If you have a great biotechnology innovation and you want to start a company to commercialize it, you’re almost certainly going to have to write a business plan. Even if you’re not going to try to obtain investment capital, in which case you would undeniably have to write a business plan, you should still write a business plan to make the case to yourself and anyone else involved in your start-up company that the company is viable and you have an understanding of what you’ll need to do to be successful. Most life scientists, however, have never written a business plan and likely don’t know how to properly compose one. While business plans for established companies or internal use only are not totally uncommon, we will focus on the business plan most relevant to bioscience inventors – an externally-focused business plan for start-up companies.
Every business plan is different, and you shouldn’t feel obliged to stick to any particular format. If you can make a better case for your business by changing the format, then do so. After all, the point of the business plan is to state what your business will be doing and why it will be successful. Making the document look and feel like a standard business plan is secondary. Whatever you do, just make sure you include all the necessary information.
In general, I like my scientific business plans to include the following sections:
- Company Overview – The company overview should be a one to three sentence description of your company. This should be very similar to your elevator pitch. It should be to the point, effectively get the readers attention, and explain the company as concisely as possible.
- Mission Statement – Your company’s mission statement should effectively state the purpose of the company. Don’t brush this off. Write a mission statement that will be able to guide the strategy and high-level decision making down the road. A mission statement is not a marketing tool, but it should read well.
- Management – Introduce your management team. Give some background on them and highlight their strengths as it pertains to the venture and their position within it. A poor management team can easily drive away investors, so be sure that your team looks good both on paper and in person. You should have enough talent on your team to realize your objectives. If there are any key skill gaps that will be addressed through outsourcing, be sure to address those in your operating plan.
- Market Analysis – This is where you really start to get into the meat and potatoes of the document, so to speak. The market analysis should give information on competition, market size, trends, challenges and opportunities the market presents, etc. As appropriate, you’ll need to be both descriptive and quantitative, and you will definitely need to back up your numbers. Do your homework, include references as appropriate, and make sure you back up your statements.
- Scientific Background – This is where you start talking about your product specifically. Since scientific products are highly technical in nature, you will need to show that your product will work as you claim and also that it will meet the needs of the market that you have just identified. If you can, reference published literature. If you’ve built a working prototype, show some results of testing.
- Marketing Plan – How will you market your product? How will you position your product within the marketplace to achieve the projected market share and hit your targets? What marketing channels will you use? You’ve addressed the market in your market analysis, but this is where you address how your company will interact with that market.
- Operating Plan – How your new biotech business will operate. You don’t have to go into minutiae, but if there are any important considerations, make sure to include them. Address operational difficulties and areas that would not be considered obvious. Again, if you plan on outsourcing anything be sure to address that here.
- Projections – The projections, which can also be referred to as the “financial plan”, etc., is where you will make the case that your venture is worth investing in. Extend your projections out to a relevant but not-too-distant time point. What should that time point be? That will be different for every company and would be based on your projected product development time, how long you project until your product goes to market, and what the life cycle of the product will be, and any other relevant factors. Revenues always involve some guesswork, but make sure that your cost estimates are very close. Also, don’t overestimate your revenues or no one will believe that you’re capable of hitting your targets. It’s better to have a slightly worse financial outlook that’s defensible
- Long Term Vision – Are there any important long-term goals or achievements for your life science start-up that would be important to partners or investors? Do you have plans for expansion into new markets to build on successes in your company’s early years? Those are some things to think about when writing a long-term vision.
- Disclaimer – Ever read a corporate financial statement where they give a disclaimer about “forward-looking statements”? You need to include something similar to protect yourself from liability. It won’t be a full section, per se, but it should constitute some small print at the end of the body of the document. Basically, your disclaimer should state that projections are subject to risks, not guaranteed, and that you nor your company are liable if they turn out to be incorrect.
Keep in mind this is just how I frame many of the scientific business plans that I write. I don’t even always stick to this format, so you shouldn’t feel obliged to either. This is merely a guideline.
A few other tips… Graphs, charts, and supporting data that is too long to put in the body of the business plan should go into figures and appendices. You’ll probably want a copyright notice in the footer. Don’t forget to include trademark symbols next to any slogans or names that you plan on claiming.
Some may want to include a section about risks and projected difficulties to show that you understand your limitations, are addressing them, and have contingency plans in case any of them become problems. I sit on the fence about this. While I certainly think you need to have thought about these issues in the event that they are asked, I don’t always think that including them in a business plan is a good idea. The business plan is supposed to sell people on the idea of your business, and listing all the drawbacks doesn’t do that. If there are obvious risks or obstacles, however, then you should definitely address them.
At the end of the day, your life science start-up should be able to create a business plan that is every bit as “bulletproof” as your idea. If you’re not a veteran at starting companies then there are likely issues you haven’t thought of. The creation of a business plan is a good way to expose those issues so you can address them before attempting to attract investors or launching your company and having unrecognized issues impact your bottom line. Remember that the business plan should show the value and merits of your idea, your understanding of the marketplace, and your ability to execute and realize commercial value. For maximum effect, don’t hesitate to modify the format and structure of the business plan to the unique needs of your biotech start-up and keep in mind what the purpose is and who your audience will be.