Product Development Plan

Doug provides strategic planning and execution as they relate to technology initiatives for our clients, Doug Allgood. While Doug has extensive experience in technology architecture and design, product and portfolio management as well as business plan development and implementation – there is much more to know about the man who can train your IT director or help you develop your own proprietary technology.

1. Candy
2. iPhone Apps
3. Health Care Technology
4. Beer, Wine, Liquor Wholesale
5. Software as a Service
6. Home Healthcare
7. Yoga Products and Services
8. Technical and Trade Schools
9. Fast Casual Dining
10. Green Construction

1. Do you see opportunities the competition doesn't see?  Or, are you out-thinking your rivals?
2. Do you have new ideas where to look for new ideas? Consider looking at other industries for thoughts about new segments, products, etc.
3. Are you the most of anything?  Your company (or product) can't be everything to everyone, so who is your target and what are you doing to separate yourselves in the eyes of your customer?
4. If your company went out of business tomorrow, who would you miss and why?  Or put another way...what really matters?
5. Have you figured out how your organization's history can help shape it's future?  Learn from the past and use it to evaluate future options.  
6. Can your customers live without you?  If the answer is yes....right NOW would be a good time to figure out how to change that view, and quickly.  
7. Do you treat different customers differently?  Remember, not all customers are created equal.  Focus on those that are core to your product and mission.
8. Are you getting the best contributions from the most people?  Surrounding yourself with a team of advisors and having a sense of humility is critical.
9. Are you consistent in your commitment to change?  Set your vision, manage your financial plan and be the constant driving force in your company.
10. Are you learning as fast as the world is changing?  Simply stated, what are you doing to stay sharp?

Typical rounds in which venture capitalists invest include seed rounds, first rounds, second rounds and later stage rounds. When a company is seeking seed capital, it is still in a very early start-up stage. Usually these companies are just beginning to develop their business plan and need capital to prove out their concepts. First round companies are those that have already proved their concept and are ready to begin commercialization of their product or service. These companies usually have a sound business plan they intend to execute, have built a management team to lead the company, and have introduced their product or service to the marketplace. Second round companies are those that have enjoyed a successful introduction of their product or service and are now preparing for rapid growth. These companies usually have strong demand for their product, but might be lacking the collateral or credit history needed to acquire bank financing. They typically need capital to expand their distribution network and increase marketing activities. Finally, later round companies are successful ventures that have proven their business model on a large scale and are usually preparing for an initial public offering, a sale or other liquidity event.

The final step in evaluating potential venture capital providers is getting to know the individuals in these firms – not only the people making the funding proposal but those you will be working with after the deal is done. Are these people that you will get along with? Do you have the same business philosophies? Do they share your vision? How do they interact with their other portfolio companies? How do they act when things are going well? How about when things are not going well? Knowing this information is vital in selecting the right partner for your business. Don’t be afraid to ask a lot of questions, and be sure to talk with other companies that the firm has funded – both present and past. While most business owners view this relationship purely from a financial standpoint, the interpersonal aspects can make the difference between success and failure of the business.

Building and utilizing budgets is important for any business owner. Budgeting can help quantify targets to monitor the company’s progress or warn management of impending problems, thus improving a business’s overall chances for success. Simply put, a budget is a financial plan that reflects a business’s operational plan. It is critical, therefore, that budgets be created with a clear operating plan in mind which, in turn, should support the company’s long-range business plan. Below is a brief outline of the more common steps used in preparing an effective budget:

Budgeting Revenue

Although there may be exceptions for certain businesses, most companies start the budget process with sales volume, or revenue. In a nutshell, sales volume (e.g., the quantity of products sold or services provided) drives both revenue dollars as well as the variable costs of sales (i.e., the costs of activities and materials required to produce and deliver your product or service). Therefore, starting out the budget process with a carefully thought-out revenue projection will provide a framework for business planning (and budgeting) other operating costs.

In creating a revenue budget, it’s important to balance the company’s desire to achieve the budget with its ability to achieve the budget. By setting revenue goals that are reasonably achievable, given a solid effort by company management, a company can optimize its resource planning. A revenue goal that is too low may hamper a company’s ability to acquire the resources in time to effectively deliver products or services demanded by customers; a goal that is too high, on the other hand, may result in overly optimistic financial projections of cash flow, potentially creating an inability to meet the company’s financial obligations. The revenue goals should take into consideration expected recurring revenue, non-recurring revenue, new customers, and new or discontinued products, services or markets. A business owner should also consider the expected effects, if any, of external forces – e.g., local economic conditions, competition, industry developments – on the revenue budget.

Budgeting Variable Costs

Once you have established your budgeted sales volumes and revenues, the next step is to budget your variable costs. Variable costs are those costs that fluctuate with the volume of sales activity. They include not only the variable costs of sales (e.g., materials, labor, supplies, contracted services), but also variable sales and administrative costs (e.g., sales commissions).

Variable costs can often be budgeted by analyzing past relationships of individual costs to sales volumes or revenues and adjusting for anticipated changes (e.g., material or labor rate increases). Having said this, it is also important to consider the company’s practical ability to implement any significant plans based on the anticipated availability of special materials or specific skilled labor. Other "step variable" costs might include facilities and infrastructure costs that increase or decrease as a result of significant increases or decreases in sales volume. You may, for example, need to rent additional space to accommodate production for a significant new product or customer.

As you can tell by now, being prepared is critical to anticipate the need for capital. However, adequate advance preparation will also help you answer many of the other critical questions that your banker will want answered. These questions might include:

1. Why do you need funding? How will the capital be used to help your business?
2. How much do you need and when?
3. Do you have a realistic business plan and financial plan to generate funds to repay the debt?
4. How strong is the management team? What is their experience managing and growing a company?

Sources of Funding

Picking the right source of capital is just as important to the business as actually receiving the money. Remember that lenders/investors will become "partners", in one form or another, in your business and will have different requirements, depending on the structure of the capital arrangement. Will they want an active voice in management decisions (e.g. a position on the Board)? What are their periodic reporting requirements and do you have personnel experienced enough to handle them? Will there be weekly meetings or status updates? Also, if you’re using debt, what is the interest rate on the loan and what impact will this have on profit margins and cash flow? While all of these requirements are not necessarily bad, they are often a necessary part of accepting funding from external sources and will, therefore, have an impact on your business. Some common sources of business financing are as follows:

1. Traditional Bank Financing – Local banks and credit unions are a major source of small business financing. If you need a short-term loan, a single-purpose loan, or a seasonal line of credit, your local bank may prove to be the best source. Banks can also offer other types of bank financing for specific situations.
2. Customer/Supplier Financing – Customers can often be sympathetic about your need to maintain good cash flow. In some cases they may be willing to pay up front for part or all of the services or products you supply. Or, they may respond to discounts for early cash payments that will free up cash for operating your business.
3. Factoring or Accounts Receivable Financing – A company with cash flow issues can turn uncollected invoices into immediate funding by assigning its accounts receivables to a factor or agent. Factoring usually involves high interest rates or a deep discount for which the factor assumes all risks involved with collecting payment. Nevertheless, factoring may be an appropriate vehicle in certain cases.
4. Working Capital Financing – This type of funding works like a line of credit that’s tied to your company’s receivables and/or the dollar value of your inventory. For example, you might request that your lender provide a 70% advance on qualified receivables or advance 50% of the value of your inventory.
5. Economic Development Programs – Many federal, state and local government programs offer small businesses loans and incentive programs. The funding is typically administered through banks, business development districts, and the Small Business Administration. Often, special consideration is given to ethnic groups, women, veterans and companies located in designated urban and rural locations. Funding through these special programs often requires a great deal of documentation and may also require that the company provide certain tangible assets, primarily real estate or equipment, as collateral.