Business Plans for Independent Inventors

Advertising, Public Relations, Management and Financial Management Plans.

How you advertise and promote your invention may make or break your business. Having a good product and deciding against advertising and promoting it is like not having a product at all. Many independent inventors operate under the mistaken concept that the invention will promote itself, and channel money that should be used for advertising and promotions to other areas of the business. Advertising and promotions, however, are the life-line of a business.

If on a shoe-string budget invent your own plans for advertising and networking as a means to promote your new business. Start by writing short, descriptive copy (text material) that clearly identifies your goods, its location, and price. Use catchy phrases to arouse the interest of your readers, listeners or viewers.

The Management Plan

Managing a business requires more than just the desire to be your own boss. It demands dedication, persistence, the ability to make decisions and the ability to manage both employees and finances. Your management plan, along with your marketing and financial management plans, sets the foundation for and facilitates the success of your business.

You will discover that employees and staff will play an important role in the total operation of your business. It's important that you know what skills you possess and those you lack since you will have to hire personnel to supply the skills that you lack.

It is important that you know how to manage and treat your employees. Make them a part of the team. Keep them informed of, and get their feedback regarding, changes. Employees oftentimes have excellent ideas that can lead to new market areas, innovations to existing products or services or new product lines or services which can improve your overall competitiveness.

Your management plan should be able to answer the following questions:

  • How does your background/business experience help you in this business?
  • What are your weaknesses and how can you compensate for them?
  • Who will be on the management team?
  • What are their strengths/weaknesses?
  • What are their duties?
  • Are these duties clearly defined?
  • Will this assistance be ongoing?
  • What are your current personnel needs?
  • What are your plans for hiring and training personnel?
  • What salaries, benefits, vacations, holidays will you offer?
  • What benefits, if any, can you afford at this point?
Next: The Financial Management Plan (Also see Financial Management Worksheets.)

Sound financial management is one of the best ways for your business to remain profitable and solvent. Each year thousands of potentially successful businesses fail because of poor financial management. As the business owner, you need to learn how to ensure that you will meet your financial obligations.

To effectively manage your finances, plan a sound, realistic budget by determining the actual amount of money needed to open your business (start-up costs) and the amount needed to keep it open (operating costs).

The first step to building a sound financial plan is to devise a start-up budget. Your start-up budget will usually include such onetime only costs as major equipment, utility deposits, down payments, etc.

The start-up budget should allow for these expenses.

Start-up Budget

  • personnel (costs prior to opening)
  • legal/professional fees
  • occupancy
  • equipment
  • licenses/permits
  • insurance
  • supplies
  • advertising/promotions
  • salaries/wages
  • accounting
  • income
  • utilities
  • payroll expenses
An operating budget is prepared when you are actually ready to open for business. The operating budget will reflect your priorities in terms of how your spend your money, the expenses you will incur and how you will meet those expenses (income). Your operating budget also should include money to cover the first three to six months of operation. It should allow for the following expenses.

Operating Budget

  • personnel
  • insurance
  • rent
  • depreciation
  • loan payments
  • advertising/promotions
  • legal/accounting
  • miscellaneous expenses
  • supplies
  • payroll expenses
  • salaries/wages
  • utilities
  • dues/subscriptions/fees
  • taxes
  • repairs/maintenance
  • The financial section of your business plan should include any loan applications you've filed, a capital equipment and supply list, balance sheet, break-even analysis, pro-forma income projections (profit and loss statement) and pro-forma cash flow. The income statement and cash flow projections should include a three-year summary, detail by month for the first year, and detail by quarter for the second and third years.

    The accounting system and the inventory control system that you will be using is generally addressed in this section of the business plan also. Whether you develop the accounting and inventory systems yourself, have an outside financial advisor develop the systems, you will need to acquire a thorough understanding of each segment and how it operates. Your financial advisor can assist you in developing this section of your business plan.

    The following questions should help you determine the amount of start-up capital you will need.

    • How much money do you have?
    • How much money will you need for start-up?
    • How much money will you need to stay in business?
    Other questions that you will need to consider are:
    • What type of accounting system will your use? Is it a single entry or dual entry system?
    • What will your sales goals and profit goals for the coming year be?
    • What financial projections will you need to include in your business plan?
    • What kind of inventory control system will you use?
    Your plan should include an explanation of all projections. Unless you are thoroughly familiar with financial statements, get help in preparing your cash flow and income statements and your balance sheet. Your aim is not to become a financial wizard, but to understand the financial tools well enough to gain their benefits. An accountant or financial advisor can help you accomplish this goal.

    Next: Time for you tor try one of the Self-Paced Activity Worksheets