Unit:-4

Entrepreneurship for Engineers:-

Industrial Evolution:- The Industrial Revolution was a period of major social, economic,
and technological change that occurred in the late 18th and early 19th centuries.

Industrial viewpoints play a crucial role in managing innovation and entrepreneurship, as

they provide a structured approach to navigate challenges, optimize resources, and leverage
opportunities within the industry. Here’s how industrial perspectives contribute to these
domains:

1. Structured Innovation: Industrial viewpoints promote a systematic approach to

innovation, which is necessary for turning creative ideas into practical, market-ready
solutions. They provide frameworks for evaluating new ideas, assessing risk, and
determining viability, which can help streamline the innovation process.
2. Resource Allocation: Managing innovation and entrepreneurship involves significant
resource investments. Industrial viewpoints emphasize efficient use of resources—
time, capital, materials, and human expertise—ensuring that innovations are
sustainable and scalable. This efficiency reduces waste and maximizes the impact of
innovation on the industry.
3. Focus on Market-Driven Solutions: An industrial perspective encourages aligning
innovation with market needs, focusing on consumer demands and industry trends.
This alignment helps ensure that new products or services address real problems and
have a better chance of succeeding in the market.
4. Risk Management and Resilience: Industrial viewpoints bring risk management into
focus, which is essential in the uncertain world of entrepreneurship and innovation.
By evaluating potential risks early, industries can implement safeguards, make
informed decisions, and develop contingency plans, leading to more resilient
innovation processes.
5. Scalability and Growth: From an industrial standpoint, scalability is key to ensuring
that innovations can grow and be applied across larger markets or production
volumes. This viewpoint prioritizes designing innovations that can be expanded or
replicated, allowing entrepreneurs to transition from small-scale ventures to large-
scale businesses.
6. Integration of Technology and Processes: Industries that manage innovation well
often integrate the latest technologies and lean methodologies. Industrial viewpoints
foster an environment where new technologies are not only adopted but are embedded
into processes to drive efficiency, quality, and productivity. This technical integration
supports the scaling of innovative ideas.
7. Collaboration and Ecosystem Building: Entrepreneurship often thrives in
collaborative environments. Industrial viewpoints encourage forming partnerships,
sharing resources, and engaging in networks that support innovation. This fosters an
entrepreneurial ecosystem where ideas can flourish, receive feedback, and gain
support from others in the industry.
8. Balancing Short-term and Long-term Goals: Industrial viewpoints emphasize the
balance between immediate results and long-term impact, helping entrepreneurs focus
on sustainable innovation. This approach ensures that innovation is not just about
quick wins but about developing products, processes, or business models with lasting
value.
In essence, industrial viewpoints provide a grounded, strategic approach to innovation and
entrepreneurship, ensuring that new ideas are not only creative but practical, efficient, and
aligned with market needs. This leads to robust, sustainable innovation that can positively
impact both the industry and society at large.

Entrepreneurial Mind
Timmons and Spinelli indicated in their textbook that the successful entrepreneur needs to
have both creative aptitude and management skills. The below Figure depicts the four
categories of business people on these two scales: entrepreneur, inventor,
manager/administrator, and promoter. Many graduate students with science and engineering
backgrounds may be eligible to be inventors, while graduate students from management and
administration departments may become managers or administrators. However, note that in
order to become entrepreneurs or start their own companies, engineers should improve their
management skills.

Inventor: Someone who invents a product is simply looking to create a wholly new product
and, in most cases, isn't trying to place their invention on the market .
Entrepreneurs: Entrepreneurs focus almost exclusively on trying to take a product to market
where it can sell to customers or clients. Often, entrepreneurs create companies based on the
product they want to place on the market, which is why most individuals who create startups
are considered entrepreneurs.
Promoter: promoter is the person who undertakes to form a company with reference to a
given project and to get it going, takes the necessary steps to accomplish that purpose.
Administrator: An administrator is someone who manages a department, division, or
functional area within an organization. His job is to perform the tasks assigned to him as
efficiently as possible and to meet all deadlines. An entrepreneur must have administrative
abilities in the sense of being able to complete tasks efficiently, but an administrator does not
have to possess the qualities associated with being an entrepreneur in order to succeed in his
job.
How to Commercialize Invention:-

1. Research

Observations and experiments can lead to new discoveries and inventions. An invention is
any new process, machine, composition of matter, or useful improvement thereof. Under
the U of T Inventions Policy, such things as research tools, computer software, data sets and
the related know-how associated with them are also considered inventions.

2.Invention Disclosure and Assignment

An invention disclosure is a written record of an invention that's used to protect and advance
intellectual property. It's a confidential document that's created by an inventor, such as an
employee, to record their discovery and provide details about the invention. The disclosure
can include supporting data and results, and should be filed as soon as possible after the
invention is conceptualized

3. Assessment

If the inventor requests to assign the invention to U of T, IPO evaluates its

commercialization, marketing, and intellectual property potential.

Key considerations for determining commercialization potential include the following.

 What is the problem the invention solves or improves upon?

 What are the top alternative ways to solve the problem? Is the invention
faster/cheaper/better?
 What is the stage of development of the Invention? The development stage is often
referred to as the Technology Readiness Level (TRL). Image 2 depicts the different
levels. More details about the nine levels can be found at Innovative Solutions
Canada: Technology Readiness Levels
 Is the team willing to improve the technology readiness?
 What are all the possible applications of or markets for the invention? How big is the
market?
 Are there any ready receptors or partners for the technology?


 Image 2: Technology Readiness Levels

If Inventors choose to take personal ownership, IPO does not assess the invention, nor
complete steps 4-9 below. Please see Guidelines for Personal Ownership of Inventions for
more information on this option.

4. Intellectual Property Protection

According to the World Intellectual Property Office (WIPO), “Intellectual property (IP)
refers to creations of the mind, such as inventions, literary and artistic works, designs, and
symbols, names and images used in commerce.” IP is protected in law by patents, copyright,
and trademarks, which enable recognition or financial benefit from creations. Unique
biological materials and software can also be licensed without formal IP protection (e.g.
through Material Transfer Agreements or Open Source Licenses).

Patent rights may be affected by public disclosure (e.g. written publication or presentation),
so it is best to involve IPO early..

5. Marketing

With support from inventors, IPO specialists evaluate and define the market opportunity for
U of T inventions. This step involves identifying potential customers and competitors, and
the key expertise, resources and business networks needed to bring the technology to market.
During this stage the technology is promoted directly to potential customers, through our
website, and other marketing platforms such as In-Part. Through this process the optimal path
to market is outlined, which may include creating a start-up or licensing to an existing
company.

6. Selecting a Licensee

When appropriate licensees are engaged, IPO licensing specialists work to develop the
financial and diligence terms to fully commercialize the technology. Licensees, if
appropriate, will be asked to follow global access principles and startup venture licensing
guidelines.

7. Licensing

IPO works with the licensee to negotiate and execute an option, license, or assignment
agreement. These agreements give the licensee(s) rights to a technology in return for
commercially reasonable financial benefits.

8. Commercialization

The licensee continues the advancement of the technology and makes other business
investments to develop the product or service. This step may entail further development,
regulatory approvals, sales and marketing support, training, and other activities.

9. Revenue

Any invention revenues received by U of T are distributed annually to inventors,

departments, units, and the Connaught Fund as per the U of T’s Inventions Policy.

For Inventor-owned technology, net revenues from license fees, royalties, and/or equity are
shared 75%/25% between the inventor(s) and the University. For University-owned
technology, net revenues from license fees, royalties, and/or equity are shared 60%/40%
between the inventor(s) and the University. In both cases, the University share of proceeds
supports faculties and departments, covers costs and advances the University’s academic and
research mission.

Discovery of new Function or Material:-

Commercializing the discovery of a new function or material requires transforming a novel

idea into a viable product that meets market needs and generates revenue. This process
involves thorough planning, strategic partnerships, and a clear understanding of market
dynamics. Here’s a structured approach to guide you from discovery to successful
commercialization:

1. Evaluate Commercial Potential

Identify Potential Applications: Assess where the new function or material can provide a
distinct advantage across industries. For example, consider if it improves performance,
reduces cost, or enhances sustainability.
Market Research: Conduct market research to understand the size, growth rate, and trends
within relevant markets. Identify existing competitors and evaluate if your discovery offers a
significant improvement over current solutions.

Define the Value Proposition: Articulate what makes this material or function unique and
valuable. This should resonate with industry needs and address specific pain points.

2. Protect Intellectual Property (IP)

Patent the Invention: Seek patent protection to safeguard the novel aspects of the discovery.
This can enhance credibility and prevent competitors from replicating it. For some materials
or functions, process patents (covering manufacturing methods) may also be valuable.

Consider Licensing Options: Think about licensing the IP to existing companies as an

alternative commercialization path, especially if they have the manufacturing and distribution
capabilities your discovery needs.

3. Develop Proof of Concept and Prototypes

Prototype Development: Create prototypes to demonstrate the functionality, reliability, and

potential applications of the material. This can help attract investors and partners by showing
real-world feasibility.

Testing and Validation: Conduct performance testing to verify that the material meets
industry standards. In fields like medical devices, energy, or construction, regulatory testing
may be required to ensure safety and compliance.

4. Secure Funding

Seek Investors: Identify venture capitalists, angel investors, or corporate venture arms that
invest in new materials or technology. Highlight the market potential and competitive edge to
attract investment.

Apply for R&D Grants: Many government agencies provide funding for innovative R&D
projects, especially in technology or sustainable materials, which can offset some
development costs.

Consider Strategic Partnerships: Partnering with established companies can provide both
funding and access to manufacturing and distribution channels.

5. Develop a Commercialization Plan

Pilot Testing and Market Entry: Launch pilot programs to gather real-world feedback and
make necessary adjustments before scaling. A pilot helps in understanding customer
experience and gauging demand.

Choose a Business Model: Decide on a business model—whether to produce and sell

directly, license the technology, or enter into joint ventures. Licensing can allow for rapid
market entry, while direct sales offer greater control.
Marketing and Branding: Educate the market about the benefits of your discovery. Position it
as a cutting-edge, problem-solving solution that addresses a specific need within the industry.

6. Establish Manufacturing and Supply Chain

Scale Manufacturing: Develop a scalable manufacturing process that meets quality standards.
Consider whether in-house production or third-party manufacturers are more suitable based
on costs, volume needs, and quality control.

Build a Reliable Supply Chain: Ensure access to the raw materials or components needed for
production, factoring in potential supply chain challenges as the product scales.

7. Market the Invention

Targeted Marketing Efforts: Develop industry-specific marketing materials such as white

papers, case studies, and technical documentation to communicate the new material’s benefits
effectively.

Engage with Industry Influencers: Leverage industry experts, publications, and trade shows
to increase visibility, credibility, and market reach.

Establish a Sales Strategy: Depending on the product, you may need a direct sales team,
distributor partnerships, or a licensing strategy to get the product into the hands of customers.

8. Gather Feedback and Iterate

Collect User Feedback: After market entry, actively seek user feedback to refine the product
and address any issues. Early adopters’ insights are invaluable in making iterative
improvements.

Adapt and Pivot if Necessary: Be willing to pivot based on feedback or new market
conditions. Flexibility is key to staying competitive, especially as new discoveries enter the
market.

9. Expand and Scale

Broaden Applications: Explore secondary markets or additional applications for the material
once it has gained a foothold in its initial industry.

Global Market Expansion: As you scale, consider expanding internationally. This may
require additional patents, regulatory approvals, and localized marketing strategies.

Continuously Innovate: Maintain a focus on R&D to improve the material further or create
complementary products, ensuring long-term relevance and competitive advantage.

By following these steps, inventors and companies can effectively navigate the complexities
of commercializing a new function or material, transforming a scientific breakthrough into a
marketable and profitable innovation.
 Performance Improvement:-
Here are some things to consider when improving the performance of commercializing an
invention:
 Identify goals: Clearly define your goals for the invention process.
 Explore the problem space: Understand the problem you're trying to solve.
 Generate solutions: Consider multiple possible solutions.
 Evaluate and select: Choose the best solution.
 Implement and communicate: Put your solution into action and share it with others.
 Monitor and improve: Continuously monitor your solution and make improvements as
needed.
 Find industry contacts: Identify companies that have the interest and resources to develop
similar products.
 Get feedback: Seek feedback from industry and business contacts to assess commercial
viability and refine your business strategy.
 Consider the business model: Choose a business model for transferring the invention from
academia to the commercial world.
 Consider the factors: Consider factors like the quality of management, availability of
financial capital, and the strength of intellectual property protection.
 Conduct benchmarking tests: Demonstrate the advantages of your product or service
through benchmarking tests.
 Monitor licensee performance: Monitor the performance of the licensee for the duration of
the license.
Product Planning Creativity:-

Product planning creativity involves generating innovative ideas and solutions during the
design and development phase of a product. For engineers, this might mean:

 Integrating Advanced Technology: Engineers can leverage cutting-edge

technologies, such as AI, IoT, or machine learning, to create products with advanced
features or capabilities. For example, creating an AI-powered wearable for health
monitoring, which can differentiate from standard fitness trackers.
 Prototyping for Early Testing: Engineers can creatively iterate through rapid
prototyping, leveraging 3D printing, virtual simulations, or digital twins. This
approach allows them to identify design flaws early, improve product performance,
and experiment with novel designs without high upfront costs.
 User-Centric Design Thinking: While engineers are traditionally more technical,
they can use creativity to prioritize user-centered designs that focus on functionality,
usability, and experience. Techniques like user journey mapping or brainstorming
workshops can foster empathy for the end user.
 Resourceful Problem-Solving: Engineers can creatively solve resource constraints
by developing low-cost or energy-efficient solutions. For instance, an engineer in an
emerging market might develop a low-energy, solar-powered device, creatively
tackling both resource limitations and environmental impact.
Market Creativity:-

Market creativity involves finding innovative ways to reach customers and differentiate
products in the marketplace. For engineers, market creativity can be applied by:

 Identifying Niche Markets: Engineers can use their technical knowledge to identify
underserved niche markets or create products tailored to specific industries. For
example, developing specialized sensors for agricultural data monitoring, targeted at
farmers who need climate-resilient technologies.
 Differentiating through Unique Value Propositions: Engineers can emphasize
unique product features that competitors don’t offer. Highlighting advanced specs,
sustainable materials, or technical reliability can position the product as the go-to
option for technically savvy or quality-focused consumers.
 Collaborating with Marketing Experts: Engineers can work alongside marketers to
creatively communicate technical benefits in relatable ways. For example, they might
help simplify complex features into benefits that matter to everyday users, like
“battery life that lasts a week” instead of “1200mAh battery.”
 Leveraging Data for Market Feedback: By using analytics to track how customers
interact with a product, engineers can quickly iterate on customer pain points or
features that resonate. Continuous improvement through data can enhance both the
product and its marketability, fostering a brand reputation for being highly responsive
to customer needs.

Combining Both for Success

In an engineering-led startup, creativity in product planning and market approaches go hand-

in-hand. By fostering a cycle of technical innovation and market responsiveness, engineers
can build products that not only solve problems effectively but also appeal to customers in a
unique way.

Start-Up
The term startup refers to a company in the first stages of operations. Startups are founded by
one or more entrepreneurs who want to develop a product or service for which they believe
there is demand.
The Founder and Team
Many people think that entrepreneurs are their own bosses and completely independent. This
is wrong! Entrepreneurs are far from independent, and have to work with many people,
including partners, investors, employees, and families.
Persuasion of the Family The most popular scenario, in my experience, is that one should
have a job with a steady income. By starting your own company, you may expect more
compensation and mental satisfaction in the future. However, you may experience challenges
initially. You may need to work long hours with less compensation during the start-up and
initial growth periods. Your lifestyle may change dramatically compared with regular
employment, reducing family time and income. An entrepreneur needs to obtain complete
understanding and strong support from his or her spouse and family. Though a corporation is
owned by shareholders who have the legal privilege of limited liability, the actual situation is
usually different for the founder. For example, an emergency short-term loan may be
obtained from a bank, with your personal property as collateral, such as a home or other
assets. The liability is not completely limited, which may affect your family’s security.
Entrepreneurial Process

The entrepreneurial process involves identifying a market opportunity, developing a viable

business concept, planning and launching the business, and managing its growth. Key phases
include Ideation, Feasibility Analysis, Business Planning, Execution and Growth, requiring a
blend of innovation, strategic planning, and persistence. This entrepreneurial
process involves transforming ideas into successful businesses through strategic planning and
execution.

Ideation
Ideation or idea generation is the stage where entrepreneurs generate and refine business
ideas. It involves identifying a problem or opportunity in the market and developing
innovative solutions. Creativity, market awareness, and customer needs are crucial during this
stage.
Entrepreneurs can brainstorm ideas individually or in teams, conduct market research to
identify gaps and trends and seek feedback from potential customers and industry experts.
The goal is to build a wide range of ideas and evaluate their feasibility and potential for
success.
Feasibility Analysis
Feasibility analysis is the stage where entrepreneurs assess their business idea’s viability and
potential success. It involves evaluating market potential, competition, resources, and risks.
Market research is essential to understand the target market’s size, demographics, and
purchasing behaviours. Competitive analysis helps identify existing players, their strengths,
weaknesses, and opportunities for differentiation. Assessing available financial and
operational resources helps determine the idea’s feasibility.
Entrepreneurs must also evaluate potential risks and challenges, such as regulatory
requirements, technological constraints, and market uncertainties. This analysis helps them
make informed decisions about whether to pursue the idea, modify it, or abandon it.
Business Planning
Business planning is the stage where entrepreneurs create a detailed roadmap for their
venture. It involves developing a business model, crafting a marketing strategy, establishing
financial projections, and setting operational goals.
The business model outlines how the venture will create, deliver, and capture value. It defines
the target customer segments, value proposition, revenue streams, and cost structure. The
marketing strategy outlines how the product or service will be positioned, promoted, and
distributed to reach the target market effectively.
Financial projections estimate revenue, expenses, and profitability over a specific period.
They help entrepreneurs understand the business's financial viability and funding
requirements. Setting operational goals and defining key performance indicators (KPIs)
provides a clear focus for implementation and evaluation.
Execution
Execution is the stage where entrepreneurs transform their plans into action. It involves
building a team, developing products or services, and launching the business. This stage
requires effective project management, resource allocation, and adaptability to navigate
challenges and capitalize on opportunities.
Building a talented team is crucial. Entrepreneurs need to identify the necessary skills, recruit
the right people, and create a culture that aligns with the vision and values of the business.
Developing and refining the product or service based on market feedback is essential to meet
customer needs and differentiate from competitors.
Launching the business involves bringing the product or service to market, establishing
operations, and implementing marketing and sales strategies. It requires effective
coordination of activities, monitoring progress, and making adjustments as needed.
Growth
The final stage of the entrepreneurial process is growth. This stage involves scaling the
business, expanding into new markets, and optimizing operations. It involves strategic
decision-making, resource allocation, and continuous innovation to sustain and increase
market share. Entrepreneurs must seize growth opportunities while maintaining the core
values and vision that led to their initial success.
Entrepreneurs must develop growth strategies that align with their long-term vision. This may
include entering new markets, expanding product lines, forming strategic partnerships, or
pursuing mergers and acquisitions. Marketing, sales, and customer acquisition strategies are
crucial in attracting and retaining customers.
Optimizing operations involves streamlining processes, leveraging technology, and
improving efficiency. By constantly adjusting to changing market dynamics, entrepreneurs
can stay ahead of their competitors and take advantage of new opportunities.
Legal Procedure:-

1. Choosing a Business Structure

 Types of Business Entities: Startups typically choose from structures like sole
proprietorship, partnership, limited liability company (LLC), or corporation (C-Corp
or S-Corp in the U.S.). Each has different implications for liability, taxes, and
governance.
 Formation and Registration: After selecting a structure, founders file the necessary
paperwork with the state (e.g., articles of incorporation for corporations or articles of
organization for LLCs). Registration typically involves paying a fee and adhering to
state-specific requirements.

2. Founders’ Agreement and Equity Distribution

 Founders’ Agreement: This document outlines the roles, responsibilities, and

ownership stakes of each founder, as well as processes for decision-making and
dispute resolution.
 Equity Allocation and Vesting: A vesting schedule specifies when founders gain full
ownership of their shares, preventing early departures from receiving unearned equity.
Vesting typically involves a “cliff” (e.g., no shares for the first year, then gradual
earning over the following years).

3. Intellectual Property (IP) Protection

 Trademarks: Startups protect their name, logo, and branding by registering

trademarks with the relevant government agency (e.g., USPTO in the U.S.).
 Patents: If the startup has unique products or technologies, patents can protect
inventions and prevent others from replicating them. This process involves filing with
the patent office and can be complex and costly.
 Copyrights: For software, content, or other creative works, copyrights can protect the
startup’s intellectual property from unauthorized copying.
 Trade Secrets and Non-Disclosure Agreements (NDAs): If your startup has
proprietary information, NDAs can prevent employees, partners, and others from
disclosing sensitive information.

4. Regulatory Compliance

 Licenses and Permits: Depending on the industry, startups may need permits (e.g.,
health and safety, environmental) or business licenses. Compliance with these laws
prevents legal issues and potential fines.
 Industry-Specific Regulations: Startups in sectors like finance, healthcare, and food
must adhere to industry-specific regulations (e.g., HIPAA for healthcare, GDPR for
data privacy).
 Employment and Labor Laws: When hiring, startups need to comply with labor
laws, including those related to wages, employee rights, worker safety, and equal
opportunity.

5. Drafting Contracts and Agreements

  Client and Vendor Contracts: Contracts with clients, suppliers, and vendors define
expectations, payment terms, delivery timelines, and intellectual property rights. They
help prevent disputes and ensure legal protection.
 Employee and Contractor Agreements: Employment contracts clarify roles,
responsibilities, compensation, confidentiality, and non-compete clauses. For
contractors, agreements also specify deliverables, timelines, and payment terms.
 Terms of Service and Privacy Policy: If the startup offers an online product or
service, it’s essential to outline the terms of use and privacy policies. Privacy policies,
in particular, are often legally required to inform users about data collection and
usage.

6. Fundraising and Securities Compliance

 Legal Structure for Investment: Startups raising capital often set up a legal structure
that facilitates investment, such as issuing stock or creating convertible notes or
SAFEs (Simple Agreements for Future Equity).
 Securities Laws Compliance: When issuing shares, startups must comply with
securities laws, such as Regulation D in the U.S., which governs how businesses can
solicit investors.
 Due Diligence Documentation: Investors may request documents showing the
startup’s legal, financial, and operational stability. Common due diligence documents
include financial statements, IP rights documentation, and founders’ agreements.

7. Taxation and Financial Compliance

 Federal and State Taxes: Startups need to register with tax authorities and ensure
they comply with corporate tax obligations. Some businesses may also need to collect
sales tax for goods or services.
 Employee Tax Withholding: Startups must withhold income taxes, Social Security,
and Medicare contributions for employees, as well as file quarterly payroll tax returns.
 Financial Reporting and Recordkeeping: Many jurisdictions require annual
financial reports, tax filings, and ongoing recordkeeping for audits or future financing
rounds. Working with an accountant or legal advisor can help startups remain
compliant.

8. Employee Benefits and Stock Options

 Employee Benefits Compliance: If offering benefits, startups must comply with

employment laws related to healthcare, retirement plans, and other benefits.
 Employee Stock Option Plan (ESOP): Many startups offer stock options to attract
talent, but the legal structure must be carefully designed to comply with securities and
tax regulations.

9. Risk Management and Insurance

 Liability Insurance: This protects the startup from potential lawsuits or claims
against the company. Common policies include general liability, professional liability,
and product liability insurance.
 Directors and Officers (D&O) Insurance: This insurance protects executives from
personal liability if they’re sued for decisions made on behalf of the company.
  Cybersecurity Insurance: For technology startups, cyber security insurance can
cover losses from data breaches, which is especially important if handling sensitive
customer data.

10. Exit Strategy Legal Considerations

 Preparing for Acquisition: For startups planning for acquisition, legal due diligence
is essential. This involves ensuring intellectual property rights, financial records, and
contracts are in order.
 IPO Compliance: If going public, a startup must comply with securities regulations,
prepare financial disclosures, and meet regulatory standards.

Business plan
A business plan is a strategic document that outlines a company's goals, strategies for
achieving them, and the time frame for their achievement. It covers aspects like market
analysis, financial projections, and organizational structure, serving as a roadmap for business
growth and a tool to secure funding.
Often, financial institutions and investors need to see a business plan before funding any
project. Even if you don’t plan to seek outside funding, a well-crafted plan becomes the
guidance for your business as it scales.

 Steps in business plan

 Draft an executive summary
 Write a company description
 Perform a market analysis
 Outline the management and organization
 List your products and services
 Perform customer segmentation
 Define a marketing plan
 Provide a logistics and operations plan
 Make a financial plan

1. Draft an executive summary

A good executive summary is one of the most crucial sections of your plan—it’s also the last
section you should write. The executive summary distills everything that follows and gives
time-crunched reviewers (e.g., potential investors and lenders) a high-level overview of your
business that persuades them to read further. Again, it’s a summary, so highlight the key
points you’ve uncovered while writing your plan.
An executive summary shouldn’t exceed one page. Admittedly, that space constraint can
make squeezing in all of the salient information a bit stressful—but it’s not impossible.
Here’s what your business plan executive summary should includes:

 Business concept. What does your business do?

 Business goals and vision. What does your business want to do?
 Product description and differentiation. What do you sell, and why is it different?
 Target market. Who do you sell to?
 Marketing strategy. How do you plan on reaching your customers?
  Current financial state. What do you currently earn in revenue?
 Projected financial state. What do you foresee earning in revenue?
 The ask. How much money are you asking for?
 The team. Who’s involved in the business?

2. Write a company description

This section of your business plan should answer two fundamental questions: who are you,
and what do you plan to do?
Answering these questions with a company description provides an introduction to why
you’re in business, why you’re different, what you have going for you, and why you’re a
good investment.
For example, clean makeup brand Saie shares a letter from its founder on the company’s
mission and why it exists.

3. Perform a market analysis

No matter what type of business you start, it’s no exaggeration to say your market can make
or break it. Choose the right market for your products—one with plenty of customers who
understand and need your product—and you’ll have a head start on success. If you choose the
wrong market, or the right market at the wrong time, you may find yourself struggling for
each sale.
“Market analysis is a key section of your business plan, whether or not you ever intend for
anyone else to read it.”

4. Outline the management and organization

The management and organization section of your business plan should tell readers about
who’s running your company. Detail the legal structure of your business. Communicate
whether you’ll incorporate your business as an S corporation or create a limited partnership
or sole proprietorship.
If you have a management team, use an organizational chart to show your company’s internal
structure, including the roles, responsibilities, and relationships between people in your chart.
Communicate how each person will contribute to the success of your startup.

5. List your products and services

Your products or services will feature prominently in most areas of your business plan, but
it’s important to provide a section that outlines key details about them for interested readers.
If you sell many items, you can include more general information on each of your product
lines. If you only sell a few, provide additional information on each. For example, bag shop
BAGGU sells a large selection of different types of bags, in addition to home goods and other
accessories. Its business plan would list out those categories and key details about the
products within each.

6. Perform customer segmentation.

Your ideal customer, also known as your target market, is the foundation of your marketing
plan, if not your business plan as a whole. You’ll want to keep this person in mind as you
make strategic decisions, which is why an overview of who they are is important to
understand and include in your plan.

To give a holistic overview of your ideal customer, describe a number of general and specific
demographic characteristics. Customer segmentation often includes:

 Where they live

 Their age range
 Their level of education
 Some common behavior patterns
 How they spend their free time
 Where they work
 What technology they use
 How much they earn
 Where they’re commonly employed
 Their values, beliefs, or opinions
 This information will vary based on what you’re selling, but you should be specific
enough that it’s unquestionably clear who you’re trying to reach—and more
importantly, why you’ve made the choices you have based on who your customers are
and what they value.

7. Define a marketing plan

Your marketing efforts are directly informed by your ideal customer. Your marketing plan
should outline your current decisions and your future strategy, with a focus on how your
business idea is a fit for that ideal customer.
If you’re planning to invest heavily in Instagram marketing or TikTok ads, for example, it
might make sense to include whether Instagram and TikTok are a leading platform for your
audience—if it’s not, that might be a sign to rethink your marketing plan.
Most marketing plans include information on four key subjects. How much detail you present
on each will depend on both your business and your plan’s audience.

 Price. How much do your products cost, and why have you made that decision?
 Product. What are you selling and how do you differentiate it in the market?
 Promotion. How will you get your products in front of your ideal customer?
 Place. Where will you sell your products? On what channels and in which markets?
Promotion may be the bulk of your plan since you can more readily dive into tactical details,
but the other three areas should be covered at least briefly—each is an important strategic
lever in your marketing mix.

8. Provide a logistics and operations plan

Logistics and operations are the workflows you’ll implement to make your business idea a
reality. If you’re writing a business plan for your own planning purposes, this is still an
important section to consider, even though you might not need to include the same level of
detail as if you were seeking investment.
Cover all parts of your planned operations, including:
Suppliers. Where do you get the raw materials you need for production, or where are your
products produced?

Production. Will you make, manufacture, wholesale, or dropship your products? How long
does it take to produce your products and get them shipped to you? How will you handle a
busy season or an unexpected spike in demand?
Facilities. Where will you and any team members work? Do you plan to have a physical retail
space? If yes, where?
Equipment. What tools and technology do you require to be up and running? This includes
everything from computers to lightbulbs and everything in between.
Shipping and fulfillment. Will you be handling all the fulfillment tasks in-house, or will you
use a third-party fulfillment partner?
Inventory. How much will you keep on hand, and where will it be stored? How will you ship
it to partners if required, and how will you approach inventory management?
This section should signal to your reader that you’ve got a solid understanding of your supply
chain and strong contingency plans in place to cover potential uncertainty. If your reader is
you, it should give you a basis to make other important decisions, like how to price your
products to cover your estimated costs, and at what point you plan to break even on your
initial spending.

9. Make a financial plan

No matter how great your idea is, and regardless of the effort, time, and money you invest, a
business lives or dies based on its financial health. At the end of the day, people want to work
with a business they expect to be viable for the foreseeable future.
The level of detail required in your financial plan will depend on your audience and goals,
but typically you’ll want to include three major views of your financials: an income
statement, a balance sheet, and a cash-flow statement. It also may be appropriate to include
financial data and projections.

Here’s a spreadsheet template that includes everything you’ll need to create an income
statement, balance sheet, and cash-flow statement, including some sample numbers. You can
edit it to reflect projections if needed.
Let’s review the types of financial statements you’ll need.

Income statements
Your income statement is designed to give readers a look at your revenue sources and
expenses over a given time period. With those two pieces of information, they can see the all-
important bottom line or the profit or loss your business experienced during that time. If you
haven’t launched your business yet, you can project future milestones of the same
information.

Balance sheets
Your balance sheet offers a look at how much equity you have in your business. On one side,
you list all your business assets (what you own), and on the other side, all your liabilities
(what you owe). This provides a snapshot of your business’s shareholder equity, which is
calculated as:

Assets - Liabilities = Equity

Cash flow statements
Your cash flow statement is similar to your income statement, with one important difference:
it takes into account when revenues are collected and when expenses are paid.
When the cash you have coming in is greater than the cash you have going out, your cash
flow is positive. When the opposite scenario is true, your cash flow is negative. Ideally, your
cash flow statement will help you see when cash is low, when you might have a surplus, and
where you might need to have a contingency plan to access funding to keep your business
solvent.
It can be especially helpful to forecast your cash-flow statement to identify gaps or negative
cash flow and adjust operations as required.