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The Product and Technology
The product and technology section of the business plan is where you describe the product, its current state of development or readiness for the market, and whether or not your business has any intellectual property rights such as a patent, trademark, copyright or registered designs.
In this section, describe the current state of development of the product (concept, prototype, or market-ready), explain what further work needs to be done, and what skills you need if any, in order for it to be ready for the market place. Unless they are already obvious and apparent make sure that the uses of the product are explained to the investor.
Minimum Viable Product
Issuing a minimum viable product into the market place is one method a business can adopt to achieve a lean startup methodology.
A minimum viable product, often abbreviated to MVP, is a product with just enough features to see whether it will work in the real world. It is important for a startup business that the minimum viable product is low cost, can reach the customer quickly, and is effectively an early prototype of the final product, so that the customers can get an early indication of what the product is trying to achieve.
The idea of a minimum viable product is to rapidly build a minimum set of features into a product and release it onto the market to test customer reaction. The feedback obtained from the early adopters can then be used to adapt and improve the product. This process can be repeated in a loop until the product is fully developed.
The minimum viable product method is in contrast to the conventional method of bringing products to market. The conventional method incorporates the maximum number of features the customer might want, carries out market research and adapts the product, and then launches the product fully developed.
The advantage of the minimum viable product method is that allows a startup business, usually with limited financial resources, a low risk method of launching a product; feedback is instant and the product can then be improved. With the conventional high risk method, the majority of the feedback comes too late after the product has been fully developed when any change would be costly.
Intellectual property is an asset of the business and can be bought or sold like any other asset. It can be used for example, to earn royalties from licensing, create strategic alliances with other businesses, and to secure loans. Set out the intellectual property rights your business has.
A patent is a form of intellectual property right granted by the state which gives an inventor the sole right to make, use, sell, or dispose of their invention for a limited number of years. A patent protects the way products and processes work, how they are made, what they are made of, what they do, and how they do it. If the patented invention is infringed, then the owner can take legal action to try and stop others making, using, importing or selling the invention without their permission.
It should be noted that not all inventions are patentable as to get the intellectual property rights associated with patent protection, the invention needs to be new, have a non obvious inventive step, and be capable of being made or used in some form of industry.
Trademarks legally distinguish the products of one business from another and give protection for the name of the product using a distinctive symbol, logo, word, phrase or signature normally placed on a product, packaging, or advertisements. Registering a trade mark gives the business the exclusive right to use it, and another business using the same or similar trademark is said to have infringed the trademark and could be sued for damages.
A registered trade mark is identified by the letter “R” surrounded by a circle ®.
A design registration is a type of intellectual property right protecting the way an object looks, its shape, and visual appeal. A registered design can protect such things as color, shape, and texture. Registering a design gives the business the exclusive right to use it, and another business using the same or similar design is said to have infringed the design registration and could be sued for damages.
Copyrights protect material when it is written down or recorded. For example, copyright will protect music, films, books.
Presenting Product and Technology in the Business Plan
There is no set style for the product and technology section of the business plan, a few paragraphs together with bullet points should be sufficient to explain the product itself, what it does, and the technology behind it.
Keep the description of the product and technology as simple as you can and avoid technical jargon where possible. The amount of technical detail will depend on the nature of the product itself, but should only be included to the extent that it is needed to explain to someone who is reasonably familiar with the industry, why the product is innovative and viable.
This is part of the Financial Projections Business Plan Guide a series of posts on what each section of a simple business plan should include. The next post in this series is about the traction your business idea has.