HOW TO PREPARE A BUSINESS PLAN

1. What is the purpose of a business plan?
   There are various reasons for preparing a business plan, including ordering your ideas about starting a new business into a logical plan, documenting an action plan on how to go about starting a new business or improving on or changing the direction of an existing one, and marketing your business to others, usually potential funders. The style and content of your business plan will depend on the objective you are trying to achieve, but most business plans have the same broad headings.
2. How do I write a business plan?
   Below is a list of the main headings that should be included in a business plan.
   1. Table of Contents
   2. Executive Summary
      1. Concept Description
      2. Problem/Opportunity
      3. Solution
      4. Value Proposition
      5. Process
      6. Management
      7. Financials
   3. Company Overview
      1. Introduction
      2. Mission Statement
      3. History and Current Status
      4. Objectives
   4. Products and Services
      1. Introduction
      2. Description
      3. Market Comparison
      4. Proprietary Rights
      5. Stage of Development
   5. Industry and Market Analysis
      1. Introduction
      2. Industry Analysis
      3. Marketplace Analysis
      4. Customer Analysis
      5. Competitor Analysis
   6. Marketing Plan
      1. Introduction
      2. Target Market Strategy
      3. Product/Service Strategy
      4. Pricing Strategy
      5. Distribution Strategy
      6. Advertising and Promotion Strategy
      7. Sales Strategy
      8. Marketing and Sales Forecasts
   7. Operations Plan
      1. Introduction
      2. Operations Strategy
      3. Scope of Operations
      4. Ongoing Operations
      5. Operations Costs
   8. Development Plan
      1. Development Strategy
      2. Development Timeline
      3. Development Expenses
   9. Management Plan
      1. Company Organization
      2. Management Team
      3. Administrative Expenses
   10. Financial Plan
       1. Financial Statements
       2. Financial Comparables
       3. Financial Summary
       4. Financial Assumptions
       5. Funding Requirements
       6. Sources and Uses of Funds
       7. Business Risks
   11. Offering (Funding Request)
       1. Investment Requirements
       2. Valuation of Business
       3. Offer
       4. Exit Strategies
   12. Appendices
       1. Required items (e.g. Financial Statements, CVs etc.)
       2. Optional items (e.g. Surveys, Development timeline, Operations layout etc.)

The IC is able to assist you with writing your business plan.

SECTION G: HOW TO PREPARE A MARKETING PLAN

1. What is the purpose of a marketing plan?
   The marketing plan is an important component of the business plan. It should provide you with a clear plan of how you will introduce your product into the market, including the commercialization route to be taken. Developing a good marketing plan requires a thorough investigation of the market, in particular to determine whether there is a need for your product in the market, whether customers will buy your product, how to let customers know about your product, how best to get the product to them, and how to compete with existing businesses in your proposed industry.
2. How do I write a marketing plan? 
   A marketing plan can be presented as part of your business plan or as a separate document. If it is presented on its own, it must include a Title Page, Table of Contents, Executive Summary, and Industry and Market Analysis. See How do I write a business plan for a list of the main headings that should be included in an Industry and Market Analysis.
   
   The Industry and Market Analysis must describe the broader industry environment in which your business operates, the characteristics of the specific market(s) for your product, who your potential customers are, who your competitors are, and how you will compete against them. Some of the questions that must be addressed in the Industry and Market Analysis include:
   • What is the state of the economy and how does this impact on your business?
   • What industry is your business in?
   • Are there any industry trends that could affect your business or product?
   • What are the current political, cultural and social trends and how do they affect your business?
   • What current or pending provincial, national and international legislation may affect your business?
   • Are there any threats or opportunities in the environment that could affect your business?
   • What is the target market, i.e. who are your customers?
   • Is there a need for your product in the market?
   • How big is the market?
   • Is it shrinking or growing?
   • What trends are visible in the market?
   • Is the industry mature or relatively young?
   • Who are your major competitors in the industry and what are their annual sales, market share, and growth profile?
   • What strategies have competitors in the industry been using?
   • What are the relative strengths and weaknesses of the competitors in the industry?
   • Is there a threat of new competitors coming into the industry and what are the major entry barriers?
   • What is your competitive advantage, i.e. why will people buy your product or service, as opposed to that of a competitor?

The Marketing Plan, on the other hand, focuses on how you will introduce your product to the market, through the 5 P's, i.e. Product, Price, Promotion, Place and Personnel, otherwise known as the marketing mix. Some of the questions that must be addressed in the Marketing Plan include:

• What features or benefits does your product have?
• Who are your customers?
• What are the personality traits of your customers?
• Do they have a high disposable income?
• Are they price sensitive?
• What influences their buying decisions?
• What pricing strategy will ensure that the target market is reached?
• How should you let customers know about your product?
• What is the best way to get your product to the customers?
• Where should your business operate from?
• Where should you sell your product?
• Who should sell your product?
• What are the expected marketing costs?
• What are the expected revenues from selling your product?

The Marketing Plan should also include a SWOT analysis of your business. A SWOT analysis involves determining the strengths and weaknesses within your company, as well as the opportunities and threats outside of the company.

3. How do I do market research? 
   There are two main sources of market research data, i.e. primary data and secondary data. Primary data refers to data gathered from the customers, suppliers and competitors themselves through direct observation, interviews, email or telephone surveys etc. Secondary data, on the other hand refers to information that already exists. The most common sources of secondary data are publications, databases, company reports, the internet etc. Market research is not difficult to do but takes time and requires some knowledge of data gathering and analysis. The IC is able to provide advice on or assist you with market research and with the development of your marketing plan.

SECTION H: FUNDING FOR COMMERCIALIZATION OF RESEARCH

1. What funding channels apply to the commercialization process? 
   Funding sources for the commercialization of research include specific and generic and public (government-backed) and private sources. Public funds can be structured as grants, loans, rebates, tax incentives, co-investments, or venture capital (VC), while private funding includes seed/incubation funding, angel investments, venture capital and private equity, and private donations, trusts or foundations. The relevant funding channels that apply to different stages of the development and commercialization process are illustrated in the figure

There are a number of different sources of funding for fundamental and applied research. Some of them are listed in the figure. Once it has been recognized that the research has commercial potential, the invention enters into the commercialization process. This may involve proof of concept, further development of the idea, preliminary market analysis etc. Funding for this stage is usually in the form of angel investment or seed funding, though other sources include the NRF's THRIP and Innovation Fund schemes and the Biotechnology Regional Innovation Centres (BRICs). Angel investments are high risk, early-stage investments usually made by wealthy individuals or groups of individuals.

Angel investors are often family members or close friends and are usually experienced and successful entrepreneurs looking for new challenges and investment opportunities. They will probably get heavily involved as mentors to new start-ups in which they invest. Seed funding is also for new ventures in the initial phases of commercialization. This funding instrument is not directed towards R&D, and is also high risk capital.

The next funding stage, which forms the natural exit opportunity for angel investors or self-funded entrepreneurs, should be venture capital or private equity investment. These investors will normally only invest after proof of concept or prototype development. They invest either in potentially sustainable and competitive companies or in the final development, marketing and licensing or sale of inventions to existing industry players. Venture capitalrepresents later stage funding that is usually invested by specialized VC firms who manage funds on behalf of investors. Investments are usually made into medium to low risk ventures for a significant equity stake in the business. More than one venture capital firm may invest in a company, even at an early stage in its development. Venture capital firms, apart from providing funds for development, usually provide assistance with business development and management and access to their extensive business networks. Venture capital firms take a risk when investing in new ventures, and therefore require high returns on their investments. The firms usually exit the investment and make their money by selling their shares in the companies. Typically this happens when a company makes a public offering, or when it is acquired by another company. Private equity is late stage funding typically reserved for existing businesses with established track records of profitability that wish to expand operations. This instrument is also utilized in the funding of management buy-outs and similar deals.

2. What public funding is available for commercialization of research?
   There are a number of public funding mechanisms available for the commercialization of research in South Africa. These include:

• Biotechnology Regional Innovation Centres (BRICs) located in the Western Cape (Cape Biotech Trust;www.capebiotech.co.za), Gauteng (Biopad) and Kwazulu Natal (LIFElab; www.lifelab.org.za). Funds available from the BRICs are directed at the development of biotechnology in South Africa, and therefore are limited to biotechnology projects that are aimed at application in industry. Please visit the respective websites for more information on the procedures and criteria for applying for funding.
• The biotechnology-focused seda-funded incubator, eGoli BIO Life Sciences Incubator (www.egolibio.co.za) in Gauteng. The incubator provides business support to projects at various stages of commercialization. Please visit the eGoli BIO website for more information on the procedures and criteria for assistance.
• Innovation Fund (www.innovationfund.ac.za), administered by the National Research Foundation (NRF). The Innovation Fund supports projects in various focus areas that are aimed at commercialization. Funding is usually for a period of 3 years. The NRF has also established a seed fund to bridge the gap between the Innovation Fund and venture capital funding. More details can be found on Innovation Fund website.
• Patent Support Fund, administered by the Innovation Fund. The fund provides assistance to public research institutions by covering a portion of all patenting costs.
• Department of Trade and Industry (DTI) (www.dti.gov.za) incentive schemes, which are not specifically aimed at the commercialization of research but which may apply to some aspects of it. Examples include the Technology and Human Resources for Industry Programme (THRIP) and the Support Programme for Industrial Innovation (SPII). Details of these schemes are available on the DTI website.

3. What private funding is available for commercialization of research?
   Private funding includes funding from private companies, incubation funding, angel funding, venture capital and private equity, and private donations, trusts or foundations. Examples of such funders can be found on the SA Venture Capital Association Website (www.savca.co.za).