the marketplace. It
comprises the visual and emotional impact people connect with your name, logo and tag
lines. Think of Nike’s “check mark,” or McDonald’s golden arches. Does the market know your
logo, name and tag? That’s the test.

5. Operations

Operations encompass the “nuts and bolts” of how a company satisfies customer needs, wants
and expectations-the blueprint that defines how a company produces its products or delivers its services. The focus here is on the five components of your company’s processes or way of doing things: systems, quality control, labor standards, material management and Internet technology.

1) What your systems/processes are. These define how your company executes, produces and
provides its products and services, including procedures, materials and process manuals.

2) How your company will control the quality of its products and services.

3) Productive labor standards that define the labor-cost relationships of providing your products and services. Think in terms of a piece worker who may be expected to produce X amount of product per X hours, a day, a week or a month. Also, think in terms of labor costs vs. overall revenue or net income. Such labor standards provide the needed benchmarks for your employees and for your managers to track and measure performance.

4) Material management or the cost of goods sold. How your company physically manages and
stores its raw material before and after products are produced. It also focuses on keeping material, shipping and storage costs to a minimum. The goal here is to minimize inventory without running short on needed materials.

5) Internet technology-how your company will use the Internet to advertise and sell your
products. The focus here is how your company effectively uses its website to promote and sell its products and services. Some companies have glorified brochures on the web, and that might be all they need. Most companies today are moving into the e-commerce where prospects can purchase items over the internet.

6. Finances

The financial aspect of your business involves how you manage budget planning, cash flows, capital and debt servicing, KPI’s or Key Performance Indicators-like pipeline and sales values, total revenue, gross margins, operating expenses and net profit to name a few. In the end, KPI’s serve as the monetary numbers that define the health of your company. The process, in short, means developing a budget that covers three years of monthly projections for your business in these three areas:

1) Income statements;
2) Cash flow statements; and
3) Balance sheets.

An experienced leader tracks his KPI’s weekly, monthly, quarterly, and annually. He knows exactly where the company stands financially at any given time. KPI’s make up the financial information a leader needs to make strategic decisions: to buy a building, increase inventories, or purchase new equipment. Running a business without KPI’s is like driving a semi-truck on a mountain road with blinders on. You are likely to drive the truck right off the cliff.

While having a successful business plan defined in terms of these six key components won’t absolutely guarantee that your company will be successful, not having one will almost inevitably lead to failure. Estrada Strategies exists to help businesses like yours succeed, in part by providing business training, executive coaching, and business monitoring you need to create a dynamic business plan.

Writing a Business Plan – What Makes a Good One?

Writing a business plan can be a lot of hard work or it can be great fun. An effective plan can help your company to greatness. A poor one can lead you out of business. No plan is like asking to fail before you even start.

Not every business needs a 200 page bound business plan. However every business needs to have some idea of where they want to go and how they are going to get there. This article covers some key insights into writing a business plan that get your business to where you want to be.

The first stage of any plan is ANALYSIS. You need to take a very objective look at a number of factors that may impact your business. There are many factors to consider but the two major ones are competition and your operating environment.

Let’s look first at competition. Every business has competition, even if you think your product or service is unique. How is this? Well it’s quite simple really, people have choices to make. The most fundamental choice they make in most cases is whether to buy what you offer or but something else. For example I could buy a game console or I could buy groceries instead. Customers only have so much money available so you first task is to ask yourself what is my competition like and can I beat them? The more you understand your competition the more you can develop your business strategy of being different and outperforming them.

Now let’s look at operating environment. This is understanding what factors around your area of operation are likely to affect your business performance. For some companies this includes looking around the World in other cases it’s just your local neighbourhood. You need to ask questions such as:

How is the economy going?

What is consumer confidence like?

Where is technology heading in my industry?

After answering all the questions you need to decide how these might negatively or positively influence your performance.

Now you know more about your competition and operating environment it’s time to set some OBJECTIVES. This is what you want to achieve in the period your business plan covers. It is said that good objectives are SMART. That is specific, measurable, achievable, realistic and targeted. Here’s an example of a SMART objective for a hypothetical business.

“By the end of this year we will have increased sales of product X by 7.5% over the previous year.”

You can see how clear this objective is. It is much easier to achieve high performance with clear objectives.

Now you need to outline your STRATEGY. How are you going to reach you objective(s)? This is where your marketing plan often comes in as it helps describe the programs you will run to achieve your desired objective(s). To continue the example above our strategy may be to gain distribution for our product in one new major retail chain.

To make your strategy work you must then allocate appropriate RESOURCES. Certain things will need to be provided to reach your goal. This could be dollars, people, equipment, etc. Your plan must have included the resources you are allocating and why you believe this is adequate to get the result.

Every business plans also has some PROJECTIONS. This is your basic financials that you plan will deliver. Are you expecting a profit or loss? How much?

Lastly you need to allow for CONTINGENCIES. Things change all the time and your plan needs to consider these possibilities in advance. A good way to do this is to ask What if?

What if a new competitor enters our market?

What if a distributor delists our product?

What if interest rates rise?

Your analysis should give you some idea of likely contingencies. It saves a lot of stress if you have some documented ideas for dealing with them before they become a big problem.

Writing a business plan is never perfect, the plan is on paper and you’re operating in the real world. However a good plan can really guide you in the right direction. Take time to put real thought into preparing your plan an above all make sure you USE YOUR PLAN!