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 The Inventor's Mentor

March 2014

Begin with a Business Plan

You came up with a million dollar idea. The first step to success is to develop a business plan.

Your business plan is essentially a road map that will help you navigate the difficult road that lies ahead and lead you to your ultimate destination: to make your invention successful and profitable. A business plan should never be cast in concrete. It is a living, changeable document that should adapt to evolving business conditions. This changeability, however, should not be taken as an excuse to skimp on how much effort you spend on writing the plan. It should be as thorough as possible. The better and more detailed your plan is, the more likely your endeavor will be successful.

The plan may have to be written differently and tailored to the following audiences:

  • Yourself. You will find that carefully stating your goals and clearly planning your project is invaluable. You will use your plan as a road map to help you focus your ideas, organize yourself and plan your use of time.

  • Private investors. Your plan will help potential investors evaluate your idea and hopefully conclude that it is a winner and that they should invest in it.

  • The government. US agencies may be soliciting proposals regarding the problem solved by your invention. Your business plan will become part and parcel of your proposal to these agencies.

Your plan should cover the following seven topics:

  • iMagination. The plan should include a clear description of your invention and the problem it is intended to solve.  

  • Manufacturing. Your idea may be enticing in principle, but when it comes down to the nitty-gritty of fabricating it, it may cost too much. Your plan should describe how your invention will be manufactured and how much it will cost to make. For initial production look into manufacturers close to home. You will be able to communicate with them more easily and ultimately you will have better control over the final product.             

  • Marketing. To make a profit, your product must sell. Your plan should include the following:        

    1. an analysis of the business environment;

    2. a description of the industry;

    3. government regulations regarding your product;

    4. competitors;

    5. the segment of the population who will buy your product;

    6. advertising methods;

    7. distribution methods;

    8. sales methods (e.g., Web, retail…);

    9. the product’s sale price;

  1. liability coverage in case of problems.

  • Money. If you intend to pay investors with stock equity, you should explain how, given their initial investment and your own resources, this stock will grow in value and therefore lead to a high exit valuation. The explanation should include competitive advantages of your invention in the marketplace as well as upcoming growth opportunities.           

  • Management. A capable management team can make the difference between success and failure. Make sure to team up with people who can make your invention a success. List your team members, with their respective positions as well as their biographies including their accomplishments.              

  • Milestones. Provide a time chart showing your goals and intermediate milestones, also describing how much money, personnel (man-hours), time and equipment are required for each one. Identify the critical paths, that is, the steps which you think will be bottlenecks in reaching your goal.      

  • Monopoly. When your invention becomes a success on the marketplace your competitors will be tempted to copy it. Make sure to describe in your plan how you intend to protect your intellectual property. A patent is the best protection. It will give you a monopoly on your invention: the right to exclude others from making, using, selling, offering to sell, and importing the invention in the US. (35USC 112).

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        This newsletter should not be construed as legal advice.                                     ©2014 by George Levy