Here you should describe what products or services you propose to market, what stage of development they are at and why they are competitive with existing sources of supply. Part of the information in this section is for the benefit of outside readers who may not be familiar with your business. It should also be useful to you since the research and analysis required will encourage you to examine your offering compared with your competitors’.
Explore these topics in this section of your business plan.
Explain what it is you are selling. Be specific and avoid unnecessary jargon. The reader should end up with more than just a vague idea about your products and/or services. Obviously, some products and services will require much more explanation than others. If you have invented a new process for analysing blood, you will need to provide the reader with many details. On the other hand, if you are selling your services as a bookkeeper, you may need to do little more than list the services you will provide. A danger of this section is in assuming that the reader can easily understand your products without your providing sufficient detail and description.
CASE STUDY Eat 17
Eat 17, founded by Siobhan O’Donnell with her partner Chris O’Connor, his brother Dan and their stepbrother James Brundle in Walthamstow, north-west London may look at first glance like a run of the mill convenience store, but once inside it rapidly becomes evident that the product on offer is very different. First off Chris is a trained chef and he brings the expertise that ensures their products are fresh and appealing for the whole of the working day. As well as offering independent, artisan and local produce made by small suppliers they have a bakery and pizza restaurant on site, and create their own range of ready-meals. Each week they try a score or so of new products adding those that sell to their core product range. This strategy keeps repeat customer visits high and pulls in new ones bored with the more conventional ranges on offer in neighbouring supermarkets. Their latest creation a bacon-based condiment, which they called ‘Bacon Jam’ flies of the shelves, alongside more conventional products provided through their partnering arrangement with the convenience brand Spar. The jam is taking the business in a slightly different direction as it has become a product in its own right now stocked in 3,000 outlets nationwide including Selfridges, Waitrose and Tesco. It has even expanded to a range of five different flavours.
Sales in 2016, their ninth year in business, delivered a healthy £5,724,432 in annual turnover. They have recently bought a former snooker hall on Chatsworth Road in Lower Clapton taking their investment in the Eat 17 venture to £500,000. Brundle reckons their product offer is the shape of things to come. Retailers need a different product proposition that relies more on being a destination that people are excited to visit than a chore that simply has to be done to get essential groceries.
In addition to listing and describing your products and/or services, you should note any applications or uses of your products that are not readily apparent to the reader. For instance, a photocopier can also produce overhead transparencies, as well as its more mundane output. When you make your list, show the proportion of turnover you expect each product or service to contribute to the whole, as illustrated in Table 7.1.
Table 7.1 Example showing products/services and their applications
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Product/service |
Description |
% of sales |
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|
|
|
|
|
|
100% |
Are your products and/or services available for sale now? If not, what needs to be done to develop them? If you are selling a product, does it require more design work or research and development? Have you actually produced one or more completed products?
CASE STUDY Strida bicycle
When Mark Saunders, Cranfield enterprise programme participant, put his proposal for the Strida, a revolutionary folding bicycle, before the venture capital panel, the only projections he could include with any degree of certainty were costs.
The business proposal he sought backing for was to take his brainchild from the drawing board to a properly costed production prototype. For this he needed time (about two years), living expenses for that period, the use of a workshop and a modest amount of materials.
Saunders’s business plan detailed how he would develop the product over this period, and as a result the concept was backed by James Marshall, one-time manager of golfer Greg Norman. Marshall put together the manufacturing and marketing elements of the business plan, and within 18 months the Strida was in full-scale production and on sale through stores such as Harrods, Next Essentials, John Lewis and many others. Worldwide distribution covers some forty countries, alphabetically listed from Australia to Vietnam. The carbon version of the STRiDA 5.0 won the award of Taiwan Excellence in 2015.
If you are selling a service, do you presently have the skills and technical capability to provide it? If not, what needs to be done?
If additional inputs are required before your products or services are ready to be sold, state both the tasks to be done and time required, as shown in Table 7.2.
Table 7.2 Example showing products/services and additional inputs to be made
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Product/service |
State of development |
Tasks to be done |
Completion date |
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Do your products or services have any special competitive advantage? If so, explain the advantages and state how long this proprietary position is likely to last. You should state any other factors that give you a competitive advantage, even though the advantage is not protected by contractual agreements of the law. Examples could include a special skill or talent not easily obtainable by others. (If you have none of these, and many businesses do not, do not just make something up!)
Getting inventions to market can be an expensive and time-consuming business, as James Dyson is only too eager to confirm. It took five years and 5,127 prototypes before the world’s first bagless vacuum cleaner arrived on the scene. It’s hardly surprising then that the Dyson (www.dyson.co.uk/about) story includes a legendary but victorious 18-month battle with Hoover, based in the UK, over patent infringement.
If, like Dyson, you have a unique business idea, you should investigate the four categories of protection: patenting, which protects ‘how something works’; trademark registration, which protects ‘what something is called’; design registration, which protects ‘how something looks’; and copyright, which protects ‘work on paper, film and CD’. Some products may be covered by two or more categories, eg the mechanism of a clock may be patented while its appearance may be design-registered.
Each category requires a different set of procedures, offers a different level of protection and extends for a different period of time. They all have one thing in common, though: in the event of any infringement your only redress is through the courts, and going to law can be wasteful of time and money, whether you win or lose.
CASE STUDY Facebook
When Mark Zuckerberg, then aged 20, started Facebook from his college dorm back in 2004 with two fellow students he could hardly have been aware of how the business would pan out. Facebook is a social networking website on which users have to put their real names and e-mail addresses in order to register, then they can contact current and past friends and colleagues to swap photos, news and gossip. Within three years the company was on track to make US $100 million sales, partly on the back of a big order from Microsoft which appears to have its sights on Facebook as either a partner or an acquisition target.
Zuckerberg, wearing jeans, Adidas sandals and a fleece, looks a bit like a latter-day Steve Jobs, Apple’s founder. He also shares something else in common with Jobs. He had a gigantic intellectual property legal dispute on his hands. Until it was settled in May 2011 he had to deal with a lawsuit brought by three fellow Harvard students who claimed, in effect, that he stole the Facebook concept from them. However, IP disputes continue to dog Facebook and many other internet giants. In January 2017 Zuckerberg was back in court defending a case against one of his recent acquisitions, Oculus VR, where his €2 billion bet on the virtual reality headset market was under threat from a rival games company.
A patent can be regarded as a contract between an inventor and the state. The state agrees with the inventor that if he or she is prepared to publish details of the invention in a set form and if it appears that he or she has made a real advance, the state will then grant the inventor a ‘monopoly’ on the invention for 20 years: ‘protection in return for disclosure’. The inventor uses the monopoly period to manufacture and sell his or her innovation; competitors can read the published specifications and glean ideas for their research, or they can approach the inventor and offer to help to develop the idea under licence.
What inventions can you patent? The basic rules are that an invention must be new, must involve an inventive step and must be capable of industrial exploitation. You cannot patent scientific/mathematical theories or mental processes, computer programs or ideas that might encourage offensive, immoral or anti-social behaviour. New medicines are patentable but not medical methods of treatment. Neither can you have just rediscovered a long-forgotten idea (knowingly or unknowingly).
If you want to apply for a patent, it is essential not to disclose your idea in non-confidential circumstances. If you do, your invention is already ‘published’ in the eyes of the law, and this could well invalidate your application.
There are two distinct stages in the patenting process:
Two fees are payable for the first part of the process and a further fee for the second part. The whole process takes some two and a half years. Forms and details of how to patent are available free from the Patent Office.
It is possible – and cheaper – to make your own patent application, but this is not really recommended. Drafting a specification to give you as wide a monopoly as you think you can get away with is the essence of patenting and this is the skill of professional patent agents. They also know the tricks of the trade for each stage of the patenting procedure. A list of patent agents is available from the Chartered Institute of Patent Agents.
What can you do with your idea? If you have dreamt up an inspired invention but don’t have the resources, skill, time or inclination to produce it yourself, you can take one of three courses once the idea is patented:
Whichever option you select, you need a good patent agent/lawyer on your side.
A trademark is the symbol by which the goods or services of a particular manufacturer or trader can be identified. It can be a word, a signature, a monogram, a picture, a logo or a combination of these.
To qualify for registration the trademark must be distinctive, must not be deceptive and must not be capable of confusion with marks already registered. Excluded are misleading marks, national flags, royal crests and insignia of the armed forces. A trademark can only apply to tangible goods, not services (although pressure is mounting for this to be changed).
The Trade Marks Act of 1938 and the Copyright, Designs and Patents Act of 1988 and subsequent amendments offer protection of great commercial value since, unlike other forms of protection, your sole rights to use the trademark continue indefinitely.
To register a trademark you or your agent should first conduct preliminary searches at the trade marks branch of the Patent Office to check there are no conflicting marks already in existence. You then apply for registration on the official trademark form and pay a fee (currently £200 for one class of goods or services, then £50 for each additional class). Registration is initially for 10 years. After this, it can be renewed for periods of 10 years at a time, with no upper time limit.
It is not mandatory to register a trademark. If an unregistered trademark has been used for some time and could be construed as closely associated with a product by customers, it will have acquired a ‘reputation’, which will give it some protection legally, but registration makes it much simpler for the owners to have recourse against any person who infringes the mark.
You can register the shape, design or decorative features of a commercial product if it is new, original, never published before or – if already known – never before applied to the product you have in mind. Protection is intended to apply to industrial articles to be produced in quantities of more than 50. Design registration applies only to features that appeal to the eye – not to the way the article functions.
To register a design, you should apply to the Design Registry and send a specimen or photograph of the design plus a registration fee (currently £90). The specimen or photograph is examined to see whether it is new or original and complies with other requirements of the Registered Designs
Act 1949 and the Copyright, Designs and Patents Act 1988 and subsequent amendments to the Act. If it does, a certification of registration is issued which gives you, the proprietor, the sole right to manufacture, sell or use in business articles of that design.
Protection lasts for a maximum of 25 years. You can handle the design registration yourself, but, again, it might be preferable to let a specialist do it for you. There is no register of design agents but most patent agents are well versed in design law.
CASE STUDY Wagamama
This small London-based restaurant chain, which has prospered by selling Japanese noodles to city ‘trendies’, sees the need to protect its idea as the main plank of its business strategy. Alan Yau, who founded the business, came to the UK as an 11-year-old economic immigrant from Hong Kong. He joined his father running a Chinese takeaway in King’s Lynn, Norfolk. Within 10 years he was running two Chinese restaurants of his own, one of which is close to the British Museum. From the outset he had plans to run a large international chain of restaurants.
Yau’s food style is healthy, distinctive and contemporary. The name ‘Wagamama’ conjures up someone who is a bit of a spoilt brat in Japanese, and the word lodged in Yau’s mind. His informal communal dining room, opened under the Wagamama banner, received favourable reviews and the queues, which have become an essential part of the Wagamama experience, started forming. Realizing he had an idea with global potential, Yau took the unusual step of registering his trademark worldwide. It cost £60,000, but within two years that investment began to pay off. A large listed company opened an Indian version of Wagamama. The concepts looked similar enough to have led ordinary people to think the two businesses were related. As Yau felt he could lose out, he decided to sue. The case was heard quickly, and within three months Yau had won and his business idea was safe – at least for the five years his trademark protection runs.
In the 18 years since he started up, Yau has opened more than 167 restaurants in the UK, Europe, the Pacific Rim, the Middle East and the United States. By March 2017 with new openings in Ayia Napa, Gibraltar, Rotterdam, Istanbul, Jeddah, Auckland and Dundonald (Belfast), turnover was in excess of £200 million and growing at 16 percent a year.
Copyright is a complex field and since it is unlikely to be relevant to most business start-ups we only touch on it lightly here. Basically, the Copyright, Designs and Patents Act 1988 gives protection against the unlicensed copying of original artistic and creative works – articles, books, paintings, films, plays, songs, music, engineering drawings. To claim copyright the item in question should carry this symbol: © (author’s name) (date). At a diplomatic conference in Geneva in December 1996, new international copyright and performances and phonograms treaties, which govern the protection of databases, were agreed on and came into force in January 1998.
You can take the further step of recording the date on which the work was completed for a moderate fee with the Registrar at Stationers’ Hall. This, though, is an unusual precaution to take and probably only necessary if you anticipate an infringement.
Copyright protection in the UK lasts for 70 years after the death of the person who holds the copyright, or 50 years after publication if this is the later. Copyright is infringed only if more than a ‘substantial’ part of your work is reproduced (ie issued for sale to the public) without your permission, but since there is no formal registration of copyright the question of whether or not your work is protected usually has to be decided in a court of law.
Now that you have gone to so much trouble to develop a business model incorporating your mission, vision, objectives and culture so that you are all set for meteoric growth, it would be an awful pity if someone were to come along and steal it.
Even when times are hard, this is probably not an area to include in any cost-cutting exercise. In the internet world, where all the value is placed in the anticipation of profits from day one, intellectual property may be all that’s really worth saving.
The advent of softer terms, such as ‘sharing’ music, rather than stealing it, doesn’t alter the fact that all the usual intellectual property laws apply to the internet, it is just harder to enforce them. You can find out more about protecting internet assets in the output of the Digital Curation Centre (DCC) at www.dcc.ac.uk where the practical issues in setting up digital rights management systems (DRM) are examined.
The UK Intellectual Property Office (www.ipo.gov.uk) has all the information needed to patent, trademark, copyright or register a design.
For information on international intellectual property see these organizations: European Patent Office (www.epo.org), US Patent and Trade Mark Office (www.uspto.gov) and the World Intellectual Property Association (www.wipo.int).
The Chartered Institute of Patents and Attorneys (www.cipa.org.uk) and the Institute of Trade Mark Attorneys (www.itma.org.uk) despite their specialized-sounding names can help with every aspect of intellectual property, including finding you a local adviser.
The British Library (www.bl.uk/bipc/protideas/index.html) links to free databases for patent searching to see whether someone else has registered your innovation. The library is willing to offer limited advice to enquirers.
Their IP Centre supports small business owners, entrepreneurs and inventors. Their team is on hand all day, six days a week, to help you take the right steps to start up, protect and grow your business.
Identify those products and/or services that you think will be competing with yours. They may be similar products/services or they may be quite different, but could be substituted for yours. An example of the latter is a business that sells copying machines, which competes not only against other copying machines, but also against carbon paper and copy shops.
Once you have identified the major competing products, compare yours with them. List the advantages and disadvantages of yours compared with the competition. Later on, when you do your market research, you will probably want to address this question again and revise this section.
After making the comparison, draw your conclusions. If your products/services will compete effectively, explain why. If not, explain what you plan to do to make them compete.
Remember also that some products differentiate themselves from competitors by their service or warranty terms. For example, KIA claims to be the only car manufacturer to offer a fully transferrable seven-year, 100,000 mile warranty.
Additionally, all retailers in the distribution network are offered extended payment terms, finance for display stock and inventory as well as dealer support for advertising.
Similarly, most management consultants in the ‘service’ sector ensure that their ‘products’, their final reports, are faultless and immaculately presented, as are the premises and facilities of the best restaurants and fast food chains.
Will you be providing either of these with your product or service? Describe the scope of the warranty or guarantee, what it may cost, the benefits you expect from providing it, and how it will work in practice.
If your product or service lends itself to other opportunities, with relatively minor alteration, which can be achieved quickly and will enhance your business, briefly describe these ideas.
One-product businesses are the natural output of the inventor, but they are extremely vulnerable to competition, changes in fashion and to technological obsolescence. Having only one product can also limit the growth potential of the enterprise. A question mark must inevitably hang over such ventures until they can broaden out their product base into, preferably, a ‘family’ of related products or services.
CASE STUDY Cobra Beer
Cambridge-educated and recently qualified accountant Karan Bilimoria started importing and distributing standard-size 660 millilitre bottles of Cobra Beer, specifically brewed to complement Indian restaurant food in the United Kingdom. Soon it became ‘the beer from Bangalore, brewed in Bedford’; it became available in 330 millilitre bottles and subsequently on draught. A low-alcohol version was then planned, followed by the addition of ‘General Billy’s Wine’ as Karan widened the product range to meet Indian restaurant demand. Sales grew to over £100 million.
Medsoft was a business founded to sell a PC and a tailor-made software package to hospital doctors. Unfortunately, the management had no idea of the cost and effort required to sell each unit. Worse still, there were no repeat sales. It was not that customers did not like the products: they did, but each user needed only one product. This meant that all the money and time spent on building up a ‘loyal’ customer were largely wasted.
In another type of venture, for example selling company cars, you could reasonably expect a satisfied customer to come back every two or three years. In the restaurant business the repeat purchase cycle might be every two to three months.
Entrepreneurs tend to be attracted to fad, fashion and luxury items because of the short response time associated with their promotion and sale. Companies producing for these markets frequently run into financial difficulties arising out of sudden market shifts. Market security is more readily gained by having products that are viewed as ‘essential’.
Simplicity, usually a desirable feature, can be a drawback. If a business idea is so basic that little management or marketing expertise is required for success, this is likely to make the cost of entry low and the value added minimal. This makes it easy for every Tom, Dick or Harry to duplicate the product idea, and impossible for the original company to defend its market, except by lowering the price.
The video rental business was a classic example of the ‘too simple product’ phenomenon. Too many people jumped on the bandwagon as virtually anyone with a couple of thousand pounds could set themselves up. Rental prices fell from pounds to pence in a year or so, and hundreds of businesses folded.
CASE STUDY BlaBla
On 16 September 2015 BlaBlaCar, the French ride hailing start-up, announced that it had raised $200 million, primarily from US investors, which in turn places a value on the company of $1.6 billion. The business was started up by Frédéric Mazzella, son of a brace of professors, one of maths and one of philosophy. Coming from the Vendée region on France’s Atlantic coast some 500km from Paris, where he had made his home since leaving university, he had his eureka moment as a result of the frustrations of making that journey. On 24 December 2003 Mazzella was trying to get from Paris to his family home for Christmas. As the trains were full his sister had to come to pick him up so they could drive down together. ‘The highway goes the same way as the trains and I could see the trains were full with no seats left and the cars were empty. I was like: Oh my God, there were seats to go to the Vendée but not on trains, in cars.’
Founded in 2006, BlaBla aims to connect people who want to split the cost of long distance journeys, a simple enough concept and one that was basically following in the footsteps of other on-demand services like Uber, the ride booking company, and Airbnb, the vacation rental website. Success was a slow-burn process with Mazella trying out six business models and endured listening to ‘endless people telling me I was wasting my time’ before hitting on the right one. In 2006, Nicolas Brusson, Francis Nappez and Mazzella wrote up a business plan while at INSEAD, a business school near Paris, for a company to be called ‘covoiturage.fr’. Ride sharing followed the Airbnb model of owners getting more mileage from their assets, in this case literally. Mazzella’s proposition is that it costs €5,000–€6,000 a year to run a car in France and 96 per cent of the time the cars are parked and not moving … and three out of four cars that are moving have only one person on board. Ergo France’s 38 million cars provide a €200 million a year optimization opportunity.
The name was changed from covoiturage.fr to BlaBla as it seemed more likely to resonate around the world. Its expansion beyond its European roots into a growing number of emerging markets like Turkey, India and Russia supports that supposition. The company now has an impressive headquarters in north central Paris near to Google France. The company’s 360 employees have an average age of 29 and adopting a unique ‘fun and serious’ attitude, the crowd at BlaBlaCar take their job seriously, yet at the same time know how to bring the fun. The BlaBla bistro is home to the Friday morning ‘breakfast’ during which staff brainstorm and the next generation of winning strategies are fostered.
One of the biggest problems for a new company is creating in the customer’s mind an image of product quality. Once there was an almost faddish belief in ‘dynamic obsolescence’, implying that low quality would mean frequent and additional replacement sales. The inroads that the Japanese car makers have made on Western car manufacturers through improving quality, reliability and value for money have clearly demonstrated the fallacy of this proposition.
You cannot sell a product you do not believe in and as James Knock, founder president of a beer company, explained, ‘In cold calling the only thing standing between you and the customers’ scorn is the integrity of your product.’
The Cranfield entrepreneurs that we have seen prosper have all learnt to fight the cost, quality and service trade-off: ‘We are only interested in making the best quality and freshest pasta around,’ explained Farshad Rouhani in describing how Pasta Masters had grown to become the leading supplier of fresh pasta to retailers and restaurants in London. Equally, David Sinclair and his team at Bagel Express were at work at 4 am each day to ensure that only freshly baked bagels were on sale each morning. To show the freshness of the product, the bagels were baked each day in open kitchens in front of the customers.
Quality is not just what you do, but also how you do it; each contact point between the customer and company is vital, be it on the telephone, at the counter, at the till. The customer who complains is probably your best friend. Julian Richer, the founder of Richer Sounds, maintains one of his key tasks is to maximize his customers’ opportunities to complain. By that he certainly doesn’t mean giving them cause to be dissatisfied; just the chance to give feedback. Everything from having a bell at the door of each shop to ring if you have enjoyed your shopping experience, to a personally assigned response card in each packaged product is a step aimed at maintaining a direct link with the customer. Getting your customers to help you maintain your quality and standards is perhaps one of the keys to business success. And it isn’t easy. It is believed that 96 per cent of complaints don’t happen. In other words the customer can’t or can’t be bothered to complain. The quality obsession is clear; if you do not catch it, you will not survive, and unless you get regular feedback from your customers you will never know.