Why Do I Need a Business Plan?

ByCarolyn Keane

Why Do I Need a Business Plan?

Why do I need to do a business plan if I just want to sell or license my idea? It is a great question and we get it all the time.

The suggestion of doing a business plan is important for many reasons. If you are fortunate enough to be able to speak to someone or a company that might license your idea or product you need to be prepared. The interested party may ask you any or all of the following questions (example is for a product):

  • What will it be made of?
  • How much are the molds?
  • How many cavities in the mold?
  • Cost per piece, per 1000, for 10,000 & 100,000 pieces?
  • Cost of shipping
  • Cost of packaging
  • How is it packaged?
  • Suggested retail price?
  • Target market – What is the demographic of your customer?
  • What is the market for your item – sales in that field?
  • What are your projected Sales?
  • How do you intend to get those sales?
  • What is the cost to acquire customers?
  • Where do you see them being sold? Is drug store, specialty shops, big box stores?
  • How many will you have to sell to break even on the cost of the molds?

When you do a business plan, you go through all of these things because at the end of the day, if it cost too much to make them, it might not be worth it.  There are other costs most inventors do not take into consideration such as Boxing, Labeling, Warehouse space, Marketing or sales reps commission

And there are many other costs involved. So the companies considering your product need to know that you know your business and how they will make money if they license your product.  In doing the business plan, you will better understand the real costs involved and will be able to explain why they would want to take on your product.  You will also have the data if you should decide to create the business and manufacture it yourself.

Every company we have pitched to has asked many of these questions. They want to know you understand the process. I have seen them ask inventors these questions and when the inventor did not have any answers, the comment is – “Why should I care about your product more than you do if you haven’t taking the time to find out this information?”

There is a lot to consider, after you have come up with the idea, in order for you to make money. It is possible and there is help available.

Keep Inventing Daily!

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