Relationship Between IP and a Business Plan

Bridging your business’ transition
from the present to the future.
Relationship Between
Intellectual Property and a
Business Plan

Relationship Between Intellectual Property and a Business Plan
Introduction
A business plan is a guiding document that provides details on how a given product or
service will be commercialized and brought to a marketplace by a company or by a
newly created joint venture. The document will typically describe the entire path from
development of idea to maximum market exploration.
A business plan will provide details on the following issues:
‣ Description of the company: status, objectives, managers, shareholders, and
mission;
‣ Description of the products and services offered, including foreseen future
developments;
‣ Description of the target markets/clients and competitors;
‣ Description of the marketing strategy of the company and the adopted sales and
distribution channels;
‣ Description of the business organizational core i.e employees, suppliers,
manufacturing sites/workspace environment, purchasing and outsourcing prowess,
as well as acquired or ability to technology partners;
‣ Provision of a financial plan including profit and loss projections, a pro-forma
balance sheet, an estimation of the external funding required and the sources of
funding available for the business (e.g. bank loans or equity investors, bootstrap,
crowd funding). 
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1. Why business plan exist and how it link with IP
1.1 Why business plans exist
The purpose of business plan is to communicate why a product or service is the best fit
for the chosen marketplace and to demonstrate the strategic planning involved in the
process. Business plan fulfill different needs:
Internally: business plans can be used as support tool for guiding strategic decisions
and aligning team members with a common vision and clear objectives in terms of
technical and commercial developments. They also provide financial targets and others
key performance indicators, which are extremely useful for performance management
purposes inside the company.
Externally: business plans are used to explain the business strategy of the company to
external investors and venture partners in order to raise money or enter into specific
collaborations with third party businesses. The scope is not only to arouse interest in
the company’s activities but also demonstrate that the entrepreneurs have precise
plans for the future and also shows that those plans are based on sound, articulated
and documented strengths and assets. From this point of view, business plans can be
used not only to describe the company itself to external stakeholders but also to
position it precisely inside the larger commercial and technological surrounding
ecosystem.
1.2 How business plan link with IP
Since the scope of the business plan is to describe not only the business logic behind
the commercialisation and go-to-market plans, but also to demonstrate the assets and
resourcefulness of the team driving it success, the definition of a strong intellectual
property (IP) protection and management policy and the business planning exercise are
strongly interconnected and it will pay for an entrepreneur to understand the
connection very early on in the business planning process.

First of all, the IP owned by or accessible to the company owners will strongly
determines the business model chosen for operating on the market. Secondly, the
business plan will typically refer to intellectual property (IP) and intellectual property
rights (IPR) to describe the company's unique speciﬁcities and the entrepreneurial
assets and the resource capital that can be called upon for establishing win-win
collaborations with clients, partners and investors. Finally, the comparison of those
assets with the IPR owned or likely to be acquired by both clients and competitors are to
be considered key indicators of the commercial viability of the business and should
inﬂuence its strategic positioning inside the broader market landscape. 

2. Related IP information in the description of a business
The IP policy of the company is to be considered a key element in the business plan,
which can bring very strong added value to the venture if appropriately described and
valued, but can by contrast hamper the confidence and interest of external
stakeholders in the business if not ascertained in a very clear and comprehensive way.
Any uncertainty in terms of freedom to exploit the technology underpinning the
products or services or the ability of the entrepreneurs to secure sound relationships
with other players on the market will raise doubts about the viability of the business.
The activities should moreover be communicated in the business plan so as to be easy
to understand and globally coherent with the global business goals. In terms of
describing the business model, the issues listed below are frequent challenges and
drawbacks which entrepreneurs may come across when elaborating business plans. All
of them are related to a description of the IP assets available to the business, which is
poor, vague, not practical enough or not business-oriented.
2.1 Description of the intellectual entrepreneurial assets owned
2.1.1 Description of the products and services
When writing a business plan, first thing to consider is how many technical details and
specifications should be included in the description of the products and services being
offered. That issue depends on what is actually needed to understand the technology
being commercialised and its added value for the targeted customers. The good news
from this point of view is that disclosure in detail of the secret know-how owned by the
company, which should be considered confidential information and be very carefully
disclosed to third parties, is usually considered as not necessary in the description of
the products and services.
The main scope in the business plan is to be able to picture the technology from the
point of view of an industry client, answering questions such as “What does the product
do?”, “How do I know that it actually works?”, “What is the added-value compared to

other products (e.g. technologies)?”. Technical drawings are welcome in the business
plan to illustrate the technological offer, but technical processes and concepts should
be described in a concise and user-oriented way. Do not hesitate to have your
description reviewed by us, we are able to have a synthetic view of the technology than
the development team or technology experts. A must-have in the business plan is a
summarised description of the products and services in a few short sentences at the
very beginning of the document outlining the company’s mission (mission statement).
The extensive use of technical jargon and an imprecise description of the different
modules of a multi-element technology for example, could be confusing for business
plan readers.
Companies should also consider products and related trade marks and possibly
describes the different products in the business plan under the specific brands that will
be used to promote them. For consistency purposes, it may be useful to have one trade
mark for the global product range and then break it down into different solutions or
modules.
2.1.2 IP ownership and the IP management policy inside the company
Innovation or the evolution of any business idea is often the result of team work. The
technology being commercialised may have been developed by different employees or
partners and may then have been further packaged and refined with the support and
involvement of third party researchers, external designers, software or hardware
suppliers. Bringing a proven and fine-tuned technology to the market is obviously an
added value in the business plan, and having involved suppliers and customers in the
product development process at a very early stage is typically considered an additional
asset. However, that may induce uncertainties about the owner of the IP assets being
commercialised. The following example for instance raises questions as to the IP
ownership in a situation where the legal basis under which the IP has been co-created,
published and shared in the context of a consortium are not clarified and the ownership
of the research results developed is not clearly defined:

Regarding the ownership of IP, a business plan should raise no doubts as to the
products and services owned/co-owned by the company and those accessible under
licensing agreements with third parties. The transfer of the ownership to the business is
the simplest and best solution when possible and is very often required by private
equity investors. In the case of co-ownership of the IP, a potentially exclusive and in any
case long term licensing agreement has to be alternatively sought to secure access to
any required technology and freedom to operate on the market. Due diligence
performed by investors heavily focuses on IP. Investors will typically check the status of
all intellectual property rights owned by the company and take them into account in
their pre-money valuation of the business.
A second element, which has to be made clear in the business plan, is the extent to
which the rights on the IP being commercialised by the company are or can be
registered and therefore efficiently prevent the entry to the market of potential
copycats. If the IP cannot be registered, how a technological advantage will anyway be
maintained in the future is a key point to consider. This can be linked for instance to a
very strong governance policy in terms of file management inside the company and
restriction of know-how access to a very limited group of people (e.g. funders and the
top management team with shareholder agreements in place).
The following examples illustrate how to clearly describe IP ownership and which
measures could be put in place to prevent unauthorised reproduction or coping of the
company IP.
2.2 Contractual relationships with third parties
2.2.1 Technical agreements in place or foreseen
The contracts secured or planned with external contractors, researchers, integrators or
suppliers should be clearly identified in the business plan and a policy should be in
place for developing strategic relationships with those external stakeholders. The scope
and framework of any technical partnerships should be clearly defined. Access to key IP
needed for future product developments should be secured, while too restrictive and

locking-in alliances should be avoided. Make sure that the company has access to what
it needs but remains free to act and react in a competitive way notwithstanding existing
formal agreements. Those issues will typically be checked by potential investors or new
technology partners interested in the business. Setting out the global partnership
scheme chosen for the company in the business plan will provide a clear vision and
roadmap in terms of collaborations and will help to clarify any potential uncertainties.
Here are some examples of precise and well-defined technical partnerships descriptions
in a business plan:
2.2.2 Commercial agreements in place or foreseen
The sales strategy is one of the most important sections of the business plan, since the
overall goal of the document is to help clarify, focus and question the business strategy
chosen to exploit a given know-how or technology. A typical mistake made by
entrepreneurs when describing their market size is to address the global market
potential without questioning the part of it which is actually achievable to them. Most
businesses require establishing ties with adequate partners and allies to be able to
reach and fulfil the needs of a very wide range of somewhat diverse target customers.
Those relationships should be carefully drafted so as not to give unlimited access to the
company’s core intellectual assets to third-party organisations without proper legal
frameworks in place. Be as precise as possible in the description of your existing and
future partnerships: Are they long-term, exclusive or limited to a given territory? Are
there some contractual milestones and targets which have to be achieved by each
specific partner? The following description for instance is to be considered too vague in
the context of a business plan:
“We will support and enhance our direct sales efforts through the development of
strategic partnerships arrangements at different levels:
‣ consulting partners;
‣ solution partners;
‣ hosted solution providers;

‣ OEM partners.”
Commercial exclusivity is typically to be granted only when there is a specific need
justified by the global business strategy.
Example: exclusivity is given on the commercialisation of a 3D camera to a very large
consumer device manufacturer with worldwide distribution channels, given the fact that
the entrepreneurs are not interested in serving that B-to-C market themselves and
intend to focus in the long term on a number of B-to-B professional market segments
instead. Exclusivity has a price, which should be reflected in the revenues derived from
the commercial agreement as described in the financial plan for the business. On the
other hand, direct and indirect sales channels, if co-existing, should be organised in a
way so as not to jeopardise each other. A clear vision and strategy in the field of IP
commercialisation naturally induces a clear division of roles on different market
segments or different territories.
More on the link between IP and business plan:
A business planning stage is not complete without the aforementioned topics and
more. Would you like to learn more? We prepared more chapters available on our
Fractional IP website.
2.3 IP-related elements in the financial plan
2.3.1 Estimate the value of the IP assets owned by the company
2.3.2 Set realistic expectations in terms of IP-related revenues
3. IPR issues within the global business and technological ecosystem
3.1 IP intelligence as a market analysis tool
3.2 IP monitoring as a competitive positioning tool 

About Fractional IP
The Fractional IP knowledge base aims at raising awareness of Intellectual Property (IP)
and Intellectual Property Rights (IPR) by providing information, direct advice and training
on IP management and IPR matters to all business owners. In addition, Fractional IP
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incorporate IP into your business plan and gain investor’s and other stakeholders
attention please send an email to info@fractionalip.com. 

Disclaimer: This educational resource was developed by Fractional IP editor in chief in view to enlighten young and old
businesses about the inclusion of IP strategy at a business planning stage will have positive effect on the bottom-line of the
business.
Even though this document has been created to educate the reader, the positions expressed are those of the authors and do
not necessarily represent a legal advice. Neither Fractional IP nor it affiliates product or service nor any person acting on
behalf of the Fractional IP or the FIP Consulting Group is responsible for the use which might be made of this information.
Although Fractional IP endeavors to deliver a high level service, no guarantee can be given on the correctness or
completeness of the content of this document and neither Fractional IP nor the FIP Consulting Group members are
responsible or may be held accountable for any loss suffered as a result of reliance upon the content of this document.
© Copyright 2017 Fractional IP.

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