First Steps: Writing the Product Section of Your Business Plan
In their book Write Your Business Plan, the staff of Entrepreneur Media, Inc. offer an in-depth understanding of what’s essential to any business plan, what’s appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors discuss what details you should include in the product section of your business plan.
Every business has something to sell, and the product section of your business plan is where you tell readers what it is you’re selling. (For simplicity’s sake, the term “product” is used to refer to both products and services unless otherwise indicated.) This is clearly a very important section of your plan. Business is about providing people with something they need. Your business should solve a problem, make life easier, expedite a process or even simply entertain, but you need to be selling something to have a business.
In your plan, it’s important to be able to build a convincing case for the product or service upon which your business will be built. The product description section is where you do that. In this section, describe your product in terms of several characteristics, including cost, features, benefits, distribution, target market, competition, and production concerns.
Let's talk about two of these characteristics in more detail. Features describe the make, shape, form, or appearance of a product, the characteristics that you use to describe products. These features convey benefits to the customer. Benefits (perceived benefits) are the emotional or other end results that your product or service provides that customer, the satisfaction or fulfillment of needs that a customer receives from your products or services. In the famous phrase “My factories make cosmetics, we sell hope,” cosmetics are the products, hope is the benefit.
Here are a few sample product descriptions:
Street Beat is a new type of portable electronic rhythm machine used to create musical backgrounds for street dances, fairs, concerts, picnics, sporting events, and other outdoor productions. The product is less costly than a live rhythm section and offers better sound quality than competing systems. Its combination of features will appeal to sports promoters, fair organizers, and charitable and youth organizations.
Troubleshooting Times is the only monthly magazine for the nation’s 6,000 owners of electronics repair shops. It provides timely news of industry trends, service product reviews and consumer product service tips written in a language service shop owners can understand.
HOBO, the Home Business Organization, provides business-consulting services to entrepreneurs who work out of their homes. The group connects home-business owners with experts who have extensive experience counseling home-business owners in management, finance, marketing and lifestyle issues. Unlike entrepreneurial peer groups, which charge members for attending sessions whether or not they receive useful advice, HOBO will guarantee its services, asking home-business owners to pay only if they derive solid benefit from the service.
A business plan product description has to be less image-conscious than an advertising brochure but more appealing than a simple spec sheet. You don’t want to give the appearance of trying to dazzle readers with a glitzy product sales pitch filled with a lot of hype. On the other hand, you want to give them a sampling of how you are going to position and promote the product.
A business plan product description isn't only concerned with consumer appeal. Issues of manufacturability are of paramount concern to plan readers, who may have seen any number of plans describing exciting products that, in the end, proved impossible to design and build economically.
If your product or service has special features that will make it easy to build and distribute, say so. For instance, the portable rhythm machine maker should point out in the business plan that the devices will be constructed using new special-purpose integrated circuits derived from military applications, which will vastly increase durability and quality while reducing costs.
To a typical consumer who’s purchased their share of shoddy products from uncooperative manufacturers, it’s encouraging to hear about a multimillion-dollar settlement of a consumer’s claim against some manufacturer. It provides proof that the high and mighty can be humbled and that some poor schmuck can be struck by lightning and receive a big fat check.
To manufacturers and distributors of products, however, the picture looks entirely different. Liability lawsuits have changed the landscape of a number of industries, from toy manufacturers to children’s furniture retailers.
Dealing with liability issues may be as simple as merely including a statement to the effect that you foresee no significant liability issues arising from your sale of this product or service. If there is a liability issue, real or apparent, acknowledge it in your plan and describe how you'll deal with it. For instance, you may want to take note of the fact that, like all marketers of children’s bedroom furniture, you attach warning labels and disclaimers to all your products and also carry a liability insurance policy. Let it be known that you will take all necessary steps to protect your business, your products, and yourself from litigation.