As part of my consulting practice, I read and review business plans written both for venture capitalists and for grant applications. The weakest part of every business plan is always how will the company get from today to “the dream” five years out.
Usually, there is a pretty good description of what will happen in the next six months and a decent description of what will happen in five years, but there is nothing in between.
Technical entrepreneurs have a good handle on what product development they need to do to get the product into a usable form. They understand the costs and the time involved. However, once the product is developed, they seem to be at a loss as to what to do next.
The lack of a business development executive early in the process often leads to the product being developed in a vacuum. There is a bit of a chicken and egg problem here: start-ups don’t feel like they can afford a business development person until they sell product and they can’t figure out how to sell a product without business development.
Also, I’ve noted that a number of engineer or scientist CEOs tend to discount the role of business development, as if the science behind the product is really what sells the product. This is just not true – if it was true, universities would be a lot richer.
A company is a machine, each part is equally as important as every other part. For instance, you may have the hottest, top of the line engine in your car, but without tires, the car isn’t going anywhere. And continuing on with the car analogy, you can purchase cheap, junky tires. If you do, your car won’t perform at its best and will eventually crash and burn.
A good business development executive will plot each step of the way how your product will go from prototype to dollars in the bank account. At the early stages of your company, if you cannot afford to hire a business development exec, look for an adviser who has performed the role for other companies and listen to him or her carefully. Your business development plan should include
- An Assessment of the Market Opportunities – Who is it who might want to buy your product? What do they have now? What is their purchasing cycle? Who at that company actually makes the purchasing decision?
- Competitive Analysis – Who is trying to sell into the same space? Why is their product worse? Why is it better? Don’t forget inertia as a competitor. As an example, everyone should have a will, but many people do not because they just don’t get around to it.
- Lead Generation – Once the market is narrowed down, you need a good strategy for how you are going to find the people who want your product.
- Follow-up Sales Activity – This is broken into two categories, one pre-sale, one post-sale. You should have a strategy for how to deal with potential clients who have been contacted, but are not interested at this time. You also need a strategy for reconnecting with the customers once the sale is complete. Even if you do not think they will need another product from you, they may be able to give you a referral.
- Pipeline Development – There should always be another customer in the pipeline. Without a strong pipeline of continuous customers, you will be unable to forecast sales and are likely to get caught short on cashflow.
Don’t neglect the business development strategy when building your business plan. If you are planning for five years out, know what you will be doing over the next six months, year, two years, three years, and so forth.