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The Role of IP in the Business Plan
Your business plan allows you to document your business objectives and helps you to focus your commercial direction – but your business plan is also a prospectus for potential funders that need to know how your company currently operates and how you intend to run your concern into the future. Many emerging ventures overlook the fact that a business plan is fundamental to securing funding, and start-ups often discount the significant role that intellectual property (IP) plays in strengthening a business plan, writes Donal M Kelly, Partner at FRKelly – Ireland’s leading Intellectual Property specialists.
Let’s take a look at how IP can bolster the key aspects of your business plan...
1. Executive Summary (Company Overview)
Essentially the most important part of your business plan, the executive summary is your chance to catch the attention of the reader and to inspire potential backers to fund your enterprise. Whether you realise it or not, IP is a commodity that all investors carefully consider, and recognising and referring to IP in your business plan demonstrates that you have knowledge of the property residing in your business and helps you to justify any statements you make regarding how your company is uniquely qualified to succeed. Upfront acknowledgement of IP can compel a potential backer to read on.
2. Market Analysis
It is imperative to show an understanding of the size and characteristics of your market and how you will effectively establish market share. Financial backers are wary of investing in saturated markets – the problem with a lucrative market is that rapid market expansion is commonplace and investors need to know that your business is capable of maintaining its stake in the market. First-to-market strategies are transitory, but IP can provide you with persisting market exclusivity, allowing you to both maintain and increase market share. Ensure that you have audited your business for any and all IP before you go to market, and that you secure any rights vesting in your company.
3. Competitive Analysis
Executing your plan to establish market share is only possible if you are certain that there are no impediments to you conducting your business. Investors want to know whether you can legitimately enter the market and whether there are any operational barriers that could effectively limit (or even cease) trading. Remember to conduct an analysis of competitors’ IP to determine whether there are any rights out there that might affect your trade in the market – what if one of your competitors has a patent that prevents sale of your product or service, or a trademark registration that prohibits the use of your brand? – Both you and your potential backer need to know as early as possible.
4. Marketing & Pricing Plan
Communicating the value of your brand is critical to promoting your business. No longer is IP solely associated with so-called “high-technology” – even everyday commodities (like shampoo) derive prestige from being recognised as “patented” or “patent pending” – a nod to your customers that you are providing a distinctive product or service. Associating market exclusivity with your product or service also allows you to garner premium prices and substantiate a premium brand – which can be protected as a registered trademark to ensure your choice brand is not hijacked by competitors.
5. Financial Plan
Your business plan is expected to give clarity on how you generate income and, no matter what revenue model your business is based on, IP can generate ancillary returns. IP is an asset that can be transacted like any other – it can be sold for a return sum, licenced for a continual income stream, or even mortgaged to secure a loan. In this way, you can reap alternative compensation that could help stabilise your primary revenue model, giving confidence to potential backers.
6. Intellectual Property Plan
Although interweaved into other aspects of your business plan, given that IP is a fundamental aspect of your business that will be scrutinised by potential funders, you should also dedicate a distinct part of your business plan to outlining the IP that already resides in your company, how you intend to prospectively capture future generated IP, and your overall strategy for managing IP. Certainly, investors will want to know that you have processes in place to ensure that any IP is fully owned by the company, so make sure you have details of contractual obligations that employees, contractors, and consultants have to assign IP to the company – a patent or trademark attorney can advise you about establishing the necessary systems and checks.
It’s clear to see that IP is not a separate consideration in your business plan, but can often form the basis of the primary aspects of your business. Savvy entrepreneurs recognise how IP is integral to reinforcing the commercial security of a business and that IP is the foremost consideration of any potential investor. So, if you are seeking funding for a new or existing business, improve your chances of eliciting investment by appropriating IP – not only in your business plan – but throughout the business itself.
Written by: Donal M Kelly, Partner, FRKelly – European Patent and Trademark Attorneys.
Please be aware that all of the views expressed in this Blog are purely the personal views of the authors and commentators (including those working for AIB as members of the AIB website team or in any other capacity) and are based on their personal experiences and knowledge at the time of writing.
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