Writing A Business Plan:Design And Development Plans

Generally, there are seven major components that make up abusiness plan. They are:

1. Executive summary

2. Business description

3. Market strategies

4. Competitive analysis

5. Design and development plans

6. Operations and management plans

7. Financial factors

The purpose of the design and development plan section is toprovide investors with a description of the product's design,chart its development within the context of production, marketing,and the company itself, and create a development budget that willenable the company to reach its goals.

There are generally three areas you'll cover in thedevelopment plan section:

*Product development

*Market development

*Organizational development

Each of these elements needs to be examined from the funding ofthe plan to the point where the business begins to experience acontinuous income. Although these elements will differ in natureconcerning their content, each will be based on structure andgoals.

The first step in the development process is setting goals forthe overall development plan. From your analysis of the market andcompetition, most of the product, market and organizationaldevelopment goals will be readily apparent. Each goal you defineshould have certain characteristics. Your goals should bequantifiable in order to set up time lines, directed so they relateto the success of the business, consequential so they have impactupon the company, and feasible so that they aren't beyond thebounds of actual completion.

Goals For ProductDevelopment

Goals for product development should center on thetechnical as well as the marketing aspects of theproduct so that there is a focused outline from which thedevelopment team can work. For example, a goal for productdevelopment of a microbrewed beer might be "Produce recipe forpremium lager beer" or "Create packaging for premiumlager beer." In terms of market development, a goal might be,"Develop collateral marketing material." Organizationalgoals would center on the acquisition of expertise in order toattain your product and market-development goals. This expertiseusually needs to be present in areas of key assets that provide acompetitive advantage. Without the necessary expertise, the chancesof bringing a product successfully to market diminish.

Procedures

With your goals set and expertise in place, you need to form aset of procedural tasks or work assignments for each area of thedevelopment plan. Procedures will have to be developed for productdevelopment, market development, and organization development. Insome cases, product and organization can be combined if the list ofprocedures is short enough.

Procedures should include how resources will be allocated, whois in charge of accomplishing each goal, and how everything willinteract. For example, to produce a recipe for a premium lagerbeer, you would need to do the following:

*Gather ingredients.

*Determine optimum malting process.

*Gauge mashing temperature.

*Boil wort and evaluate which hops provide the best flavor.

*Determine yeast amounts and fermentation period.

*Determine aging period.

*Carbonate the beer.

*Decide whether or not to pasteurize the beer.

The development of procedures provides a list of workassignments that need to be accomplished, but one thing itdoesn't provide are the stages of development that coordinatethe work assignments within the overall development plan. To dothis, you first need to amend the work assignments created in theprocedures section so that all the individual work elements areaccounted for in the development plan. The next stage involvessetting deliverable dates for components as well as the finishedproduct for testing purposes. In Terence P. McGarty's book,Business Plans That Win Venture Capital there are primarilythree steps you need to go through before the product is ready forfinal delivery:

1. Preliminary product review. All the product'sfeatures and specifications are checked.

2. Critical product review. All the key elements of theproduct are checked and gauged against the development schedule tomake sure everything is going according to plan.

3. Final product review. All elements of the product arechecked against goals to assure the integrity of the prototype.

Scheduling

In procedures we mentioned scheduling. This is one of the mostimportant elements in the development plan. Scheduling includes allof the key work elements as well as the stages the product mustpass through before customer delivery. It should also be tied tothe development budget so that expenses can be tracked. Butits main purpose is to establish time frames for completion of allwork assignments and juxtapose them within the stages through whichthe product must pass. When producing the schedule, provide acolumn for each procedural task, how long it takes, start date andstop date. If you want to provide a number for each task, include acolumn in the schedule for the task number.

Costs

That leads us into a discussion of the development budget. Whenforming your development budget, you need to take into account allthe expenses required to design the product and to take it fromprototype to production.

Costs that should be included in the development budgetinclude:

*Material -- All raw materials used in the development ofthe product.

*Direct Labor -- All labor costs associated with thedevelopment of the product.

*Overhead -- All overhead expenses required to operatethe business during the development phase such as taxes, rent,phone, utilities, office supplies, etc.

*G&A Costs -- The salaries of executive andadministrative personnel along with any other office supportfunctions.

*Marketing & Sales -- The salaries of marketingpersonnel required to develop pre-promotional materials and planthe marketing campaign that should begin prior to delivery of theproduct.

*Professional Services -- Those costs associated with theconsultation of outside experts such as accountants, lawyers, andbusiness consultants.

*Miscellaneous Costs -- Costs that are related to productdevelopment.

*Capital equipment -- To determine the capitalrequirements for the development budget, you first have toestablish what type of equipment you will need, whether you willacquire the equipment or use outside contractors, and finally, ifyou decide to acquire the equipment, whether you will lease orpurchase it.

Personnel

As we mentioned already, the company has to have the properexpertise in key areas to succeed; however, not every company willstart a business with the expertise required in every key area.Therefore, the proper personnel have to be recruited, integratedinto the development process, and managed so that everyone forms ateam focused on the achievement of the development goals.

Before you begin recruiting, however, you should determine whichareas within the development process will require the addition ofpersonnel. This can be done by reviewing the goals of yourdevelopment plan to establish key areas that need attention. Afteryou have an idea of the positions that need to be filled, youshould produce a job description and jobspecification.

Once you've hired the proper personnel, you need tointegrate them into the development process by assigning tasks fromthe work assignments you've developed. Finally, the whole teamneeds to know what their role is within the company and how eachinterrelates with every position within the development team. Inorder to do this, you should develop an organizational chart foryour development team.

Assessing Risks

Finally, the risks involved in developing the product should beassessed and a plan developed to address each one. The risks duringthe development stage will usually center on technical developmentof the product, marketing, personnel requirements, and financialproblems. By identifying and addressing each of the perceived risksduring the development period, you will allay some of your majorfears concerning the project, and those of investors as well.

Part five of seven. Tomorrow, we'll cover operations andmanagement plans. Tips are updated daily at 8:30am PST or 11:30EDT.