Whether it’s for a formal business plan, a lean business plan, or just optimizing management, if you create, manufacture, develop, or publish products of any kind, your business can benefit from product planning.
If you are developing a formal business plan, you should include these elements related to the product.
- Start with listing or itemizing, in whatever level of detail makes sense, the important products and services your business provides. Use common sense and context to decide whether to divide them into main categories or list them individually; for a standard plan you want a few categories, not an exhaustive list of 50 or 100 or more. You might want a lot of detail for team members, but too much detail is hard for outsiders to absorb. Make your items or categories match your sales projections. Consider the objective of your business plan and its target audience too. Bankers probably want to see sales history that validates financial performance, and investors want to see evidence of potential future growth. You can always add existing product information, such as published price lists and such, as material in appendices.
- It’s a plan, so it looks to the future. That means you should include product road maps showing plans for product improvements, new features, versions, and so forth. Anticipate growth and future development. Make sure to include concrete dates and deadlines and details that will mark progress and keep the business on track.
- If your plan is to be presented to outsiders, then you should include practical descriptions of the technology involved. And if you are buying components or assembling, or simply buying products for resale, then explain sourcing as well. Of course the details here depend on the context, but technology platforms and development are critical for most high-tech products, apps, and websites; and sourcing is often important for physical products.
- If you have intellectual property, and your plan is for outsiders, then you should list your intellectual property. Patents are always impressive, and usually offer evidence of barriers to entry from competition, if they are good strong patents. But even without patents, you may have some copyrights and trademarks, so list these. And if you have trade secrets, point that out. Existing market position, trade secrets, and relationships can sometimes work like a secret sauce, to defend your business against competition.
- Especially if you are dealing with physical product, do a good analysis of unit economics and scalability. The unit economics show what it costs to deliver your product or service to a customer, what you charge for it, and margins through channels of delivery or affiliate sites and sales structure. Investors prefer product businesses that are scalable. In a classic professional service business, for example, doubling sales requires doubling headcount and fixed costs. This goes for consultants, accountants, attorneys, and many other professional services. And some service businesses, such as web tools, are easily scalable. Achieving scale means you can add sales volume that’s disproportional to overhead and fixed costs.
- Bankers will want to see sales history, steady growth, clear distribution channels, stability, and easy sourcing. Existing companies will have distribution agreements, vendor contracts, and other evidence of stability.
- Startups seeking investment need to offer validation any way possible. Show sales if you have them. Sales made through a Kickstarter.com, Indiegogo, FundRazr, or similar crowd funding site, are excellent, early validation. Contracts with buyers, or even signed letters from potential buyers or distributors, can help immensely.
A final thought: All business planning is context sensitive. Include in your plan the elements you need to meet the business objective. That means that with plans for internal use only, such as lean business plans, you include just bullet point lists, action points, tasks, deadlines, and budgets; not descriptions of what everybody on the team already knows. And it also means that if your business plan will be shared with outsiders, you need to add descriptions they’ll need to absorb and understand.