Section 7 : Design and Development Plan

Design and Development Plans –

Development Status and Tasks
Your product’s development is of interest to investors for
three reasons:
1. the further along you are the less time they’ll have to wait before seeing
some returns

2. if your product is in an industry they’re familiar with, they may want to put
their two cents worth in on how your product should be made

3. your long-term plans for revision and future products reveal your planning
horizon and level of commitment

Your intention here is to have development plans

appropriate for the type of industry you’re in.  Don’t skimp
on development plans for fast-pace industries such as
computers–you won’t be taken seriously.
Below are a few research and development questions:
  What is the current status of your product, and what needs to be done
before it is market ready?
  What is the estimated amount of time to complete each phase or task? 
(State the time in man hours, days, or months, not elapsed time.)
  Will you need any special expertise to complete your product?
  Will you need any special engineering facilities or capital expenditures to
complete your product?

Challenges and risks

Most entrepreneurs are risk-takers by nature, or at minimum calculated visionaries with
a clear plan of action to launch a new product or service to fill a gap in the industry. On
a personal level, many entrepreneurs take big risks to leave stable jobs to throw their
efforts (and sometimes their own money) into launching a business.

For entrepreneurs, there is no guaranteed monthly income, no guarantee of success,

and spending time with family and friends can be a challenge in the early days of
launching a company. Here are some of the most common risks that every
entrepreneur and investor should evaluate and minimize before starting a business.

Financial Risk
An entrepreneur will need funds to launch a business either in the form of loans from
investors, their own savings, or funds from family. The founder will have to put their
own "skin in the game." Any new business should have a financial plan within the
overall business plan showing income projections, how much cash will be required to
break even, and the expected return for investors in the first five-year timeframe.
Failure to accurately plan could mean that the entrepreneur risks bankruptcy, and
investors get nothing.

 
Entrepreneurs face many risks when they launch a venture, and they should
take measures to insure against those that are most likely to affect them.

Strategic Risk
An impressive business plan will appeal to investors. However, we live in a dynamic
and fast-paced world where strategies can become outdated quickly. Changes in the
market or the business environment can mean that a chosen strategy is the wrong one,
and a company might struggle to reach its benchmarks and key performance
indicators (KPIs). 

Market Risk
Many factors can affect the market for a product or service. The ups and downs of the
economy and new market trends pose a risk to new businesses, and a certain product
might be popular one year but not the next. For example, if the economy slumps,
people are less inclined to buy luxury products or nonessentials. If a competitor
launches a similar product at a lower price, the competitor might steal market share.
Entrepreneurs should perform a market analysis that assesses market factors, the
demand for a product or service, and customer behavior.

Competitive Risk 
An entrepreneur should always be aware of its competitors. If there are no competitors
at all, this could indicate that there is no demand for a product. If there are a few larger
competitors, the market might be saturated, or, the company might struggle to
compete. Additionally, entrepreneurs with new ideas and innovations should protect
intellectual property by seeking patents to protect themselves from competitors.

Reputational Risk
A business's reputation is everything, and this can be particularly so when a new
business is launched and customers have preconceived expectations. If a new
company disappoints consumers in the initial stages, it may never gain traction. Social
media plays a huge role in business reputation and word-of-mouth marketing. One
tweet or negative post from a disgruntled customer can lead to huge losses in revenue.
Reputational risk can be managed with a strategy that communicates product
information and builds relationships with consumers and other stakeholders.

Environmental, Political, and Economic Risk 

Some things cannot be controlled by a good business plan or the right insurance.
Earthquakes, tornadoes, hurricanes, wars, and recessions are all risks that companies
and new entrepreneurs may face. There may be a strong market for a product in an
under-developed country, but these countries can be unstable and unsafe, or logistics,
tax rates, or tariffs might make trade difficult depending on the political climate at any
point in time.

Also, some business sectors have historically high failure rates, and entrepreneurs in
these sectors may find it difficult to find investors. These sectors include food service,
retail, and consulting.
Writing a Business Plan—Financial
Projections
Spell out your financial forecast in dollars and sense

•••
BY DANIEL RICHARDS 
Updated on February 10, 2021
FACT CHECKED BY 
VIKKI VELASQUEZ

Creating financial projections for your startup is both an art and a science. Although
investors want to see cold, hard numbers, it can be difficult to predict your financial
performance three years down the road, especially if you are still raising seed money.
Regardless, short- and medium-term financial projections are a required part of your
business plan if you want serious attention from investors.

The financial section of your business plan should include a sales forecast, expenses

budget, cash flow statement, balance sheet, and a profit and loss statement. Be sure to
follow the generally accepted accounting principles (GAAP) set forth by the Financial
Accounting Standards Board, a private-sector organization responsible for setting
financial accounting and reporting standards in the U.S. If financial reporting is new
territory for you, have an accountant review your projections.
Sales Forecast

As a startup business, you do not have past results to review, which can make
forecasting sales difficult. It can be done, though, if you have a good understanding of
the market you are entering and industry trends as a whole. In fact, sales forecasts
based on a solid understanding of industry and market trends will show potential
investors that you've done your homework and your forecast is more than just
guesswork.

In practical terms, your forecast should be broken down by monthly sales with entries
showing which units are being sold, their price points, and how many you expect to sell.
When getting into the second year of your business plan and beyond, it's acceptable to
reduce the forecast to quarterly sales. In fact, that's the case for most items in your
business plan.

Expenses Budget

What you're selling has to cost something, and this budget is where you need to show
your expenses. These include the cost to your business of the units being sold in
addition to overhead. It's a good idea to break down your expenses by fixed costs and
variable costs. For example, certain expenses will be the same or close to the same
every month, including rent, insurance, and others. Some costs likely will vary month by
month such as advertising or seasonal sales help.

Cash Flow Statement

As with your sales forecast, cash flow statements for a startup require doing some
homework since you do not have historical data to use as a reference. This statement,
in short, breaks down how much cash is coming into your business on a monthly basis
vs. how much is going out. By using your sales forecasts and your expenses budget,
you can estimate your cash flow intelligently.

Keep in mind that revenue often will trail sales, depending on the type of business you
are operating. For example, if you have contracts with clients, they may not be paying
for items they purchase until the month following delivery. Some clients may carry
balances 60 or 90 days beyond delivery. You need to account for this lag when
calculating exactly when you expect to see your revenue.

Profit and Loss Statement

Your P&L statement should take the information from your sales projections, expenses
budget, and cash flow statement to project how much you expect in profits or losses
through the three years included in your business plan. You should have a figure for
each individual year as well as a figure for the full three-year period.

Balance Sheet

You provide a breakdown of all of your assets and liabilities in the balances sheet. Many
of these assets and liabilities are items that go beyond monthly sales and expenses. For
example, any property, equipment, or unsold inventory you own is an asset with a value
that can be assigned to it. The same goes for outstanding invoices owed to you that
have not been paid. Even though you don't have the cash in hand, you can count those
invoices as assets. The amount you owe on a business loan or the amount you owe
others on invoices you've not paid would count as liabilities. 

The balance is the difference between the value of everything you own vs. the value of
everything you owe.

Break-Even Projection

If you've done a good job projecting your sales and expenses and inputting the numbers
into a spreadsheet, you should be able to identify a date when your business breaks
even—in other words, the date when you become profitable, with more money coming
in than going out. As a startup business, this is not expected to happen overnight, but
potential investors want to see that you have a date in mind and that you can support
that projection with the numbers you've supplied in the financial section of your business
plan.
Additional Tips

When putting together your financial projections, keep some general tips in mind:

 Get comfortable with spreadsheet software if you aren't already. It is the starting point
for all financial projections and offers flexibility, allowing you to quickly change
assumptions or weigh alternative scenarios. Microsoft Excel is the most common, and
chances are you already have it on your computer. You can also buy special software
packages to help with financial projections.
 Prepare a five-year projection. Don’t include this one in the business plan, since the
further into the future you project, the harder it is to predict. However, have the projection
available in case an investor asks for it.
 Offer two scenarios only. Investors will want to see a best-case and worst-case
scenario, but don’t inundate your business plan with myriad medium-case scenarios.
They likely will just cause confusion.
 Be reasonable and clear. As mentioned before, financial forecasting is as much art as
science. You’ll have to assume certain things, such as your revenue growth, how your
raw material and administrative costs will grow, and how effective you’ll be at collecting
on accounts receivable. It’s best to be realistic in your projections as you try to recruit
investors. If your industry is going through a contraction period and you’re projecting
revenue growth of 20 percent a month, expect investors to see red flags.

Proprietary issues
Patent
A patent is a type of intellectual property that gives its owner the legal right to exclude others from
making, using, or selling an invention for a limited period of years in exchange for publishing an
enabling disclosure of the invention.

Trademarks
The term trademark refers to a recognizable insignia, phrase, word, or
symbol that denotes a specific product and legally differentiates it from all
other products of its kind. A trademark exclusively identifies a product as
belonging to a specific company and recognizes the company's ownership of
the brand. Trademarks are generally considered a form of intellectual
property and may or may not be registered.

Copyright
Copyright is an internationally recognized system of protecting the rights of
creators of written, performed or artistic works such as books, plays, paintings,
computer programs or sound recordings. Copyright does not protect ideas or
titles, although a title may be registered as a trademark. It does protect the
written or published form of your book.

Protecting your copyright

There is no procedure to protect the copyright of your book; this is an automatic
right. As soon as you write something, whether it is a book, a play, a short story,
a poem, a film, etc., that work is automatically copyrighted to you regardless of
whether you use the © symbol.

However, the Australian Attorney General’s Department advises that it is best

practice to display a copyright notice prominently on your work. In addition, the
department advises keeping dated copies of your manuscript and other writings
as well as any letters submitting your work to others.

Pen names
Some writers may choose to publish their work under a pen name. Authors use
pen names for a variety of reasons: for privacy or if they feel their real name
doesn’t stand out. For example, a man called John Smith might choose to
publish romance novels under the name Juliet Wildblood. However, the
Fellowship of Australian Writers advises that the copyright of this work belongs to
John Smith and should be indicated as such (ie. © John Smith, not © Juliet
Wildblood).

Selling copyright
Copyright can be bought and sold, although we don’t generally recommend that
authors sell their copyright. Once copyright of a work is sold, the author will have
no further say in what happens to that work.

When a book is published authors usually license rights to a publisher, which is

done by signing a contract that specifies which rights are to be licensed and what
royalties and share of income will be returned to the author. Contracts should
also specify the conditions under which licensed rights return to the author when
the book goes out of print.

The Fellowship of Australia advises that in some cases an organisation such as a

magazine or television company may insist on purchasing copyright. In such
cases the author must be clear about what is being sold and should ask for a
higher payment.

First rights
If you are selling an article to a newspaper or magazine, or a short story or poem
to a journal, the publisher may ask for first publication rights. This is a common
industry practice and means they are obtaining the right to be the first to publish
your work. First rights should not preclude you, the author, from publishing your
work again in another publication at a later date. For more information about first
rights, contact Copyright Agency or the Arts Law Centre of Australia.
Copyright duration
Although the duration of copyright protection can vary, in the case of literary
works it usually lasts for the lifetime of the creator plus seventy years.

Quotation permission
If you have used quotations from other writers – no matter how small the
quotation – you may have to get permission to use them and, in some cases,
may have to pay a fee. Permission fees are payable to copyright owners whose
work, or part of a work, is being reproduced in any form. For clearance of text,
photos and images, see the Copyright Agency or the Australian Copyright
Council. For permission on using music and song lyrics, visit the Australian
Performing Rights Association.

Publishers’ Licensing Services, a not-for-profit organisation owned by the UK

Publishing Industry, have also developed a free service for authors
called PLSclear. It allows authors to request text, poetry, images, and other
content from published works. There is no fee for using the system itself, and
authors may make as many permission requests as they wish.

Digital rights
The area of digital rights for work is constantly changing. Writing NSW
recommends contacting the Arts Law Centre of Australia for questions regarding
digital rights. The Australia Society of Authors recommends contacting
the Australian Copyright Council, which has copyright lawyers on staff.

Business Licenses and Permits

Business License

Contact your city's business license department to find out about getting a
business license, which essentially grants you the right (after you pay a fee, of
course) to operate a business in that city. When you file your license
application, the city planning or zoning department will check to make sure
your area is zoned for the purpose you want to use it for and that there are
enough parking spaces to meet the codes.

You can't operate in an area that is not zoned for your type of business unless
you first get a variance or conditional-use permit. To get a variance, you'll
need to present your case before your city's planning commission. In many
cases, variances are quite easy to get, as long as you can show that your
business won't disrupt the character of the neighborhood where you plan to
locate.

Because you're planning to start a business in your home, you should

investigate zoning ordinances especially carefully. Residential neighborhoods
tend to have strict zoning regulations preventing business use of the home.
Even so, it's possible to get a variance or conditional-use permit; and in many
areas, attitudes toward homebased businesses are becoming more supportive,
making it easier to obtain a variance. Visit the Zoning section of this article for
more information.

Fire Department Permit

You may need to get a permit from your fire department if your business uses
any flammable materials or if your premises will be open to the public. In
some cities, you have to get this permit before you open for business. Other
areas don't require permits but simply schedule periodic inspections of your
business to see if you meet fire safety regulations. If you don't, they'll issue a
citation. Businesses such as restaurants, retirement homes, day-care centers
and anywhere else that lots of people congregate are subject to especially
close and frequent scrutiny by the fire department.

Air and Water Pollution Control Permit

Many cities now have departments that work to control air and water pollut

Air and Water Pollution Control Permit

Many cities now have departments that work to control air and water pollution. If you burn any
materials, discharge anything into the sewers or waterways, or use products that produce gas
(such as paint sprayers), you may have to get a special permit from this department in your city
or county. Environmental protection regulations may also require you to get approval before
doing any construction or beginning operation. Check with your state environmental protection
agency regarding federal or state regulations that may apply to your business.

Sign Permit

Some cities and suburbs have sign ordinances that restrict the size, location and sometimes the
lighting and type of sign you can use outside your business. To avoid costly mistakes, check
regulations and secure the written approval of your landlord (if you rent a house or apartment)
before you go to the expense of having a sign designed and installed.

County Permits

County governments often require essentially the same types of permits and licenses as cities. If
your business is outside any city or town's jurisdiction, these permits apply to you. The good
news: County regulations are usually not as strict as those of adjoining cities.

State Licenses

In many states, people in certain occupations must have licenses or occupational permits. Often,
they have to pass state examinations before they can get these permits and conduct business.
States usually require licensing for auto mechanics, plumbers, electricians, building contractors,
collection agents, insurance agents, real estate brokers, repossessors, and anyone who provides
personal services (i.e., barbers, cosmetologists, doctors and nurses). Contact your state
government offices to get a complete list of occupations that require licensing.

Federal Licenses

In most cases, you won't have to worry about this. However, a few types of businesses do require
federal licensing, including meat processors, radio and TV stations, and investment advisory
services. The Federal Trade Commission can tell you if your business requires a federal license.

Sales Tax License

There are two reasons you need a certificate of resale (in other states, this may be called a
"seller's permit" or a "certificate of authority"). First, any homebased business selling taxable
goods and services must pay sales taxes on what it sells. The definition of a taxable service
varies from state to state. Depending on individual state rulings, both the parts and labor portions
of your bill may be taxable.

Sales taxes vary by state and are imposed at the retail level. It's important to know the rules in the
states and localities where you operate your business because if you're a retailer, you must collect
state sales tax on each sale you make.
Before you open your doors, be sure to register to collect sales tax by applying for each separate
place of business you have in the state. A license or permit is important because in some states
it's a criminal offense to undertake sales without one.

Health Department Permits

If you plan to sell food, either directly to customers as in a restaurant or as a wholesaler to other
retailers, you'll need a county health department permit. This costs about $25 and varies
depending on the size of the business and the amount and type of equipment you have. The
health department will want to inspect your facilities before issuing the permit.

What is a Brand Name?

By 

Richard Nordquist

Updated October 30, 2019

A brand name or trade name is a name (usually a proper noun) applied by a

manufacturer or organization to a particular product or service. While a brand
name is sometimes simply the name of the founders of a company, such as John
Deere or Johnson & Johnson (founded by brothers Robert Wood, James
Wood, and Edward Mead Johnson), these days, brand names are most often
strategically thought-out marketing tools geared toward establishing consumer
awareness and fostering brand loyalty.
What is the Purpose of a Brand Name?
In its simplest form, a brand name is a form of a signature that gives credit to the
creator of a particular work or service and sets it apart from those created by
others. Two of the main purposes of brand names are:

FEATURED VIDEO

 Identification: To differentiate a particular product or service from other

like or similar brands.
 Verification: To authenticate that a product or service is the genuine or
desired article (as opposed to a generic or knock-off).

It's the same principle as artists signing their paintings, journalists getting a
byline, or designers attaching a brand logo. A brand name is what consumers use
to identify the provenance and authenticity of the things they consume—be it a
work of art, a film franchise, a TV show, or a cheeseburger.
Fast Facts About Brand Names

 Brand names are usually capitalized, although in recent

years bicapitalized names (such as eBay and iPod) have become
increasingly popular. 
 A brand name may be used and protected as a trademark. In writing,
however, it's not usually necessary to identify trademarks with the
notations ™ or ®.
The History of Brand Naming
The practice of brand naming is nothing new. Exekias, an Athenian potter
working in ancient Greece circa 545 to 530 BCE, actually signed one of his vases:
“Exekias made and painted me.” As early as the 1200s, Italian tradesmen were
creating watermarked paper to differentiate one maker from another.

During the Second Industrial Revolution, when a man's good name was often
synonymous with his reputation (and all that reputation implied: integrity,
ingenuity, trustworthiness), companies started branding themselves with the
names of their powerful owners. Examples of this trend are the Singer Sewing
Machine Company, the Fuller Brush Company, and Hoover vacuum cleaners—all
of which are still in use (even if the original company has been sold or absorbed
into a larger corporation).

Modern branding as we know it employs sophisticated focus groups combined

with data from detailed linguistic and psychological analysis to come up with
brand names that are meant to instill confidence and induce the public to buy.
These targeted practices started just after the Second World War when a booming
consumer market created a proliferation of new products from competing
companies and made finding unique, memorable names a necessity.

Types of Brand Names

While some brands are still named for the people behind a product or service,
others are created to give consumers a specific idea of what something is or how
they might expect it to perform. For example, while Shell Oil has nothing to do
with mollusks, a consumer who buys Hefty trashbags infers from the name they
are getting a product that will be strong enough to do its intended job.

Likewise, when consumers purchase Mr. Clean, they know the purpose of the
product is to eliminate dirt, or when they shop at Whole Foods, they have the
expectation that the products they're buying will be healthier and more eco-
friendly than those they'd find at grocery chains or box stores.
Other brand names do not identify a specific quality, but rather, evoke a concept
or a feeling. Such names have a symbolic rather than literal meaning. For
example, Apple computers don't grow on trees and you can't eat them, and yet
the name plays perfectly into the mental associations people make with apples.
While Apple founder Steve Jobs didn't go the focus-group route when naming the
company (he told his biographer that he was on one of his "fruitarian diets," had
recently visited an apple farm, and thought the name sounded “fun, spirited and
not intimidating”), apples evoke connections as basic as simplicity and being
good for you to more esoteric concepts, such the innovative scientific advances
made by Sir Isaac Newton in his experiments with the laws of gravity.
The Evolution of Brand Names in Language
Two of the more interesting ways in which brand names make the transition from
names that simply represent a company to becoming integrated into
a language in a broader context have to do with their purpose and popularity.
In the facet of grammar known as open class words, language is constantly
evolving as words are added or altered. The function of words, including brand
names, can change over time. For example, Google in addition to being a search
engine (a noun), is also a word that's come to mean what people do while on that
site, i.e, search (a verb): "I'll Google it; He Googled it; I'm Googling it now."
Other brand names have such strong consumer identification that they eventually
supplant the goods or services they are identified with. When a brand name is in
such common usage that it becomes generic, it's known as
a proprietary eponym or generic trademark. 

Two examples of this phenomenon are Kleenex and Q-Tips. When the majority of
American consumers sneeze, they ask for a Kleenex, not a tissue; when they clean
their ears, they want a Q-Tip, not a cotton swab. Other generic trademarks are
Band-Aids, ChapStick, Roto-Rooter, and Velcro.

"Jacuzzi is a commercial brand, hot tub is the generic term; i.e., all Jacuzzis are
hot tubs, but not all hot tubs are Jacuzzis."—Jim Parsons as Sheldon Cooper in  The
Big Bang Theory
And finally, some brand names don't really mean anything at all. Kodak Camera
Company founder George Eastman simply made up something he liked the sound
of: "A trademark should be short, vigorous, incapable of being misspelled,”
Eastman famously explained. "The letter 'K' had been a favorite of mine. It seems
a strong, incisive sort of letter. It became a question of trying out a great number
of combinations of letters that made words starting and ending with 'K.'"