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5 Brilliant Ways to Defend Your Business From Competitors

Is your entrepreneurial kung-fu strong it better be..

So you're off to the races creating a clear and elevating solution to a singular problem you're passionate about solving . Congratulations: You're already ahead of a good 50% of your would-be competition. But what of the other pesky half? How are they going about tackling your problem? How are they going after your customers? How are they structuring their investor pitches? Incentive plans? Happy hours?

The Grass isn't Greener... But It's Distracting and Demotivating

There's a difference between healthy competitive intelligence and unhealthy... let's call it... "competitive infatuation". In the same way that neighbors would be wise to avoid trying to keep up with the proverbial Joneses, startups ought to resist the temptation to over-attend to their competitors. Why? Because doing so risks positioning you as a reactive game-player instead of a proactive rule-maker. Venerable writer and game designer (i.e., rule-maker) Neal Stephenson shares this perspective in his 2011 article in Wired Magazine titled " Innovation Starvation ":

Most people who work in corporations or academia have witnessed something like the following: A number of engineers are sitting together in a room, bouncing ideas off each other. Out of the discussion emerges a new concept that seems promising. Then some laptop-wielding person in the corner, having performed a quick Google search, announces that this "new" idea is, in fact, an old one -- or at least vaguely similar -- and has already been tried. Either it failed, or it succeeded. If it failed, then no manager who wants to keep his or her job will approve spending money trying to revive it. If it succeeded, then it's patented and entry to the market is presumed to be unattainable, since the first people who thought of it will have "first-mover advantage" and will have created "barriers to entry." The number of seemingly promising ideas that have been crushed in this way must number in the millions.

tl;dr : If it's already been done, it's not worth doing. If it hasn't, it's... still not worth doing.

Not particularly inspiring.

If over-focusing on your competitors' every move is a recipe for pessimism and inaction, what's an optimistic, proactive entrepreneur to do?

Master Your Own Kung Fu

Simon Sinek taught me that "people don't buy what you do; they buy why you do it" . Customers commit to your product or service if there's reason to believe that it's an expression of your authentic values and purpose. Here's a build on that: By relentlessly cultivating your customers' "reason to believe", you're simultaneously signaling a "reason to stand down" that can deter potential copycats. The first defense is a good offense.

Bruce Lee , martial artist extraordinaire who knew a thing or two about competitive defense, once said: "Fear not the man who has practiced 10,000 kicks once. Fear the man who has practiced one kick 10,000 times." Your job as a startup founder is to master your solution's singular "kick" (product-market fit). With sufficiently demonstrated mastery, fellow warriors far and wide will fear (ahem... choose not to compete with) you because they simply can't hang with your Kung fu. Keep it up, and you'll begin to attract the attention of the Shaolin elders of Mountain View , who might extend you an invitation to join their order at their temple .

Alas, we're getting ahead of ourselves. Just as every journey begins with a single step, so I ask you to commence with your study of the Furious Five Forms below.

The Five Furious Forms (a.k.a. The Five Relevant Startup Competitive Defense Positions)

1. Expertise (a.k.a. What you know): Master your craft to such an extent that savvy foes stay out of your business entirely. "The greatest victory is that which requires no battle." ~Sun Tzu.

2. Relationships (a.k.a. Who you know): Trusted relationships are a finite resource. Your unique relationships (with vendors, partners, and especially, customers) are yours and yours alone. "If you do not seek out allies and helpers, then you will be isolated and weak." ~Sun Tzu (again... Sheesh, this guy.)

3. Trade Secrets (a.k.a. What others don't know): If you have a truly innovative (read: new and better) differentiator, keep it quiet. You can happily outperform the market until someone figures out how to replicate it. The Coca-Cola recipe has been a trade secret since 1886!

4. Network Effects (a.k.a. Who's already here ): Engineer virality and stickiness into your offering from day one to ensure that first-mover advantage gives way to sustainable advantage. You might build technically superior alternatives to Facebook or eBay, but good luck moving everyone over to the new digs.

5. Patents (a.k.a. Who's first ): Finally, if others could easily replicate your approach, and given enough time and treasure, outperform you, I'd recommend filing for a patent as a competitive safeguard of last resort. The inefficiency of modern patent law notwithstanding, sometimes it's comforting to know that you can call in a grownup (read: the government) to settle your scuffle.

Bottom line: As an investor, I prefer to invest in companies whose solutions are rooted in hard-won, unique experiences that yield hard-to-replicate expertise and relationships. Trade Secrets, Network Effects, and Patents further strengthen the story.

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Writing a Business Plan & Protecting Your Idea Don't know where to start? Here are the first steps, plus how to protect your business idea.

By Stever Robbins Jul 17, 2000

Opinions expressed by Entrepreneur contributors are their own.

Q: I'm a budding entrepreneur, and over the years, I've brainstormed about many different business ideas. What's the first step in getting my concepts rolling? Is it setting up the Web site and launching a direct-mail campaign, forming the company structure or writing a business plan?

A: Unfortunately, there's no magic formula. Successful companies use every combination, and then some. Here's my recommendation, but check with your lawyer and accountant before making final decisions.

First, create the business plan. A plan structures your idea. It lets you think through your market assumptions, product, distribution, management and financial needs. Even if you never need to raise outside money, now may be your only chance to think through everything from top to bottom and know where and how you're going. You can also work with a lawyer to choose a corporate structure that's most suited to your operational and financial needs.
Next, incorporate. That way, start-up expenses clearly belong to your business and not to you as an individual. Incorporating early will also start your company's legal history, which can make it easier to get credit and raise bank financing later on. Furthermore, lawyer Joe Volman ( [email protected] ), a specialist in early-stage deals, points out that incorporating limits your liability once you start dealing with customers. In addition, he says you want as much time as possible between incorporation and outside investment to justify a low share price at incorporation. Your founder's shares are considered income by the IRS, and it's hard to value them at a penny per share two weeks before outside investors pay $1 per share. But always check with your own lawyer who knows your situation and your state's tax laws before deciding when to incorporate. Doing this properly at the start can save thousands (if not millions) of dollars down the road.
Finally, build your site and market it. Your business plan is your chance to identify your customers, value proposition, financials and the response rates you need to be successful. If you begin building and marketing without the up-front thought, you won't know if your time and money are going toward the right things. A 3 percent direct-mail response rate is incredibly good, but if your business plan requires a 10 percent response to be profitable, it's best to know that before you pay for a direct-mail campaign.

Q: I'm also uncertain about showing my plan around once it's completed. Should I take measures to protect my ideas and concepts at that stage, and if so, what types of actions can I take to ensure my concept stays mine?

A: Protecting intellectual property (IP) is best done early by using a good intellectual capital lawyer. IP protection covers many areas, including the business idea, technology ownership and trademarks.

Entrepreneurs often ask investors to sign nondisclosure agreements (NDA) to protect the business idea. Few angels and almost no venture capitalists will sign an NDA. If one of their portfolio companies is already working on a similar idea, they can't sign it. If they did, you could show up years later claiming they stole your idea.

VCs also say you can trust them anyway since breaking confidentiality would hurt their deal flow. Really? If a VC has track record of making entrepreneurs multimillionaires in 18 months, would you talk with them even if you heard rumors they steal ideas? Probably. Especially since those rumors can be dismissed as sour grapes from unfunded entrepreneurs. Indiscretion might tank a VC's deal flow, but I doubt it would be as devastating as they portray.

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But they have a much more solid argument: The idea doesn't make the difference-entrepreneurship is all about execution. And I agree wholeheartedly. Dreamers with good ideas are a dime a dozen. But in my daily work with entrepreneurs, it's the day-to-day implementation that makes or breaks them, not the grand ideas.

Specific technology is easier to protect than ideas. You can apply for patents and trademarks to protect proprietary technology you bring to the table. Patents protect, and they become assets that increase your valuation. Patents may even protect your business models. One company I've worked with has been told that some of their ways of doing business are patentable.

Caution: Don't rely too much on patents or trademarks in a practical sense. If someone infringes, your patent is only as good as your ability (time and legal resources) to prosecute infringements.

If your idea is all you have, as soon as you start sharing it to raise money, hire employees or establish trade accounts, then it's time to start executing for everything you're worth.

As an entrepreneur, technologist, advisor and coach, Stever Robbins seeks out and identifies high-potential start-ups to help them develop the skills, attitudes and capabilities they need to succeed. He has been involved with start-up companies since 1978 and is currently an investor or advisor to several technology and Internet companies including ZEFER Corp., University Access Inc., RenalTech, Crimson Soutions and PrimeSource. He has been using the Internet since 1977, was a co-founder of FTP Software in 1986, and worked on the design team of Harvard Business School's "Foundations" program. Stever holds an MBA from Harvard Business School and a computer science degree from MIT. His Web site is a http://www.venturecoach.com .

The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.

Stever Robbins is a venture coach, helping entrepreneurs and early-stage companies develop the attitudes, skills and capabilities needed to succeed. He brings to bear skills as an entrepreneur, teacher and technologist in helping others create successful ventures.

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How to legally protect a business idea

Table of Contents:

Last updated on: April 2, 2024

Have a great business idea? Whatever you do, don’t let it fall into the wrong hands and lose your hard work and innovation to someone else. There are countless scammers, bad actors, and legitimate competition who could steal your idea, along with your revenue if you don’t protect it properly.

When it comes to protecting business ideas, what many business owners fail to prepare for is enforcing ownership of their ideas and content. We have compiled this guide on how to legally protect a business idea, as well as enforce your ownership and stop infringements when they occur.

How to legally protect your business idea

Register your intellectual property (IP) portfolio
Monitor for infringements of your protected business ideas

Enforce IP ownership and take down infringements

Employ a brand protection software

Register your intellectual property portfolio

The first step to legally protect a business idea is fairly straightforward: you want to register ownership of your intellectual property. Intellectual property refers to the ownership of intellectual creations, ideas, and concepts. Common examples of business IP include brand logos and names, inventions, product design, and more.

Having formal registrations for each of your business ideas will help you stop infringements of your intellectual property . There are four distinct types of IP that will protect your business ideas, and it’s important you register them correctly. The four types of intellectual property are copyrights, trademarks, patents, and trade secrets.

Copyrights protect original creations. There are many types of content that would fall under copyright protection as it pertains to your business. Blog articles, web content, unique patterns, and graphic designs are all forms of business copyright content you can register.

Copyrights protect your unique business content from being replicated. This means that someone can’t legally make a copy of your creation, whether they go on to sell it or simply copy it for themselves.

While copyright actually applies automatically to the creator, it’s still a good idea to get it registered in order to best protect your copyright content . This will create a record and make it easier to prove your ownership of creations if you have to take down an infringement.

Trademarks protect the content and ideas that help customers distinguish your brand from others. Common business trademark examples include brand names, logos, slogans, and particular product packaging and/or design.

Trademarks, like copyrights, are automatically applied and protect your unique brand identifiers from being used by scammers or competition.

Again, we do recommend you officially register your business trademarks if you want the best protection for your business ideas. Registering your business trademarks allows you the right to take legal action against anyone infringing on your IP and using it for themselves.

Patents protect inventions that may or may not yet exist, and therefore help protect ideas and concepts vs. creations like copyrights and trademarks.

Unlike the former types of intellectual property rights, patents aren’t automatically applied to inventions and require registration with the United States Patent and Trademark Office .

Patents are necessary to protect your invention and keep it from being stolen and replicated. To enforce a patent and take down anyone stealing your idea, you’ll need this legal registration in your IP portfolio.

Trade Secrets

Trade secrets protect the particular processes and information a business uses to operate and succeed. Common examples of trade secrets include recipes, processes used to create or analyze content, and client lists used for sales.

Trade secrets are another type of intellectual property that is automatically granted to the owner. To be considered a trade secret legally, you must ensure the information is:

Beneficial to your business because it is a secret
Beneficial to others (like consumers) who can’t access the information
Be reasonably protected by the owner to ensure the information does not become public knowledge

If someone steals your trade secrets, you have the legal right to enforce your ownership and take legal action against them. This is vital to ensure your competition cannot benefit from your unique business ideas.

Once you have the proper registrations for all of your intellectual property, ensure you keep a detailed record. Developing an IP portfolio will ensure you and the rest of your team knows exactly which of your content is protected. It will also be necessary to prove ownership of your IP if you have to deal with infringements.

Monitor for infringements of your protected business ideas

Registering your IP will help you claim legal ownership of your business ideas, but it won’t necessarily stop bad actors from stealing your IP anyway. It’s especially easy for scammers to steal your content and business ideas and infringe on your IP online, where counterfeits and brand impersonation is rampant.

To protect a business idea from being stolen, you must be on the lookout for anyone infringing on your content. Monitor for infringements across all of your sales channels, as well as places you don’t currently sell your products or operate your business.

Common places for IP infringements to occur include fake websites , Ecommerce marketplaces like Amazon and Shopify , and social media platforms like Facebook and Instagram . To best protect your business ideas and content, it’s important to monitor for infringements on as many of these channels as possible.

If you do notice someone infringing on your intellectual property, enforce your ownership and take it down immediately. If left alone, someone can completely damage your brand reputation and steal your revenue.

How are intellectual properties enforced?

One of the most universal ways to enforce ownership of your IP is to send a cease and desist letter to the infringer. This notifies them that they have unlawfully used your protected content and will face legal repercussions if they don’t take down the infringement. It also creates a record for you to use in court if you need to proceed with legal action.

You can also report an infringement to any platforms the stolen content appears on, if applicable. You can report an infringement on Instagram , for example, and other social media platforms, Ecommerce marketplaces, and search engines.

No matter what methods you use to enforce your intellectual property, it’s important to keep following up until the infringement is taken down. If you aren’t successful with these tactics, it’s a good idea to invest in an IP lawyer or brand protection expert .

Employ a brand protection software

With the volume of scammers and bad actors online, protecting your business ideas from being stolen can be nearly impossible alone. Employing a brand protection software like Red Points can help you monitor for infringements on the scale you need to properly protect your business ideas.

Red Points software can change the way you enforce your IP by making the process completely automatic. Instead of spending days scouring thousands of sites and platforms yourself, this software keeps a constant monitor for infringements all across the web. It also sends automatic takedown requests when infringements are identified, so you don’t have to waste time writing and sending C&D letters.

What’s next

There are thousands of scammers, bad actors, and even industry competition out there who can easily steal your intellectual property. It is vital to protect your business ideas and enforce your IP to ensure others aren’t stealing your revenue and profiting off your ideas. Red Points can help protect your business idea with 24/7 infringement monitoring and automatic takedowns that save you time, stress, and money. Learn more about our services and see how you can protect your business with the most widely used Brand Protection Software .

More From Forbes

10 steps for strategic planning to defend your future.

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Strategic planning

Did you know that the typical five-year strategic planning forecasts perform about as well as dart-throwing chimpanzees? Cognitive science and behavioral economics scholars have conducted research on people who are the most skilled forecasters among us. Apparently, they perform no better than chance on economic predictions more than three to five years out. Given that gloomy information, you might be asking why I wrote an article about strategic planning at all.

You’re in the same boat with my consulting client Beth, the CEO of a mid-size medical management company, when I told her about this same research finding in our conversation about strategic planning in the spring of 2019. Based on her personal experience, she resonated with the accuracy of this statement.

Beth told me that about seven years before she and I had that conversation, her company went through a five-year strategic planning process. Well, the plan didn’t go according to plan. The roiling controversy surrounding Obamacare after Donald Trump’s election and Republicans’ taking both houses of Congress caused a great deal of uncertainty and resulting problems for her company.

Other predicted trends happened faster than expected. One problem was lower occupancy in her company’s nursing homes due to shifts to using alternative nursing care services such as home health care and retirement communities. Another problem stemmed from a decrease in the more lucrative Medicare Part A patients.

The assumptions built into her strategic plan, and the resulting projects and financial commitments, failed to pan out. The strategic plan, she felt, cost her some serious money. She invested into more facilities and staff than was needed, so that the company’s supply of medical services outpaced demand from customers.

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She had to cut costs to compete. Beth even ended up canceling some planned projects and lost the initial investments. She also had to lay off long-time staff to maintain the company’s financial viability.

Not a pretty picture; no wonder she wasn’t optimistic about strategic planning. Wouldn’t you be if you had her experience?

The Problems With Beth’s Strategic Planning

After taking a look at her previous strategic planning process, it became clear that it suffered from a number of dangerous judgment errors that result from the biological structure of our brain, what scholars term cognitive biases . While we as human beings suffer from over 100 such mental blindspots, not all are relevant for business and leadership. You’ll find the 30 cognitive biases that cause the biggest problems in these areas, and discover where and how these judgment errors are plaguing your organization, in the Assessment on Dangerous Judgment Errors in the Workplace .

We know from studies that cognitive biases pose a high threat to strategic planning . Beth’s plan, in particular, suffered from the planning fallacy , our tendency to assume that everything will go according to plan. That dangerous judgment error leads to our failure to build in enough resources and flexibility for various contingencies. Indeed, Beth’s company didn’t account nearly enough potential for problems with Obamacare and other issues.

Her plan also exhibited the mental blind spot known as the optimism bias . It’s like it sounds: the optimism bias causes us to perceive a more bright and hopeful vision of the future than is the case in reality. We then underestimate threats and risks, such as the risk of one political party taking both the presidency and both houses of Congress. Beth’s plan mistakenly anticipated that due to the overwhelming commitment among Democrats to Obamacare, there would be no effective challenge to it from Republicans.

Finally, the plan proved highly vulnerable to sunken costs . This cognitive bias makes us reluctant to terminate projects after we already sunk some money into them. Due to the strategic plan’s structure, Beth’s company continued to throw good money after bad long after many red flags suggested it might be time to sink the projects. As a result, Beth suffered substantially more losses than needed, making the required financial corrections significantly more painful than needed.

As I went through each of these problems, Beth found herself both nodding her head and clenching her fists. How she wished she knew about these problems when she worked with the consulting company that helped her leadership team create that plan, she told me. She wouldn’t have fallen for those traps!

Gut-Based Strategic Planning

Beth’s experience is pretty common, due to the widespread failure to address cognitive biases in business strategic planning and decision making. Instead, business advice encourages leaders to trust their gut when planning and deciding.

“Go with your gut” may be both the most repeated business advice and the most wrong-headed one. Our gut reactions have evolved for the ancestral tribal environment, not the modern business one. Many of the cognitive biases that cause us to make decision disasters in today’s workplace worked perfectly well for our ancestors.

For instance, it was highly beneficial for our ancestors to eat as much sugar as possible, such as when they found an abandoned beehive. Those who ate the most sugar survived and passed on their genes; unfortunately, this instinct today harms us greatly, as the obesity epidemic in the US makes clear. We have inherited the sugar-eating instinct and other unhealthy behaviors in our decision making, and tend to rely on these gut reactions without realizing that they don’t serve us well in modernity.

Tragically, even business strategic assessments meant to address the weaknesses of human thinking through structures and planning are deeply flawed if they don’t specifically account for cognitive biases. Take the most popular of them, SWOT, where you try to figure out the Strengths, Weaknesses, Opportunities, and Threats facing your business.

SWOT assessments usually fail to account for our mental blind spots. It’s particularly problematic that SWOT is almost always performed in a group setting, and cognitive biases are often exponentially increased in group settings. One particularly large problem is known as groupthink , where groups tend to coalesce around the opinions of a powerful leader.

SWOT and similar strategic assessments give a false sense of comfort and security to business leaders who use them. These comforting techniques result in appalling oversights that ruin profitable businesses.

By now, you – like Beth – might feel pretty down on strategic planning. She certainly did, when we discussed these typical problems with strategic planning and strategic assessments.

Defend Your Future Through Effective Strategic Planning

Fortunately, there’s a much more effective way to approach strategic planning and assessment.

Rather than making a simple strategic plan, you focus on assessing potential threats and opportunities and building them into your plan. You emphasize making your plan flexible and resilient, able to handle unanticipated developments that you didn’t consider when you made the original plan. You also work to counteract the typical cognitive biases that cause your plans to go astray.

An easy way to do so involves using a technique I developed called “Defend Your Future.” This technique allows you to get the benefits of strategic planning – confidence, clarity, certainty – without the failures, risks, and problems accompanying typical strategic planning and assessments.

It’s informed by extensive cognitive neuroscience and behavioral economics research on defeating cognitive biases and making the most profitable decisions. I refined it in over two decades of consulting and coaching for leaders at mid-size and large companies and nonprofits. By using this method, you can tap into both my business expertise and my knowledge of groundbreaking scholarship, without straining your budget to hire me.

The benefits from this technique don’t come from a perfect forecast of the future; beyond a couple of years, such forecasting is like relying on a dart-throwing chimpanzee, as I mentioned earlier. They stem instead from knowing you’ve done your best to make yourself and your organization as safe, secure, and stable as you reasonably could with the information and resources you have available. No one could ask for more.

Beth perked up as we talked about the “Defend Your Future” technique. She definitely wanted to protect her organization from threats and position it to seize opportunities in a flexible and resilient manner. As we talked further and I shared the details of this approach, she grew more and more excited, realizing it would have addressed the vast majority of the problems with her old strategic plan.

She still had some skepticism about strategic planning due to her bad experience in the past; as the saying goes, “once bitten, twice shy.” Nonetheless, she had confidence in my ability due to a successful culture shift I oversaw to improve collaboration between doctors and nurses in a hospital her company managed.

While I provide guidance to my coaching and consulting clients when I support them in doing this technique, you may not have anyone on hand with the expertise needed to help you through this technique. If you don’t, I recommend you learn about research-based techniques to perceive clearly cognitive biases and to understand the principles behind them. Then, you’ll need to assess the ones most strongly impacting your workplace, and learn methods to defeat these mental blindspots most powerfully impacting your career and business , as well as your relationships, professional and personal alike .

Likewise, you will gain from integrating structured decision-making techniques into your toolkit, whether for quick everyday decisions , for moderately important choices that substantially impact your bottom line, and for decisions that are either critically important or highly complex or both . You’ll also need to know how to avoid failure and maximize success in implementing decisions and managing projects and processes. Finally, apart from structured techniques, you’ll find invaluable gaining habits and skills of mind to notice when cognitive biases are about to ruin your day and prevent this outcome.

Given that the “Defend Your Future” technique is meant to shape your overarching strategy, you’ll find yourself using these more targeted techniques and mental skills for components of the strategic plan you’ll eventually develop. “Defend Your Future” is a good fit either for a team or an individual. You can use it to develop a strategy for your personal career, your business or other organization, your department in a larger organization, your physical and/or mental health, your civic engagement, your relationships, and other areas of personal and professional growth

10 Steps to Truly Effective Strategic Planning

Step 1: Scope and Strategic Goals

Decide on the scope and the strategic goals of the activity that you will evaluate, as well as the timeline, anywhere from 6 months to 5 years. Remember that your forecasting will deteriorate the further out you go as you make longer-term plans, so add extra resources, flexibility, and resilience if you have a longer projected timeline. For the same reason, make your strategic goals less specific and concrete if you have a longer time horizon.

Step 2: Gather

Gather the people relevant to the activity that is being evaluated in the room, or, if there are too many to have in a group, representatives of the stakeholders (a good number is six, and not more than ten people to ensure a manageable discussion). Make sure the people in the room have the most expertise in the activity being evaluated, rather than simply gathering the higher-ups. The goal is to give input on various attributes of a vision of the future and then address any potential problems and opportunities uncovered.

At the same time, have some people with the power to make and commit to the decisions that will be reached during the exercise. Consider recruiting an independent facilitator who is not part of the team to help guide the exercise.

If you are making the decision by yourself as a business professional (for example, a solopreneur deciding on your marketing strategy for the next year), write out a list of various stakeholders who are relevant to the project. This may reflect competing goals within your own project if you are a sole decision-maker.

Step 3: Explain

Explain the exercise to everyone by describing all the steps, so that all participants are on the same page about the process.

Step 4: Your Anticipated Future

Consider what the future would look like if everything goes as you intuitively anticipate and how many resources it would require.

As I discussed this step with Beth, she recognized that her leadership team and the other consulting firm seven years ago only went up to this step, skipping the rest of the critical steps.

Step 5: Potential Internal Problems

Now, consider what the future would look like if there were unanticipated problems internal to the business activity that seriously undermined the expected vision of the future. Write out what kind of possible problems might arise, including low-probability ones. Also lay out the kind and amount of resources (money, time, social capital) that might be needed to address these problems in alternative visions of the future.

Evaluate the likelihood of each problem in percentage terms and multiply the likelihood by the number of resources needed to address the problem. Try to convert the resources into money if possible in order to have a single unit of measurement.

Next, consider what you can do to address the internal problems in advance, and write out how much you anticipate these steps might cost. Finally, add up all the extra resources that may be needed due to the various possible internal problems and all the steps you committed to taking to address them in advance.

If you are planning this out as a group, first have everyone suggest problems ANONYMOUSLY, then discuss each scenario as a group, come up with resource amounts ANONYMOUSLY, and finally average out the differences between amounts.

Beth asked me about the anonymity; I explained that the purpose stemmed both from the goals of addressing groupthink, and also of permitting people to share potentially unpopular and even politically dangerous points of view. She recalled how she heard some rumors in her company’s grapevine that some people weren’t thrilled about the optimism of the strategic plan; she dismissed the rumors because no one brought up these points publicly. With this in mind, she conceded the usefulness of anonymity.

Step 6: Potential External Problems

Complete the previous step for potential problems external to the business activity.

Beth really wished that the strategic plan seven years ago had this section, as it would have greatly increased the likelihood of a more realistic assessment.

Step 7: Potential Opportunities, Internal and External

Go on to consider what your anticipated plan would look like if unexpected opportunities opened up; most will be external, but consider internal ones as well. Next, consider the likelihood of each scenario and the number of resources you would need to take advantage of this opportunity. Try to convert the resources into money if possible, for the benefit of a single unit of measurement.

Consider what steps you can take in advance to take advantage of unexpected opportunities and write out how much you anticipate these steps might cost. In the end, add up all the extra resources that may be needed due to unexpected opportunities and all the steps you committed to budgeting to take advantage of these potential opportunities.

If you are planning this out as a group, first have everyone suggest opportunities ANONYMOUSLY, discuss each scenario as a group, come up with resource amounts ANONYMOUSLY, then average out the differences.

Beth really wished her team had considered this in the original plan. Due to some of the same pressures faced by her company, the nation’s second-largest nursing home chain went bankrupt in 2018 , resulting in sales of many facilities and other valuable assets, along with great opportunities to hire top-notch staff. If Beth’s company had reserved some resources instead of investing them into trying to build new facilities of its own – a number of which had to be canceled – they could have gotten valuable properties and human resources at fire-sale prices.

Step 8: Check for Cognitive Biases

Check for potential cognitive biases that are relevant to you personally or to the organization as a whole and adjust the resources and plans to address such errors. I recommend you check for all of the 30 most dangerous mental blindspots in professional settings found in the Assessment on Dangerous Judgment Errors in the Workplace . If you don’t have the opportunity to do so, make sure to at least check for loss aversion , status quo bias , confirmation bias , attentional bias , overconfidence , optimism bias , pessimism bias , and halo and horns effects .

If you are planning this out as a team, discuss the cognitive biases, then come up with resource amount adjustments ANONYMOUSLY, then average out the differences.

Step 9: Account for Unknown Unknowns (Black Swans)

To account for unknown unknowns – also called black swans – add 40 percent to the resources you anticipate. Also, consider ways to make your plans more flexible and secure than you intuitively feel is needed.

Initially surprised by the 40 percent figure, Beth realized the value of this step when we discussed the collapse of the 2008 housing bubble and the Great Recession, and prior to that, the dotcom boom and bust. Given the political turbulence surrounding healthcare, reserving 40 percent made sense to her.

Step 10: Communicate and Take Next Steps

Communicate effectively to organizational stakeholders about the additional resources needed. Then, take the next steps that were decided on during this exercise to address unanticipated problems and take advantage of opportunities by improving your plans and reserving resources.

By the end of our discussion, Beth determined that she and her leadership team needed to do this exercise for the next three years; she didn’t want to do a longer plan, due to the political instability associated with healthcare at the time we had the discussion in the spring of 2019. She was very happy with the outcome after it was completed during a weekend strategic retreat in early summer 2019. She felt confident it would be critical to addressing the threats and seizing the opportunities for her company, along with boosting resilience and flexibility.

You should use the “Defend Your Future” technique for any medium or long-term planning you do for your organization or your career. To help you remember the technique, you can use this decision aid .

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How to Really Protect Your Business Idea

7 min. read

Updated May 3, 2024

Download Now: Free Business Idea Validation Checklist →

How do I protect my business idea?

How can I find investors without giving it away? How can I get people to join me without telling them all about it?

What if they steal my idea?

Here’s the hard truth about protecting your business ideas:

You don’t own your idea, and you can’t sell it

You don’t own your idea.

An idea is like a summer breeze—you can enjoy it, maybe use it to power your windmill or sailboat, but you can’t own it. And you can’t steal it. An idea is like a good joke—using somebody else’s joke is not stealing it.

Yes, there are rare exceptions to this rule. The exceptions are that you can patent an invention, copyright a creative work (songs, movies, books, software), and trademark a commercial phrase, image, sound, or video.

I’m not dealing with those exceptions in this article. That’s all for some other time.

Important note: Sharing an idea is giving it away.

You can’t sell an idea; the first reason is because you don’t own it. The second reason is because you can’t find anybody who will buy it.

If you don’t believe me, do a good web search. You’ll find thousands of people—no, probably millions—saying (or posting) that they have a great idea they want to sell to an existing company. And you’ll find nothing, not one example, of a company actually buying an idea.

Companies buy companies, products, websites, software, startups with traction, and occasionally startups with just an idea and a team, but not ideas.

So, get this straight: You are supposed to build a business with that idea, add value, gather a team, and get going. Get customer commitments, early sales, and traction.

Daunting indeed…so what? Do nothing? Give up?

Seriously, if you’re thinking you can sell your idea as such, stop reading this post. I’m not writing this for you. You are wasting your time. Businesses and people that cater to that pipe dream are almost all plain scams.

The only exceptions to that rule are a few legitimate businesses that help inventors apply for and market patents—and this article isn’t about patents.

If, on the other hand, if you’re ready to execute your idea, then read on. I want to help you protect it as much as you can while you build on it.

That’s worth discussing.

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Don’t let the cat out of the bag.

The first thing you do with your big idea is shut up. Borrow from all those spy movies and adopt a “need to know” policy that covers who you share with and how much you share. Remember, people who hear your idea and execute it before you do didn’t steal your idea; they executed it.

They deserve to win. And if you did nothing but talk, you deserve to lose.

The next thing to do is figure out who needs to know and tell those people carefully and appropriately. If you can execute your idea all by yourself, do that. If you need a team to build it, gather your team carefully.

Talk to people one at a time. Start with people you trust.

Feel them out first, for their interest, before sharing the whole idea.

Who can you trust?

Don’t get paranoid—you’ll never gather a team if you can’t trust anybody with your idea. Legitimate investors won’t steal your idea; they need teams to execute, not naked ideas (remember, an idea has no value; the work gives it value, and sometimes a team gives it value).

I’ve been in business for more than 30 years now, and I’ve had a lot of success with the straight-in-the-eye moral and ethical commitment. Asking, “Can I trust you with this?” isn’t an iron-clad solution, for sure; so many people give secrets away without even having bad intentions.

Moral and ethical commitments get broken, as do legal and written commitments, especially around ideas and non-disclosure. And, sometimes, I suspect the straight-in-the-eye method is more binding than legalese in letters (but that’s just me, and I’m not an attorney).

Not to mention, is it possible that some people interpret an allegedly binding document as a rule of a game to be circumvented?

Use common sense with investors and investor groups. I’m really serious that legitimate investors won’t steal your idea—but, on the other hand, when you pitch to a group of 30 or more investors, there can be leakage. Despite all good intentions, when there’s a group of people listening, responsibilities get diluted. At the very least, discuss it with a group quickly to bring up the possibility of conflicts of interest.

If the two paragraphs above sound dicey, good.

That’s why I say shut up and deal on need-to-know only. There are risks, but it comes with the territory. You can’t keep an idea secret and execute it at the same time, but you can be smart about how much you say.

Registering the entity protects your business name to some extent, as long as you are the first in the world. It can cost as little as $50. Registering the domain name, if you have a good one, protects you for that domain but not against copycats with similar names.

Create the proof of what and when

Here’s something easy to do that provides some limited protection: write your idea down and mail yourself 10 copies via registered mail. Don’t get me wrong: proving you had an idea first doesn’t give you ownership and may not matter in court.

Even so, this can possibly help in certain cases, with sloppy problems that come up, showing legal proof of what your idea was on what date.

Should you make it legal?

Some legitimate experts will insist on having people sign confidentiality and non-disclosure documents before you share anything with them. They are often attorneys, and I’m not, so maybe they know better.

I say do what you can. Do the legal end when it’s practical, but don’t trust it. Don’t think it solves the problem.

You’ll never get a legitimate investor to sign one of those documents before you pitch. If an investor signs off on a non-disclosure, she’s just ruled out a whole class of business she can never invest in without risking legal action. They just don’t do it.

And, I think lots of people who you might want as team members would be put off by the idea of signing a legal document before talking about it. I would.

On the other hand, some kinds of situations, such as starting to work with a business ally doing co-promotion, or working with vendors, lead almost naturally to non-disclosure documents and confidentiality. In some situations, people expect to sign those documents before discussing a deal.

Work with an experienced small business or entrepreneurship attorney who gets it. Let your attorney tell you when to get signatures first and when not to. And if the attorney says you need potential investors to sign off before you pitch, then change attorneys.

Bottom line: Don’t talk about it. Do it.

In my decades of doing businesses, I’ve seen thousands of would-be startups derailed by excess secrecy. Not one failed because its idea was stolen.

Don’t get all balled up with idea constipation, worrying about who’s going to steal your idea. Get going and build a business. Be smart about protecting your idea, but understand that if you don’t risk sharing, your chances go way down.

Have you had a business idea that you were worried about protecting? How did you handle it?

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

You don’t own your idea, and you can’t sell it
Daunting indeed…so what? Do nothing? Give up?
Don’t let the cat out of the bag.
Bottom line: Don’t talk about it. Do it.

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7 Ways to Protect your Business’s Competitive Advantage

Being a small business owner is a little bit like being a race car driver. To win the race, you need to stay focused on who is ahead of you and execute strategies to overtake them. At the same time, you must frequently look over your shoulder to monitor competitors to find ways to expand your lead and protect your competitive advantages.

In car racing, these advantages could be advanced technology, process economies and efficiencies, designs that decrease friction, and (of course) the experienced driver behind the wheel. It's not that different in business. And once you have identified and developed an advantage that puts your small business in the lead, protecting those advantages becomes a high priority.

With that in mind, here are seven ways to protect specific types of competitive advantages so you can outpace your competitors for the win.

1. BECOME THE BRAND OF CHOICE

Who doesn't want to be the first brand that comes to mind when someone is ready to buy? But getting top-of-mind brand awareness and the positive perceptions that make a customer choose your brand over competitors isn't always easy. Here are some of the strategies that can get you over the finish line faster than your competitors.

Craft a memorable brand identity Any brand can craft a memorable identity, no matter how common its products or services are and no matter its size. In fact, small businesses are often better at describing the passion behind the way they do business, pinpointing exactly who would benefit most from their products and services, and explaining what sets them apart from competitors both large and small. With big players, these messages often get lost behind mass marketing campaigns designed for large audiences.

You only need to look at the example provided by the Dollar Shave Club for inspiration. It literally turned a commodity product (razor blades) into a much-talked-about brand and a $1 billion dollar business.

Some of the key elements of a brand identity that people connect with and remember include:

Mission statement —what your business does, and why
Vision statement —what your business will become by fulfilling its mission
Core values —the values and principles that drive how you operate and pursue your vision
Brand positioning statement —what sets your brand apart and who it serves
Visual, text, and auditory brand identity —colors, logos, verbiage, slogans, taglines, and more.To make your brand identity memorable, tie everything back to the pain points, concerns, and causes that motivate your target audience. Then, implement a cohesive and consistent use of your brand identity across all your marketing channels.

Develop a unique selling proposition Your unique selling proposition, or USP (also known as a unique value proposition or UVP), is the main reason someone chooses you over other options. Essentially, it's the type of competitive advantage you hope to create and protect. It must be something that differentiates your brand from your competitors and is compelling to your target audience.

Here are some steps you can take to create a compelling USP:

Evaluate the market to identify gaps not being served adequately.
Create ideal customer profiles (ICP) to identify the specific values, needs, and pain points of your ideal clients or prospects.
Study the unique value propositions in your competitors' advertising and marketing collateral.
List ways your business is different than your competitors.
Circle back to your market evaluation and ICPs and develop a unique value proposition based on the differentiators that set your brand apart.

Simple examples of unique and compelling selling propositions could be your business being able to provide delivery or curbside pickup, serving clients that have a hard time finding solutions (like higher-risk insurance options), or having a team with extensive experience and tenure.

Build a strong online brand presence Today, even the most non-digital products and services require an online presence. In fact, research from BrightLocal shows that 88 percent of consumers researched local businesses on Google in 2022 (up from 81 percent in 2021). Here are some of the cornerstones you will need to build brand visibility online:

A website optimized for online search
Social media profiles and posts on the channels where your customers engage with brands
An email marketing plan (and strategy for building your contact list)
A permission-based SMS text marketing program (for retail and restaurant businesses in particular)
In-store Wi-Fi to make it easy for customers to check in and tag your business on social channels while visiting
Digital ads to get on top of search engine results pages (SERPs) and into the social feeds of your target audience
Press releases to generate positive publicity and buzz about your brand

Get reviews on Google Google might not be the only platform where positive customer reviews will help your business, but it's the most important one. BrightLocal's 2023 Consumer Review Survey shows that 98 percent of consumers read reviews online before making a purchase or visiting a local business. What's more, Google Business profiles are shown alongside organic search results, especially where Google assumes a purchasing search intent.

To get reviews on Google, you will first need to create (or claim) your Google Business page. Next, optimize it with keywords and your business information, and don't forget to include video and images to increase online engagement. Finally, implement tactics to get more Google reviews, such as:

Asking at the point of sale
Asking for reviews in post-transaction emails
Adding a QR code or link to your profile on receipts
Using website popups
Embedding Google reviews onto your website

2. BUILD A WINNING TEAM TO PROTECT YOUR COMPETITIVE ADVANTAGE

When asked what sets their business apart, a lot of small business owners fall back on a vague cliché, “Our employees set our business apart." The thing is, if that's true about nearly every business, then it's a non-differentiator.

Your team could well be the X factor that makes your brand a winner, but you need to be able to specify why or how. You can also purposefully set out to build a winning team to keep your business out in front of the competition by:

Recruiting people with recognized expertise or industry authority
Hiring strategically to fill skill gaps
Regularly investing in employee training and development
Rewarding employees who level up
Recognizing high performers throughout your company (not just in highly visible roles)

3. PROVIDE A SUPERIOR CUSTOMER EXPERIENCE

Shep Hyken's 2023 Achieving Customer Amazement study revealed the top reasons people switch brands are:

Employee rudeness or apathy
Inconsistent information
Inability to reach someone who could help
A poor or inconsistent customer service experience

A straightforward way to offer a superior customer experience that creates stickiness and retention is to implement strategies to combat the ways your competitors are letting customers down. To achieve this, do some research into the experiences your competitors are providing and look for inconsistencies in service or information.

Hire or engage in some secret shopping to find out whether your competitors have passionate, engaged employees (and whether or not your business does). Then, develop training programs and scripts and make it easy for your customers to reach someone who can help with their issues.

With this foundation, you can then brainstorm ways you can go over and above the expectations of your customers. For example, if call-in customers experience on-hold wait times, how can you make those enjoyable instead of the expected poor-quality elevator music and occasional “your call is important to us" interruptions?

Next, develop additional customer retention and loyalty sticking points with insider exclusives, a customer loyalty program, purchasing rewards, and so on. Take the temperature as to the level of customer satisfaction with your business using polls and surveys on a regular basis.

4. DEVELOP HOLISTIC STRATEGIES TO OUT-COMPETE ON PRICE

Many small businesses fail to thrive because they find themselves in a race to the bottom price-wise, having failed to create differentiators that overcome price objections. That's not to say that you can't compete and win on price—but it's important to win on price without sacrificing your margins.

For example, restaurants often make up margins by charging a premium on items like soda and other beverages, making it possible for them to offer great happy hour pricing or trim margins on dishes with a higher production cost. Many printing companies lead with super-low pricing on items like business cards, knowing they will make up the difference when the business orders flyers, catalogs, and other marketing materials.

Likewise, you can become more competitive on pricing by reducing your overhead and input costs. Some ways to do this include:

Asking for price breaks in exchange for exclusive supplier privileges
Decreasing costs with discounts for paying in cash or upfront
Buying in bulk to lessen cost-per-unit
Outsourcing to reduce overhead
Upgrading equipment or software to streamline workflows

The key here is to look at your pricing and margins holistically and develop accurate projections. Then, use all that math to see where you can out-compete your rivals on price without sacrificing the financial health of your small business.

5. OWN A NICHE MARKET

Big players generally have to serve a wide audience, whereas small businesses have the agility to tailor their products and services to serve niche markets and even very specific client types. When you can identify this type of niche customer and offer a superior product or experience, you have the opportunity to own it. Once established, this makes your brand very hard to beat in the niche.

6. PROTECT YOUR PROPRIETARY ASSETS

It's often the case that a business will emerge into the marketplace after coming up with new tech, processes, products, or services that allow it to serve the market better (or even completely disrupt it). In many cases, this involves proprietary assets like designs, trade secrets, and names that can be protected with tools like:

Contracts with suppliers and vendors
Employee confidentiality agreements, like non-competes and non-disclosures
Server and website security to protect data from hacks

7. MAKE STRATEGIC ALLIANCES

To identify potential partners for alliances, look at where your buyer is just before they make a purchase from a business like yours and what happens afterward. If other players are involved in the process, creating strategic alliances and partnerships can work to build business for all parties.

For example, businesses often partner with other businesses to create protected territories. Salon manufacturers contract with beauty product distributors who enjoy exclusive distribution rights within states or regions.

Others create alliances to offer better customer experiences, such as a home builder who sets new home buyers up with a home warranty company. Or an insurance agency that teams up with specific appraisers to estimate risk, assess value, and generate policy pricing.

ONE LAST WORD OF ADVICE: DON'T STOP INNOVATING

Without continuously innovating and monitoring competitors in the marketplace and watching the trends happening in your industry, you could find a rival pulling ahead. Conversely, by doing so, you position your brand to take advantage of emerging opportunities and extend your lead.

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Importance of Asset Protection

Internal and external claims on assets, asset types, asset-protection strategies, best asset-protection vehicles, picking a general partnership, the bottom line.

Small Business
How to Start a Business

Asset Protection for the Business Owner

As a business owner, you probably realize that operating and owning a business can be fraught with pitfalls and risks. Turning a profit isn't enough; you must also protect your business from claims and lawsuits. Debts and mortgage obligations to third parties and vendors , claims for damages caused by your employees, product or professional liability, and consumer-protection issues are just some of the risks you must deal with. If handled improperly, these risks could result in the loss of both business and personal assets. Knowing what risks you face and how to minimize or avoid them gives you the chance to run your business successfully.

The goal of a comprehensive asset-protection plan is to prevent or significantly reduce risk by insulating your business and personal assets from the claims of creditors. Unfortunately, most small-business owners are unaware of all the potential risks that can harm their business and the options available to protect themselves. An asset-protection plan employs legal strategies, put in place before a lawsuit or claim arises, that can deter a potential claimant or help prevent the seizure of your assets after a judgment . If you haven't already put your asset-protection plan in place, don't wait. The longer the plan has been in existence, the stronger it likely will be.

Strategies used in asset-protection planning include separate legal structures or arrangements, such as corporations , partnerships , and trusts . The structures that will work best for you depend, in large part, on the kinds of assets you own and the types of creditors most likely to pursue claims against you.

Internal claims arise from creditors whose remedy is limited to assets of a particular entity, such as a corporation. For example, if you have a corporation that owns a piece of real estate and someone slips and falls on the property owned by the corporation, the injured party is limited to pursuing the corporation's assets (i.e., the real estate). This assumes you did not cause the injury.

External claims are not limited to the assets of the entity and can extend to your personal assets. For instance, if the same corporation owned a truck that you negligently drove into a crowd of pedestrians, the injured could not only sue the corporation but also you, and satisfy any judgment from corporate assets as well as your personal assets.

Knowing the type of claims that can be made will allow you to better plan and protect your property from seizure and your wages from garnishment . It is also important to understand which types of assets are more susceptible to claims.

So-called dangerous asset , by their very nature, creates a substantial risk of liability. Examples of dangerous assets include rental real estate, commercial property , business assets , such as tools and equipment, and motor vehicles. Safe assets , on the other hand, do not promote a high degree of inherent liability. Ownership of stocks , bonds , and individually owned bank accounts do not incorporate risk by their very existence.

Safe assets can generally be owned by you individually or by the same entity since they carry with them a low probability of risk. However, you do not want to commingle dangerous assets either with other dangerous assets or with safe assets. Keeping ownership of dangerous assets separate limits exposure of loss to the individual asset.

For example, a medical practice has an obvious, inherent risk of liability. But did you know that if you own the building in which the practice is operated, that property may also be considered a dangerous asset? If both the practice and building are owned by you or by the same entity, liability arising from either asset could stretch to and include the other, exposing both your livelihood and property to risk of loss.

Many different strategies have been developed over the years claiming to protect assets. Some of these plans use long-standing legal entities to carry out their intent, while others are nefarious or even illegal, and promote a money-making scam on the innocent and uneducated. Some of the more common legal vehicles used for asset protection include corporations, partnerships, and trusts.

Corporations

Corporations are a form of business organization created in accordance with state law. Legal ownership of the corporation vests in its shareholders, as evidenced by shares of stock. Generally, each shareholder is entitled to elect a board of directors charged with the overall management of the corporation. The board of directors elects the officers (the president, secretary, and treasurer), who are authorized to conduct the day-to-day business of the corporation. Many states permit a single individual to serve as sole director and to hold all of the corporate offices.

There are several types of corporations that are used to protect assets: business or C corporation , S corporations , and limited liability companies (LLCs). The appeal of corporations as an asset-protection tool lies in the limited liability provided to its officers, directors, and shareholders (principals). Corporate principals have no personal liability for corporate debts, breaches of contract or personal injuries to third parties caused by the corporation, employees or agents. While the corporation may be liable or responsible, a creditor is limited to pursuing only corporate assets to satisfy a claim. The assets of the corporate principals are not susceptible to claim or seizure for corporate debts. This protection from personal liability distinguishes the corporation from other entities, such as partnerships or trusts.

One prominent exception to the limited liability of corporate principals relates to providers of personal services. Personal service liability includes work done for or on behalf of another by doctors, attorneys, accountants , and financial professionals. For example, a doctor who forms a corporation and works for it as an employee may still be liable for damages attributable to the treatment of a patient even though he was working for the corporation.

In addition, liability protection offered by a corporation will be available only if the corporation carries itself as a separate and distinct entity, apart from the individual shareholders or officers. If a corporation has no significant assets, a creditor can attempt to prove that the corporation is not acting as a separate and distinct business entity but is the alter ego of its officers or shareholders. This strategy is called piercing the corporate veil, and if successfully proven, it allows the creditor to reach beyond the corporation to the assets of its shareholders.

S Corporations

An S corporation is similar to a C corporation except that it qualifies for a special IRS tax election to have corporate profits pass through the business and be taxed only at the shareholder level. While the liability protection afforded to C corporations generally applies to S corporations as well, there are additional qualifications the S corporation must meet as to the number and type of shareholders, how profits and losses may be allocated among shareholders, and the kinds of stock the company can issue to investors.

Limited Liability Corporations

Due to the added formalities imposed on S corporations, this entity evolved. An LLC affords similar liability protection to corporate principals as a C corporation and the same "pass-through" tax treatment of S corporations, but without the formalities and restrictions associated with those corporation structures.

General Partnership

A general partnership is an association of two or more persons carrying on a business activity together. This agreement can be written or oral. As an asset-protection tool, a general partnership is one of the least-useful arrangements because each partner is personally liable for all of the debts of the partnership, including debts incurred by other partners on behalf of the partnership. Any single partner can act on behalf of the other partners with or without their knowledge and consent.

This feature of unlimited liability contrasts with the limited liability of the owners of a corporation. Not only is a partner liable for contracts entered into by other partners, but each partner is also liable for the other partners' negligence. In addition, each partner is personally liable for the entire amount of any partnership obligation.

Limited Partnership

A limited partnership (LP) is authorized by state law and consists of one or more general partners and one or more limited partners. The same person can be both a general partner and a limited partner , as long as there are at least two legal persons or entities, such as a corporation, who are partners in the partnership. The general partner is responsible for the management of the affairs of the partnership and has unlimited personal liability for all partnership debts and obligations.

Limited partners have no personal liability for the debts and obligations of the partnership beyond their contributions to the partnership. Because of this protection, limited partners also have little control over the day-to-day management of the partnership. If a limited partner assumes an active role in management, that partner may lose their limited liability protection and be treated as a general partner. This restricted control over the partnership business diminishes the value of limited-partnership shares.

A trust is an agreement between the person creating the trust (referred to as the settler, trustor or grantor ) and the person responsible for managing the assets of the trust (the trustee ). The trust provides that the grantor will transfer certain assets to the trustee, who will hold and manage the assets in trust for the benefit of another person, called the beneficiary . A trust created during the life of the grantor is called an inter-vivos trust or living trust , while a trust created at the death of the grantor through a will or living trust is referred to as a testamentary trust .

While trusts have been used in many different asset-protection strategies, there are two basic types of trusts: revocable and irrevocable. A revocable trust is one in which the grantor reserves the right to alter the trust by amendment, or to dissolve a part or all of the trust by revoking it. The grantor has no such rights with an irrevocable trust . It's this precise lack of control that makes the irrevocable trust a powerful asset-protection tool. You can't be sued for assets you no longer own or control.

Now that you're familiar with the most common asset-protection structures, let's consider which vehicles work best to protect particular types of assets.

If you have a professional practice or business, your risk of loss and liability for claims is particularly high, making this type of business a dangerous asset. Incorporating your business or practice was once considered the best way to insulate your personal assets from liability and seizure resulting from claims against your business. However, the limited liability company has quickly replaced the standard business or C corporation as the asset-protection entity of choice, as it offers a more convenient, flexible, efficient and less-expensive alternative to the C corporation while providing the same level of protection.

Because LLCs are creatures of individual state law, the filing requirements and protections they offer may differ from state to state. But, for the most part, state law essentially separates the owners of the LLC and their personal assets for liability arising out of LLC activities.

Nevertheless, in many states, certain types of business professionals cannot afford themselves all of the protections offered by the LLC. Professionals, such as doctors, lawyers, dentists, and psychiatrists, to name a few, can't shield themselves from liability with either an LLC or a corporation for claims directly arising from their actions or inaction.

If the business entity cannot protect you personally, consider sheltering your personal assets in other entities, such as a family limited partnership (FLP), a trust or an LLC. Then, even if you are sued personally, at least some of your personal assets are protected within one or a combination of these entities, discouraging creditors from pursuing them.

A final note for professional practice or business owners: It is still worth your while to incorporate either with a C corporation or an LLC. While these business entities may not protect you from malpractice claims, they will shelter you from the financial obligations of the corporation, unless you personally guarantee the debt. You also may be protected from most other claims of the business not directly related to your actions as a professional, such as claims of employees, suppliers, landlords or tenants.

The answer is almost always an unequivocal "no." As a co-partner, you are responsible for all partnership debts and acts of the partners regardless of your participation or knowledge. Being part of a general partnership greatly expands the exposure of your personal assets to claims arising from your business relationship.

If you are part of a general partnership, strongly consider protecting your personal property as described above. Without some protection, you could lose everything because of your mere association with the partnership and other partners.

Creating and implementing a comprehensive asset-protection plan involves almost every aspect of your business. The goal of the plan is to protect your business assets within the framework of your business operations. Protecting your business is both allowed and encouraged, using honest, legal concepts and entities where appropriate. Extending these goals to intentionally deceive other businesses or individuals is not asset-protection planning - it's a fraud.

Consider the services of an asset-protection professional, such as an attorney or financial advisor , in developing an asset-protection plan that works best for you.

For related reading, see " Build a Wall Around Your Assets ."

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10 Best Ways to Protect your Business idea in South Africa

By: Author Tony Martins Ajaero

Coming up with a brilliant, cash-spinning idea is not always easy. Unfortunately, there are always people lurking around the corner looking for business ideas to steal and profit from. It is always easy to get your business idea stolen in the process of sourcing for funds, creating product prototypes, or during the process of business documentation. To avoid this, you have to take some preventive measures to prevent your business ideas from getting snatched off your hands.

1. Make Sure You Register Your Business

Registering your business would make it eligible to be recognized as a corporate entity with its own assets. It would also give you access to all the necessary licenses that you need to make your business legitimate.

2. Trademark Your idea

Trademarking involves developing a unique phrase, logo, word, design, symbol, or image for your business or product. If anyone decides to use these elements, then you can take legal action against them. Trademarking your product designs, images and logos can keep people from using them without authorization. To trademark your product in south africa, you can visit www.cipc.co.za .

3. Copyright Your Work

You can protect your creative work by registering it as a copyright. Copyright helps to protect your intellectual property and ideas from unauthorized copying, and prescribes the steps that must be taken should anyone decide to copy your work.

4. Apply for a Patent

You can also apply for a patent for your product or business idea with CIPRO, the organization responsible for registering patents in South Africa. When you apply for a patent with CIPRO, they check to ensure that the product idea hasn’t been patented by someone else in South Africa or in other countries in the past, then they issue you with a patent certification that shows that you now have exclusive rights to the product/idea, and no one else can use them without your permission.

You can register your patent in South Africa by visiting www.cipro.gov.za . It costs between R7,000 and R10,000 to file a patent in South Africa and afterwards, you also have to pay an annual maintenance fee of about R200.

5. Sign a Non-Disclosure Agreement

When pitching your business ideas to potential investors, you should have them sign a non-disclosure or confidentiality agreement. This document is legally binding, and prevents any of the investors from using your ideas without your permission. A non-disclosure confidentiality agreement allows you to take legal action against investors who may go against this agreement.

6. Mark Documents with Appropriate Notices

You can opt for a simple business protection approach like marking your business plans and other related documents with the word ‘Confidential’ or ‘Proprietary’. This serves as a legal warning to readers that the contents of the document are not to be copied or disclosed to third parties.

7. Protect Your Computers

You also have to protect your computers, email accounts, and social media accounts from unauthorized access by hackers. Hackers can easily break into your accounts to steal important information about your business or product ideas for themselves.

8. Sign Non-Compete Agreements

If you need to hire someone during the process of developing your business idea, for instance, if you need to hire someone to develop a product prototype for you, you should have them sign a non-compete agreement. This agreement prevents them from setting up a business similar to yours or using your business ideas in any way. You can take legal action against them if they go against this agreement.

9. Work-for-Hire Agreements

You should also have the people you hire to develop your product sign work-for-hire agreements to show that you only hired them to work for you, and they are not responsible for developing or formulating any of the ideas. This can help to protect your business in the future when it becomes successful and someone comes up to say that they were involved in developing the business or product idea.

10. Hire a Lawyer

Nothing beats professional legal advice when trying to protect your business idea from intellectual property or idea theft. A lawyer would be able to prescribe some adequate measures to take in order to protect your business.

Sometimes, when people know that you have a lawyer at your beck and call, they simply avoid messing with you in order to avoid legal battles and consequences, so always throw in some subtle hint about the fact that you have a lawyer at your beck and call during pitches and business meetings to keep intending business idea or intellectual property thieves from going through with the plans because they know that there would be legal consequences.

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Run » technology, how to protect your business from being hacked.

In a digitally connected world, a cyberattack could be imminent. Preventative actions can reduce vulnerabilities and protect your small business.

Three people with serious expressions sit and stand around a pair of computer monitors, which are turned away from the viewer. The man sitting down has a pair of white headphones hanging around his neck. He looks up at another man, who wears a hoodie and leans over the desk. On the other side of the seated man is a woman in a chambray shirt and glasses; she looks at one of the monitors. In the foreground are more computer monitors, out of focus.

With large corporations focused on hardening their security infrastructure, cybercriminals are increasingly targeting small to mid-sized businesses. Cybercrime complaints increased by 7% from 2020 , according to the FBI’s 2021 Internet Crime Report. And “the majority of those victims were small businesses,” FBI Supervisory Special Agent Michael Sohn told CNBC . Therefore, a proactive approach is the best way to protect your business from being hacked.

The National Institute of Standards and Technology (NIST) provides a cybersecurity framework to prevent attacks, and the Cybersecurity and Infrastructure Security Agency (CISA) offers guidance for small businesses. Using this information, we developed the following recommendations for reducing cyber risks.

Assess your cybersecurity posture and critical processes

Awareness is key to preventing, detecting, responding, and recovering from a cyberattack. An assessment helps you learn which activities and hardware are vital to operations, identify potential threats, and evaluate vulnerabilities. Managed service providers (MSPs) offer cybersecurity audits and assessments, or your information security team can handle them in-house.

NIST suggested that small businesses start with its internal report, Small Business Information Security: The Fundamentals . It provides templates and details ways your company can systematically and proactively reduce risks.

On a basic level, your assessment should include:

A list of mission-critical business processes and assets, like protecting customer data or keeping payment software functioning.
An inventory of your hardware and software, including on-site, remote, and cloud-based applications and devices.
A flowchart of how collected information enters your business and where it goes (i.e., public cloud or software as a service (SaaS) cloud storage).
A cybersecurity risk assessment that identifies and documents threats, consequences, and risk levels. TechTarget’s five-step process is easy to follow.

[ Read more: CO— Blueprint: Defending Your Business From Cyber Threats ]

Develop a cybersecurity program

All businesses, regardless of size, should designate a security program manager, establish a zero-trust security culture, and outline cybersecurity policies and procedures. Additionally, your program should include regular training for all employees and leaders. However, according to NIST , “organizations have unique risks—different threats, different vulnerabilities, different risk tolerances—and how they implement the practices in the Framework to achieve positive outcomes will vary.”

Your incident response and disaster recovery plans are part of your larger business continuity plan.

In short, there isn’t a one-size-fits-all cybersecurity solution. But taking no action isn’t an option. The FTC’s Cyberplanner helps you build a custom cybersecurity plan, and SANS offers security policy templates . Also, check out the Cyber Basics for Small Businesses Training and free cyber awareness videos .

Secure your IT infrastructure

CISA provides an expansive list of free cybersecurity tools and resources to protect your business from being hacked, assess threats, and respond to incidents. Take a multilayer approach using various tools and services to detect malicious activity and secure your organization.

Here are suggestions from NIST’s small business report for securing and hardening your infrastructure:

Use multifactor authentication , privileged access management tools, or password managers .
Regularly update and patch software and firmware for all assets listed on your inventory sheet.
Apply the principle of least privilege to control access to systems, applications, and hardware.
Set up firewalls on all business networks, including those of remote employees.
Use an Intrusion Detection / Prevention System (IDPS) to analyze network traffic.
Follow best practices for configuring your wireless access point and networks.
Consider requiring remote employees to use an encrypted virtual private network (VPN).
Install email and web filters to reduce spam and block unsecured websites.
Back up your systems and applications regularly.

[ Read more: 8 Best Practices for Keeping Customer Data Secure ]

Craft incident response and recovery plans

Time is critical when your business is under attack. Everyone should follow role-based steps when responding to and recovering from a cyber incident. Your incident response and disaster recovery plans are part of your larger business continuity plan. Together, these living documents help your business remain operational.

NIST’s Incident Response Plan (IRP) Basics offer these recommendations for protecting your company from a hacking attempt:

Have an attorney review your plan.
Conduct attack simulation exercises regularly.
Go over your documents quarterly.
Keep printed copies of your incident response plan and contact list.
Have a press response ready.
Know what outside firm you will use if under attack.
Print cyber insurance policy information.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here .

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How to Protect Your Interests When Sharing Your Business Plan

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You should take steps to protect yourself when starting your own business. Trade secrets generally include sensitive company information that can’t be covered by patents, trademarks, and copyrights. Business plans are often considered trade secrets. The only method of protecting trade secrets is through contracts and non‐disclosure agreements that specifically detail the trade secret to be protected.

No other legal form of protection exists. If you have any concerns about sharing your business plan with anyone outside your circle of trust, including employees or investors, consider creating a contract or a non‐disclosure agreement.

A contract simply is an offer or a promise to do something or refrain from doing something in exchange for consideration, which is the promise to supply or give up something in return. So you are asking your employees to not reveal your company’s trade secrets in exchange for having a job there (and not getting sued if they do reveal them).

In addition to using contracts with employees and others who have access to your trade secrets, make sure that no one has all the components of your trade secret. For example, suppose you develop a new barbecue sauce that you intend to brand and market to specialty shops. If you’re producing in large volumes, you obviously can’t do all the work yourself, so you hire others to help. To avoid letting them know how to reproduce your unique barbecue sauce, you can do three things:

Execute a contract with them binding them to not disclose what they know about your recipe.

Provide them with premixed herbs and spices so they don’t know exactly what’s in the recipe.

Give each person a different portion of the sauce to prepare.

Non‐disclosure agreements

Many entrepreneurs and small business start‐ups try protecting their ideas through a non‐disclosure agreement (NDA). An NDA is a document that announces the confidentiality of the material being shared with someone and specifies that the person or persons cannot disclose anything identified by the NDA to other parties or personally use the information.

Providing an NDA to anyone you are speaking to in confidence about your business plan, or any other trade secret, is a good idea. Without it, you have no evidence that you provided your proprietary information in confidence; therefore, it can be considered a public disclosure — that is, no longer confidential.

You definitely want to work with an attorney when you construct your NDA, because it must fit your situation. Generic NDAs do not exist. If you want an NDA to be valid for evidence purposes, it must include the following:

Consideration, or what is being given in exchange for signing the document and refraining from revealing the confidentiality.

A description of what is being covered (be sure this is not too vague or broad).

A procedure describing how the other party will use or not use the confidential information.

Whom should you have sign an NDA? Anyone who will become privy to your trade secret.

Immediate family: Spouses, children, and parents do not usually require NDAs, but it wouldn’t be a bad idea to have them sign one anyway.

Extended family and friends who will not be doing business with you: To meet the consideration requirement for the NDA, you typically offer $1 in compensation.

Business associates or companies with which you might do business: Consideration, in this case, is the opportunity to do business with you. For example, if you show your business plan to a potential investor or creditor, the consideration is the stake in the business or the return on investment.

Buyers: Buyers typically don’t sign non‐disclosures because doing so may preclude them from developing something similar, or they may already be working on a similar concept. For example, toy manufacturer Mattel Inc. will not sign NDAs from inventors because they have a large R&D department that continually works on new ideas for toys. Chances are they’re working on something that will be similar enough to potentially infringe on an inventor’s product.

The truth is, an NDA is only as good (and reliable) as the person who signs it. Fighting a violation of an NDA in the courts is difficult and expensive, so when you’re ready to talk about your business plan with outsiders, sometimes the best thing you can do is be careful whom you talk to.

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What is a contingency plan? A guide to contingency planning

A business contingency plan is a backup strategy for your team or organization. It lays out how you’ll respond if unforeseen events knock your plans off track—like how you’ll pivot if you lose a key client, or what you’ll do if your software service goes down for more than three hours. Get step-by-step instructions to create an effective contingency plan, so if the unexpected happens, your team can spring into action and get things back on track.

No one wants Plan A to fail—but having a strong plan B in place is the best way to be prepared for any situation. With a solid backup plan, you can effectively respond to unforeseen events effectively and get back on track as quickly as possible.

A contingency plan is a proactive strategy to help you address negative developments and ensure business continuity. In this article, learn how to create a contingency plan for unexpected events and build recovery strategies to ensure your business remains healthy.

What is contingency planning?

What is a contingency plan .

A contingency plan is a strategy for how your organization will respond to important or business-critical events that knock your original plans off track. Executed correctly, a business contingency plan can mitigate risk and help you get back to business as usual—as quickly as possible.

You might be familiar with contingency plans to respond to natural disasters—businesses and governments typically create contingency plans for disaster recovery after floods, earthquakes, or tornadoes.

But contingency plans are just as important for business risks. For example, you might create a contingency plan outlining what you will do if your primary competitors merge or how you’ll pivot if you lose a key client. You could even create a contingency plan for smaller occurrences that would have a big impact—like your software service going down for more than three hours.

Contingency planning vs risk management

Project risk management is the process of identifying, monitoring, and addressing project-level risks. Apply project risk management at the beginning of the project planning process to prepare for any risks that might come up. To do so, create a risk register to identify and monitor potential project risks. If a risk does happen, you can use your risk register to proactively target that risk and resolve it as quickly as possible.

A contingency plan is similar to a project risk management plan or a crisis management plan because it also helps you identify and resolve risks. However, a business contingency plan should cover risks that span multiple projects or even risks that could affect multiple departments. To create a contingency plan, identify and prepare for large, business-level risks.

Contingency planning vs crisis management

Contingency planning is a proactive approach that prepares organizations for potential emergencies by implementing pre-planned risk mitigation strategies. It involves identifying threats and crafting strategies in advance.

Crisis management , on the other hand, is reactive, focusing on immediate response and damage control when a crisis occurs. While contingency planning sets the stage for effective handling of emergencies, crisis management involves real-time decision-making and project management during an actual crisis. Both are important for organizations and businesses to maintain their stability and resilience.

Contingency plan examples

There are a variety of reasons you’d want to set up a contingency plan. Rather than building one contingency plan, you should build one plan for each type of large-scale risk or disaster that might strike.

Business contingency plan

A business contingency plan is a specialized strategy that organizations develop to respond to particular, unforeseen events that threaten to disrupt regular operations. It's kind of like a business continuity plan, but there's one key difference.

While business continuity plans aim to ensure the uninterrupted operation of the entire business during a crisis, a business contingency plan zeroes in on procedures and solutions for specific critical incidents, such as data breaches, supply chain interruptions, or key staff unavailability.

A business contingency plan could include:

Strategies to ensure minimal operational disruption during crises, such as unexpected market shifts, regulatory compliance changes, or severe staff shortages.

Partnerships with external agencies that can provide support in scenarios like environmental hazards or public health emergencies.

A comprehensive communication strategy with internal and external stakeholders to provide clear, timely information flow during crises like brand reputation threats or legal challenges.

Environmental contingency plan

While severe earthquakes aren’t particularly common, being unprepared when “the big one” strikes could prove to be catastrophic. This is why governments and businesses in regions prone to earthquakes create preparedness initiatives and contingency plans.

A government contingency plan for an earthquake could include things like:

The names and information of the people designated to handle certain tasks in advance to ensure the emergency response is quick and concise

Ways to educate the public on how to respond when an earthquake hits

A timeline for emergency responders.

Technology contingency plan

If your business is particularly data-heavy, for example, ensuring the safety and cybersecurity of your information systems is critical. Whether a power surge damages your servers or a hacker attempts to infiltrate your network, you’ll want to have an emergency response in place.

A business’s contingency plan for a data breach could involve:

Steps to take and key team members to notify in order to get data adequately secured once more

The names and information of stakeholders to contact to discuss the impact of the data breach and the plan to protect their investment

A timeline to document what is being done to address the breach and what will need to be done to prevent data breaches in the future

Supply chain contingency plan

Businesses that are integral parts of the supply chain, such as manufacturing entities, retail companies, and logistics providers, need an effective supply chain contingency plan to continue functioning smoothly under unforeseen circumstances.

These plans hedge against supply chain disruptions caused by events like natural disasters or technological outages and help organizations reduce downtime and ensure real-time operational capabilities.

A supply chain contingency plan could include:

Secure critical data and systems while promptly notifying key team members, such as IT staff and management, for immediate action.

A predetermined list of essential stakeholders, including suppliers, customers, investors, and authorities, should be contacted to inform them about the disruption and steps being taken.

A detailed timeline is essential for documenting the immediate response and outlining long-term strategies to prevent future disruptions in the supply chain.

Pandemic contingency plan

In the face of a global health crisis, a pandemic contingency plan is vital for organizations in healthcare, retail, and manufacturing. This plan focuses on mitigation strategies to minimize operational disruptions and ensure the safety of employees while maintaining business continuity.

A pandemic response plan could include:

A comprehensive health and safety protocol for employees, which integrates regular health screenings, detailed risk analysis, and emergency medical support as key components.

Flexible work arrangements and protocols for remote operations and digital communication.

A list of key personnel and communication channels for immediate response and coordination.

Regularly reviewing and adapting the pandemic contingency plan as part of an ongoing disaster recovery plan to address evolving challenges and lessons learned.

How to create a contingency plan

You can create a contingency plan at various levels of your organization. For example, if you're a team lead, you could create a contingency plan for your team or department. Alternatively, company executives should create business contingency plans for situations that could impact the entire organization.

As you create your contingency plan, make sure you evaluate the likelihood and severity of each risk. Then, once you’ve created your plan—or plans—get it approved by your manager or department head. That way, if a negative event does occur, your team can leap to action and quickly resolve the risk without having to wait for approvals.

1. Make a list of risks

Before you can resolve risks, you first need to identify them. Start by making a list of any and all risks that might impact your company. Remember: there are different levels of contingency planning—you could be planning at the business, department, or program level. Make sure your contingency plans are aligned with the scope and magnitude of the risks you’re responsible for addressing.

A contingency plan is a large-scale effort, so hold a brainstorming session with relevant stakeholders to identify and discuss potential risks. If you aren’t sure who should be included in your brainstorming session, create a stakeholder analysis map to identify who should be involved.

2. Weigh risks based on severity and likelihood

You don’t need to create a contingency plan for every risk you lay out. Once you outline risks and potential threats, work with your stakeholders to identify the potential impact of each risk.

Evaluate each risk based on two metrics: the severity of the impact if the risk were to happen and the likelihood of the risk occurring. During the risk assessment phase, assign each risk a severity and likelihood—we recommend using high, medium, and low.

3. Identify important risks

Once you’ve assigned severity and likelihood to each risk, it’s up to you and your stakeholders to decide which risks are most important to address. For example, you should definitely create a contingency plan for a risk that’s high likelihood and high severity, whereas you probably don’t need to create a contingency plan for a risk that’s low likelihood and low severity.

You and your stakeholders should decide where to draw the line.

4. Conduct a business impact analysis

A business impact analysis (BIA) is a deep dive into your operations to identify exactly which systems keep your operations ticking. A BIA will help you predict what impact a specific risk could have on your business and, in turn, the response you and your team should take if that risk were to occur.

Understanding the severity and likelihood of each risk will help you determine exactly how you will need to proceed to minimize the impact of the threat to your business.

For example, what are you going to do about risks that have low severity but high likelihood? What about risks that are high in severity, but relatively low in likelihood?

Determining exactly what makes your business tick will help you create a contingency plan for every risk, no matter the likelihood or severity.

[inline illustration] Business impact analysis for a contingency plan (example)

5. Create contingency plans for the biggest risks

Create a contingency plan for each risk you’ve identified as important. As part of that contingency plan, describe the risk and brainstorm what your team will do if the risk comes to pass. Each plan should include all of the steps you need to take to return to business as usual.

Your contingency plan should include information about:

The triggers that will set this plan into motion

The immediate response

Who should be involved and informed?

Key responsibilities, including a RACI chart if necessary

The timeline of your response (i.e. immediate things to do vs. longer-term things to do)

[inline illustration] 5 steps to include in your contingency plan (infographic)

For example, let’s say you’ve identified a potential staff shortage as a likely and severe risk. This would significantly impact normal operations, so you want to create a contingency plan to prepare for it. Each person on your team has a very particular skill set, and it would be difficult to manage team responsibilities if more than one person left at the same time. Your contingency plan might include who can cover certain projects or processes while you hire a backfill, or how to improve team documentation to prevent siloed skillsets.

6. Get approval for contingency plans

Make sure relevant company leaders know about the plan and agree with your course of action. This is especially relevant if you’re creating team- or department-level plans. By creating a contingency plan, you’re empowering your team to respond quickly to a risk, but you want to make sure that course of action is the right one. Plus, pre-approval will allow you to set the plan in motion with confidence—knowing you’re on the right track—and without having to ask for approvals beforehand.

7. Share your contingency plans

Once you’ve created your contingency plans, share them with the right people. Make sure everyone knows what you’ll do, so if and when the time comes, you can act as quickly and seamlessly as possible. Keep your contingency plans in a central source of truth so everyone can easily access them if necessary.

Creating a project in a work management platform is a great way of distributing the plan and ensuring everyone has a step-by-step guide for how to enact it.

8. Monitor contingency plans

Review your contingency plan frequently to make sure it’s still accurate. Take into account new risks or new opportunities, like new hires or a changing business landscape. If a new executive leader joins the team, make sure to surface the contingency plan for their review as well.

9. Create new contingency plans (if necessary)

It’s great if you’ve created contingency plans for all the risks you found, but make sure you’re constantly monitoring for new risks. If you discover a new risk, and it has a high enough severity or likelihood, create a new contingency plan for that risk. Likewise, you may look back on your plans and realize that some of the scenarios you once worried about aren’t likely to happen or, if they do, they won’t impact your team as much.

Common contingency planning pitfalls—and how to avoid them

A contingency plan is a powerful tool to help you get back to normal business functions quickly. To ensure your contingency planning process is as smooth as possible, watch out for common pitfalls, like:

Lack of buy-in

It takes a lot of work to create a contingency plan, so before you get started, ensure you have support from executive stakeholders. As you create your plan, continuously check in with your sponsors to ensure you’ve addressed key risks and that your action plan is solid. By doing so, you can ensure your stakeholders see your contingency plan as something they can get behind.

Bias against “Plan B” thinking

Some company cultures don’t like to think of Plan B—they like to throw everything they have at Plan A and hope it works. But thinking this way can actually expose your team to more risks than if you proactively create a Plan B.

Think of it like checking the weather before going sailing so you don’t accidentally get caught in a storm. Nine times out of ten, a clear sunny day won’t suddenly turn stormy, but it’s always better to be prepared. Creating a contingency plan can help you ensure that, if a negative event does occur, your company will be ready to face it and bounce back as quickly as possible.

One-and-done contingency plans

It takes a lot of work to put a contingency plan together. Sometimes when you’ve finished, it can be tempting to consider it a job well done and forget about it. But make sure you schedule regular reminders (maybe once or twice a year) to review and update your contingency plan if necessary. If new risks pop up, or if your business operations change, updating your contingency plan can ensure you have the best response to negative events.

[inline illustration] The easiest ways to prevent contingency plan pitfalls (infographic)

You’ve created a contingency plan—now what?

A contingency plan can be a lot of work to create, but if you ever need to use it, you’ll be glad you made one. In addition to creating a strong contingency plan, make sure you keep your plan up-to-date.

Being proactive can help you mitigate risks before they happen—so make sure to communicate your contingency plan to the team members who will be responsible for carrying them out if a risk does happen. Don’t leave your contingency plan in a document to collect dust—after creating it, you should use it if need be!

Once you’ve created the plan, make sure you store it in a central location that everyone can access, like a work management platform . If it does come time to use one of your contingency plans, storing them in a centrally accessible location can help your team quickly turn plans into action.

Related resources

15 creative elevator pitch examples for every scenario

How Asana streamlines strategic planning with work management

How to create a CRM strategy: 6 steps (with examples)

What is management by objectives (MBO)?

Startup Knowledge Base

The most complete information site for startups

How to protect a business idea: the 4 types of protection

In recent years, there has been an increase in interest in entrepreneurship . Consequently, there is much demand for innovative ideas able to create something of value to society and to generate a good financial performance. What many of these do not know is that when they are faced with a business idea Must protect it at all costs. Yet, startups still struggle on securing an idea .

Entrepreneurs should understand the basic principles of Intellectual property (PI) for protect your ideas aggressive competition. This is suitable for all companies, regardless of their size or the sector in which they are embedded, whether technology is a more traditional industry.

The rights of intellectual property They can be about a brand, logo, corporate identity, products, services or even processes that differentiate the commercial offer. These are the most valuable assets that a company can own.

Today, almost all companies bet and benefit from communication marketing digital in order to get their products to a huge audience and at relatively low cost, which in a more traditional method would be impossible. But also increases the likelihood of business idea be stolen by third parties. That's why the intellectual property protection It is essential to the success of business and entrepreneurs should understand their rights, duties and securing an idea .

Importance of intellectual property

As already mentioned, intellectual property It plays an essential role for the business success. Especially in the case of a startup where innovation of the idea and the risk on investment and success of this are united. Of the various advantages that this protection features, it highlights the following:

Is the exclusive right by preventing third parties to produce, manufacture, sell or to economically exploit the developed solution, without the permission of the holder;
Facilitates business growth as this is protected legally impossible competition to adopt the ideas;
It demonstrates the commitment of entrepreneurs for their ideas;
Values the investment for the development of products or services;
It allows for differentiation from competitors by offering customers something new and innovative;
It generates money by selling or licensing the product or service;
Transmits security, credibility and commitment to the customer by the holder.

At first glance, this process protection of their ideas It can seem quite complex and complicated, leading to many entrepreneurs ignore this step. However, it is simpler than it appears and is an asset to any company or entrepreneur, worth the time and effort devoted.

The good news is that there are certain rights intellectual property which are automatically protected by law. However, there are also other types of protection cool that the entrepreneur should ask.

When starting a business you need to confirm that there is no longer patented. This process avoids having to deal with the possibility of proceeding by the holder. Similarly, you must verify that the intellectual property your idea is not being violated. It is up to the entrepreneur to exercise since no one else will do it.

Next are listed the types of protection existing and steps securing an idea .

Types of protections

The kind of intellectual property protection an entrepreneur or business can get depends on the setting in question. Thus, it is necessary for them to decide which of his ideas fall into which of the options available and that action is taken as soon as possible in order to reduce the likelihood of losing protection .

There are four main types of business ideas protection : Patent, trademark, copyright and design registered.

If the entrepreneur is facing an invention may consider protect it with a patent. A patent grants property rights to an invention, new products and innovative processes. That is, this gives the holder the right to prevent others from making, using, importing or selling these without your permission.

This type of protection It is granted by the government, making the idea of property holder. Usually remains in effect for 20 years, should be renewed regularly. It also allows the holder to license third parties to use their invention, generating royalties (periodic payment to the holder for the use of the product or service) thereby providing an important source of revenue for your business.

There are three main types of patents of which the entrepreneur must learn about how to protect a business idea in these circumstances:

Patent utility

It is the most common type of patent that entrepreneurs and companies seek. It covers any process, machinery, material composition, articles of manufacture and new and useful improvements. Processes refer to any industrial or technical acts or methods of doing something, machines include objects that can be considered machines (such as a computer), compositions of matter are basically chemical compositions including a mixture of ingredients or new chemical compounds and lastly, articles of manufacture are goods that can be manufactured or manufactured.

The holder to apply for a utility patent, as indicated by name, must have a breakthrough with some useful, novel and non-obvious. Ie, it may not be immediately obvious to anyone with basic skills in the same industry. This patent lasts up to 20 years where the holder during this period may have to renew it.

Design patent

The design is defined as the ornamentation of the surface of an article of manufacture, whether the shape or configuration of this. For this type of patent, the design should be separable from the article since it only protects the look of this. For to protect the other aspects, such as structural or functional features, the holder should look for a utility patent. These patents last for 14 years and are notoriously difficult to investigate because the documentation is mostly done in the manufacture of the article pictures or drawings. That is, the entrepreneur should seek help on securing an idea through such patent.

Plant patent

This type of patent, as indicated by the name, is intended to protect plants and any new and distinct variety of plants. In order to apply for this protection , The plant can not be propagated by tubers, it can not be found in an uncultivated state and can be reproduced asexually, to ensure that the holder can reproduce the plant. The plant patent lasts 20 years.

It is important that patents are requested as soon as possible. There is a risk of other companies or entrepreneurs also create patents for their ideas and if they are of the same type, the likelihood of getting a patent may decrease. Also, if it takes a lot to ask the patent, the entrepreneur may lose the chance to do so. This is because past 12 months after launching the product on the market, this opportunity will disappear.

This type of protection are signs that distinguish the products or services of one trader from another. They can take many forms, such as, words, slogans, logos, shapes, colors, sounds, symbols, distinct product names or marks or even a combination of these elements.

Trademarks are registered for specific products of a certain class. It is possible that other companies or entrepreneurs register their marks that are identical or similar, provided that they belong to different classes of brands already registered.

For a holder to apply for this type of protection , It must have a clear representation of the mark as well as identified the class of products for which the mark is applied. This mark must not be descriptive, include common last names, geographical names, registered company names or any indication of royal patronage.

A trademark lasts 10 years and that the holder can renew it indefinitely.

Copyrights protect original works of authorship. Examples of these are literary works, music, sound recordings, dramatic works, pantomimes, and cinematic choreography, sculptural works, pictorial and graphic, architectural works, software, web content, among many others.

A company or entrepreneur automatically owns the copyright in any work that they or their employees create. That is, your registration is voluntary. With this protection , The holder has exclusive rights and can decide how their work can be modified, performed, licensed, displayed or copied by others.

To qualify for copyright registration, the work should be represented in a tangible means of expression, such as a piece of paper. The duration varies according to the type of work, when and where it was created. Thus, the company should seek information on securing an idea .

trade secrets

A trade secret is something that companies keep secret in order to provide an advantage over its competitors. This kind of protection may include, but are not limited to the following, formula, process, device, business information, list of customers or suppliers, financial data, computer algorithms, programs, techniques.

Unlike other types of intellectual property , a protection by trade secret is not registered. Its duration depends on the measures taken by companies to control the dissemination and use of information. Thus, companies use confidentiality agreements, restricted access to confidential information, post-employment restrictive agreements, regular meetings with employees to keep them aware of what can not be transmitted outside the company and other security practices to keep information important within the company.

Innovative ideas allow many companies to succeed. This is because develop new and better alternatives that already exists in the market, offering a competitive advantage. THE intellectual property It is essential to ensure safety to the entrepreneur and facilitates a possible internationalization of the business.

Before boarding no product development Should confirm that there is no patent or other form of protection already registered, you can limit the planned development of the business idea.

If you need or feel better, the entrepreneur should seek professional help from lawyers, for example in order to determine the best protection that fits business and securing an idea . The aid of experienced entities can help the entire application process is done correctly.

About Sara Pereira

How to Write a Business Plan (Plus Examples & Templates)

Have you ever wondered how to write a business plan step by step? Mike Andes, told us:

This guide will help you write a business plan to impress investors.

Throughout this process, we’ll get information from Mike Andes, who started Augusta Lawn Care Services when he was 12 and turned it into a franchise with over 90 locations. He has gone on to help others learn how to write business plans and start businesses. He knows a thing or two about writing business plans!

We’ll start by discussing the definition of a business plan. Then we’ll discuss how to come up with the idea, how to do the market research, and then the important elements in the business plan format. Keep reading to start your journey!

What Is a Business Plan?

A business plan is simply a road map of what you are trying to achieve with your business and how you will go about achieving it. It should cover all elements of your business including:

Finding customers
Plans for developing a team
Competition
Legal structures
Key milestones you are pursuing

If you aren’t quite ready to create a business plan, consider starting by reading our business startup guide .

Get a Business Idea

Before you can write a business plan, you have to have a business idea. You may see a problem that needs to be solved and have an idea how to solve it, or you might start by evaluating your interests and skills.

Mike told us, “The three things I suggest asking yourself when thinking about starting a business are:

What am I good at?
What would I enjoy doing?
What can I get paid for?”

Three adjoining circles about business opportunity

If all three of these questions don’t lead to at least one common answer, it will probably be a much harder road to success. Either there is not much market for it, you won’t be good at it, or you won’t enjoy doing it.

As Mike told us, “There’s enough stress starting and running a business that if you don’t like it or aren’t good at it, it’s hard to succeed.”

If you’d like to hear more about Mike’s approach to starting a business, check out our YouTube video

Conduct Market Analysis

Market analysis is focused on establishing if there is a target market for your products and services, how large the target market is, and identifying the demographics of people or businesses that would be interested in the product or service. The goal here is to establish how much money your business concept can make.

Product and Service Demand

An image showing product service and demand

A search engine is your best friend when trying to figure out if there is demand for your products and services. Personally, I love using presearch.org because it lets you directly search on a ton of different platforms including Google, Youtube, Twitter, and more. Check out the screenshot for the full list of search options.

With quick web searches, you can find out how many competitors you have, look through their reviews, and see if there are common complaints about the competitors. Bad reviews are a great place to find opportunities to offer better products or services.

If there are no similar products or services, you may have stumbled upon something new, or there may just be no demand for it. To find out, go talk to your most honest friend about the idea and see what they think. If they tell you it’s dumb or stare at you vacantly, there’s probably no market for it.

You can also conduct a survey through social media to get public opinion on your idea. Using Facebook Business Manager , you could get a feel for who would be interested in your product or service.

I ran a quick test of how many people between 18-65 you could reach in the U.S. during a week. It returned an estimated 700-2,000 for the total number of leads, which is enough to do a fairly accurate statistical analysis.

Identify Demographics of Target Market

Depending on what type of business you want to run, your target market will be different. The narrower the demographic, the fewer potential customers you’ll have. If you did a survey, you’ll be able to use that data to help define your target audience. Some considerations you’ll want to consider are:

Other Interests
Marital Status
Do they have kids?

Once you have this information, it can help you narrow down your options for location and help define your marketing further. One resource that Mike recommended using is the Census Bureau’s Quick Facts Map . He told us,

“It helps you quickly evaluate what the best areas are for your business to be located.”

How to Write a Business Plan

Now that you’ve developed your idea a little and established there is a market for it, you can begin writing a business plan. Getting started is easier with the business plan template we created for you to download. I strongly recommend using it as it is updated to make it easier to create an action plan.

Each of the following should be a section of your business plan:

Business Plan Cover Page
Table of Contents
Executive Summary
Company Description
Description of Products and Services

SWOT Analysis

Competitor Data
Competitive Analysis
Marketing Expenses Strategy

Pricing Strategy

Distribution Channel Assessment
Operational Plan
Management and Organizational Strategy
Financial Statements and/or Financial Projections

We’ll look into each of these. Don’t forget to download our free business plan template (mentioned just above) so you can follow along as we go.

How to Write a Business Plan Step 1. Create a Cover Page

The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions.

A good business plan should have the following elements on a cover page:

Professionally designed logo
Company name
Mission or Vision Statement
Contact Info

Basically, think of a cover page for your business plan like a giant business card. It is meant to capture people’s attention but be quickly processed.

How to Write a Business Plan Step 2. Create a Table of Contents

Most people are busy enough that they don’t have a lot of time. Providing a table of contents makes it easy for them to find the pages of your plan that are meaningful to them.

A table of contents will be immediately after the cover page, but you can include it after the executive summary. Including the table of contents immediately after the executive summary will help investors know what section of your business plan they want to review more thoroughly.

Check out Canva’s article about creating a table of contents . It has a ton of great information about creating easy access to each section of your business plan. Just remember that you’ll want to use different strategies for digital and hard copy business plans.

How to Write a Business Plan Step 3. Write an Executive Summary

A notepad with a written executive summary for business plan writing

An executive summary is where your business plan should catch the readers interest. It doesn’t need to be long, but should be quick and easy to read.

Mike told us,

How long should an executive summary bein an informal business plan?

For casual use, an executive summary should be similar to an elevator pitch, no more than 150-160 words, just enough to get them interested and wanting more. Indeed has a great article on elevator pitches . This can also be used for the content of emails to get readers’ attention.

It consists of three basic parts:

An introduction to you and your business.
What your business is about.
A call to action

Example of an informal executive summary

One of the best elevator pitches I’ve used is:

So far that pitch has achieved a 100% success rate in getting partnerships for the business.

What should I include in an executive summary for investors?

Investors are going to need a more detailed executive summary if you want to secure financing or sell equity. The executive summary should be a brief overview of your entire business plan and include:

Introduction of yourself and company.
An origin story (Recognition of a problem and how you came to solution)
An introduction to your products or services.
Your unique value proposition. Make sure to include intellectual property.
Where you are in the business life cycle
Request and why you need it.

Successful business plan examples

The owner of Urbanity told us he spent 2 months writing a 75-page business plan and received a $250,000 loan from the bank when he was 23. Make your business plan as detailed as possible when looking for financing. We’ve provided a template to help you prepare the portions of a business plan that banks expect.

Here’s the interview with the owner of Urbanity:

When to write an executive summary?

Even though the summary is near the beginning of a business plan, you should write it after you complete the rest of a business plan. You can’t talk about revenue, profits, and expected expenditures if you haven’t done the market research and created a financial plan.

What mistakes do people make when writing an executive summary?

Business owners commonly go into too much detail about the following items in an executive summary:

Marketing and sales processes
Financial statements
Organizational structure
Market analysis

These are things that people will want to know later, but they don’t hook the reader. They won’t spark interest in your small business, but they’ll close the deal.

How to Write a Business Plan Step 4. Company Description

Every business plan should include a company description. A great business plan will include the following elements while describing the company:

Mission statement
Philosophy and vision
Company goals

Target market

Legal structure

Let’s take a look at what each section includes in a good business plan.

Mission Statement

A mission statement is a brief explanation of why you started the company and what the company’s main focus is. It should be no more than one or two sentences. Check out HubSpot’s article 27 Inspiring Mission Statement for a great read on informative and inspiring mission and vision statements.

Company Philosophy and Vision

The company philosophy is what drives your company. You’ll normally hear them called core values. These are the building blocks that make your company different. You want to communicate your values to customers, business owners, and investors as often as possible to build a company culture, but make sure to back them up.

What makes your company different?

Each company is different. Your new business should rise above the standard company lines of honesty, integrity, fun, innovation, and community when communicating your business values. The standard answers are corporate jargon and lack authenticity.

Examples of core values

One of my clients decided to add a core values page to their website. As a tech company they emphasized the values:

Prioritize communication.
Never stop learning.
Be transparent.
Start small and grow incrementally.

These values communicate how the owner and the rest of the company operate. They also show a value proposition and competitive advantage because they specifically focus on delivering business value from the start. These values also genuinely show what the company is about and customers recognize the sincerity. Indeed has a great blog about how to identify your core values .

What is a vision statement?

A vision statement communicate the long lasting change a business pursues. The vision helps investors and customers understand what your company is trying to accomplish. The vision statement goes beyond a mission statement to provide something meaningful to the community, customer’s lives, or even the world.

Example vision statements

The Alzheimer’s Association is a great example of a vision statement:

A world without Alzheimer’s Disease and other dementia.

It clearly tells how they want to change the world. A world without Alzheimers might be unachievable, but that means they always have room for improvement.

Business Goals

You have to measure success against goals for a business plan to be meaningful. A business plan helps guide a company similar to how your GPS provides a road map to your favorite travel destination. A goal to make as much money as possible is not inspirational and sounds greedy.

Sure, business owners want to increase their profits and improve customer service, but they need to present an overview of what they consider success. The goals should help everyone prioritize their work.

How far in advance should a business plan?

Business planning should be done at least one year in advance, but many banks and investors prefer three to five year business plans. Longer plans show investors that the management team understands the market and knows the business is operating in a constantly shifting market. In addition, a plan helps businesses to adjust to changes because they have already considered how to handle them.

Example of great business goals

My all time-favorite long-term company goals are included in Tesla’s Master Plan, Part Deux . These goals were written in 2016 and drive the company’s decisions through 2026. They are the reason that investors are so forgiving when Elon Musk continually fails to meet his quarterly and annual goals.

If the progress aligns with the business plan investors are likely to continue to believe in the company. Just make sure the goals are reasonable or you’ll be discredited (unless you’re Elon Musk).

A man holding an iPad with a cup of coffee on his desk

You did target market research before creating a business plan. Now it’s time to add it to the plan so others understand what your ideal customer looks like. As a new business owner, you may not be considered an expert in your field yet, so document everything. Make sure the references you use are from respectable sources.

Use information from the specific lender when you are applying for lending. Most lenders provide industry research reports and using their data can strengthen the position of your business plan.

A small business plan should include a section on the external environment. Understanding the industry is crucial because we don’t plan a business in a vacuum. Make sure to research the industry trends, competitors, and forecasts. I personally prefer IBIS World for my business research. Make sure to answer questions like:

What is the industry outlook long-term and short-term?
How will your business take advantage of projected industry changes and trends?
What might happen to your competitors and how will your business successfully compete?

Industry resources

Some helpful resources to help you establish more about your industry are:

Trade Associations
Federal Reserve
Bureau of Labor Statistics

Legal Structure

There are five basic types of legal structures that most people will utilize:

Sole proprietorships
Limited Liability Companies (LLC)

Partnerships

Corporations.

Franchises.

Each business structure has their pros and cons. An LLC is the most common legal structure due to its protection of personal assets and ease of setting up. Make sure to specify how ownership is divided and what roles each owner plays when you have more than one business owner.

You’ll have to decide which structure is best for you, but we’ve gathered information on each to make it easier.

Sole Proprietorship

A sole proprietorship is the easiest legal structure to set up but doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your company and your home.

To start a sole proprietorship, fill out a special tax form called a Schedule C . Sole proprietors can also join the American Independent Business Alliance .

Limited Liability Company (LLC)

An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state’s requirements . Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.

Partnerships are typically for legal firms. If you choose to use a partnership choose a Limited Liability Partnership. Alternatively, you can just use an LLC.

Corporations are typically for massive organizations. Corporations have taxes on both corporate and income tax so unless you plan on selling stock, you are better off considering an LLC with S-Corp status . Investopedia has good information corporations here .

There are several opportunities to purchase successful franchises. TopFranchise.com has a list of companies in a variety of industries that offer franchise opportunities. This makes it where an entrepreneur can benefit from the reputation of an established business that has already worked out many of the kinks of starting from scratch.

How to Write a Business Plan Step 5. Products and Services

This section of the business plan should focus on what you sell, how you source it, and how you sell it. You should include:

Unique features that differentiate your business products from competitors
Intellectual property
Your supply chain
Cost and pricing structure

Questions to answer about your products and services

Mike gave us a list of the most important questions to answer about your product and services:

How will you be selling the product? (in person, ecommerce, wholesale, direct to consumer)?
How do you let them know they need a product?
How do you communicate the message?
How will you do transactions?
How much will you be selling it for?
How many do you think you’ll sell and why?

Make sure to use the worksheet on our business plan template .

How to Write a Business Plan Step 6. Sales and Marketing Plan

The marketing and sales plan is focused on the strategy to bring awareness to your company and guides how you will get the product to the consumer. It should contain the following sections:

SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. Not only do you want to identify them, but you also want to document how the business plans to deal with them.

Business owners need to do a thorough job documenting how their service or product stacks up against the competition.

If proper research isn’t done, investors will be able to tell that the owner hasn’t researched the competition and is less likely to believe that the team can protect its service from threats by the more well-established competition. This is one of the most common parts of a presentation that trips up business owners presenting on Shark Tank .

SWOT Examples

Examples of strengths and weaknesses could be things like the lack of cash flow, intellectual property ownership, high costs of suppliers, and customers’ expectations on shipping times.

Opportunities could be ways to capitalize on your strengths or improve your weaknesses, but may also be gaps in the industry. This includes:

Adding offerings that fit with your current small business
Increase sales to current customers
Reducing costs through bulk ordering
Finding ways to reduce inventory
And other areas you can improve

Threats will normally come from outside of the company but could also be things like losing a key member of the team. Threats normally come from competition, regulations, taxes, and unforeseen events.

The management team should use the SWOT analysis to guide other areas of business planning, but it absolutely has to be done before a business owner starts marketing.

Include Competitor Data in Your Business Plan

When you plan a business, taking into consideration the strengths and weaknesses of the competition is key to navigating the field. Providing an overview of your competition and where they are headed shows that you are invested in understanding the industry.

For smaller businesses, you’ll want to search both the company and the owners names to see what they are working on. For publicly held corporations, you can find their quarterly and annual reports on the SEC website .

What another business plans to do can impact your business. Make sure to include things that might make it attractive for bigger companies to outsource to a small business.

Marketing Strategy

The marketing and sales part of business plans should be focused on how you are going to make potential customers aware of your business and then sell to them.

If you haven’t already included it, Mike recommends:

“They’ll want to know about Demographics, ages, and wealth of your target market.”

Make sure to include the Total addressable market . The term refers to the value if you captured 100% of the market.

Advertising Strategy

You’ll explain what formats of advertising you’ll be using. Some possibilities are:

Online: Facebook and Google are the big names to work with here.
Print : Print can be used to reach broad groups or targeted markets. Check out this for tips .
Radio : iHeartMedia is one of the best ways to advertise on the radio
Cable television : High priced, hard to measure ROI, but here’s an explanation of the process
Billboards: Attracting customers with billboards can be beneficial in high traffic areas.

You’ll want to define how you’ll be using each including frequency, duration, and cost. If you have the materials already created, including pictures or links to the marketing to show creative assets.

Mike told us “Most businesses are marketing digitally now due to Covid, but that’s not always the right answer.”

Make sure the marketing strategy will help team members or external marketing agencies stay within the brand guidelines .

An iPad with graph about pricing strategy

This section of a business plan should be focused on pricing. There are a ton of pricing strategies that may work for different business plans. Which one will work for you depends on what kind of a business you run.

Some common pricing strategies are:

Value-based pricing – Commonly used with home buying and selling or other products that are status symbols.
Skimming pricing – Commonly seen in video game consoles, price starts off high to recoup expenses quickly, then reduces over time.
Competition-based pricing – Pricing based on competitors’ pricing is commonly seen at gas stations.
Freemium services – Commonly used for software, where there is a free plan, then purchase options for more functionality.

HubSpot has a great calculator and blog on pricing strategies.

Beyond explaining what strategy your business plans to use, you should include references for how you came to this pricing strategy and how it will impact your cash flow.

Distribution Plan

This part of a business plan is focused on how the product or service is going to go through the supply chain. These may include multiple divisions or multiple companies. Make sure to include any parts of the workflow that are automated so investors can see where cost savings are expected and when.

Supply Chain Examples

For instance, lawn care companies would need to cover aspects such as:

Suppliers for lawn care equipment and tools
Any chemicals or treatments needed
Repair parts for sprinkler systems
Vehicles to transport equipment and employees
Insurance to protect the company vehicles and people.

Examples of Supply Chains

These are fairly flat supply chains compared to something like a clothing designer where the clothes would go through multiple vendors. A clothing company might have the following supply chain:

Raw materials
Shipping of raw materials
Converting of raw materials to thread
Shipping thread to produce garments
Garment producer
Shipping to company
Company storage
Shipping to retail stores

There have been advances such as print on demand that eliminate many of these steps. If you are designing completely custom clothing, all of this would need to be planned to keep from having business disruptions.

The main thing to include in the business plan is the list of suppliers, the path the supply chain follows, the time from order to the customer’s home, and the costs associated with each step of the process.

According to BizPlanReview , a business plan without this information is likely to get rejected because they have failed to research the key elements necessary to make sales to the customer.

How to Write a Business Plan Step 7. Company Organization and Operational Plan

This part of the business plan is focused on how the business model will function while serving customers. The business plan should provide an overview of how the team will manage the following aspects:

Quality Control

Legal environment

Let’s look at each for some insight.

Production has already been discussed in previous sections so I won’t go into it much. When writing a business plan for investors, try to avoid repetition as it creates a more simple business plan.

If the organizational plan will be used by the team as an overview of how to perform the best services for the customer, then redundancy makes more sense as it communicates what is important to the business.

A wooden stamp with the words "quality control"

Quality control policies help to keep the team focused on how to verify that the company adheres to the business plan and meets or exceeds customer expectations.

Quality control can be anything from a standard that says “all labels on shirts can be no more than 1/16″ off center” to a defined checklist of steps that should be performed and filled out for every customer.

There are a variety of organizations that help define quality control including:

International Organization for Standardization – Quality standards for energy, technology, food, production environments, and cybersecurity
AICPA – Standard defined for accounting.
The Joint Commission – Healthcare
ASHRAE – HVAC best practices

You can find lists of the organizations that contribute most to the government regulation of industries on Open Secrets . Research what the leaders in your field are doing. Follow their example and implement it in your quality control plan.

For location, you should use information from the market research to establish where the location will be. Make sure to include the following in the location documentation.

The size of your location
The type of building (retail, industrial, commercial, etc.)
Zoning restrictions – Urban Wire has a good map on how zoning works in each state
Accessibility – Does it meet ADA requirements?
Costs including rent, maintenance, utilities, insurance and any buildout or remodeling costs
Utilities – b.e.f. has a good energy calculator .

Legal Environment

The legal requirement section is focused on defining how to meet the legal requirements for your industry. A good business plan should include all of the following:

Any licenses and/or permits that are needed and whether you’ve obtained them
Any trademarks, copyrights, or patents that you have or are in the process of applying for
The insurance coverage your business requires and how much it costs
Any environmental, health, or workplace regulations affecting your business
Any special regulations affecting your industry
Bonding requirements, if applicable

Your local SBA office can help you establish requirements in your area. I strongly recommend using them. They are a great resource.

Your business plan should include a plan for company organization and hiring. While you may be the only person with the company right now, down the road you’ll need more people. Make sure to consider and document the answers to the following questions:

What is the current leadership structure and what will it look like in the future?
What types of employees will you have? Are there any licensing or educational requirements?
How many employees will you need?
Will you ever hire freelancers or independent contractors?
What is each position’s job description?
What is the pay structure (hourly, salaried, base plus commission, etc.)?
How do you plan to find qualified employees and contractors?

One of the most crucial parts of a business plan is the organizational chart. This simply shows the positions the company will need, who is in charge of them and the relationship of each of them. It will look similar to this:

Our small business plan template has a much more in-depth organizational chart you can edit to include when you include the organizational chart in your business plan.

How to Write a Business Plan Step 8. Financial Statements

No business plan is complete without financial statements or financial projections. The business plan format will be different based on whether you are writing a business plan to expand a business or a startup business plan. Let’s dig deeper into each.

Provide All Financial Income from an Existing Business

An existing business should use their past financial documents including the income statement, balance sheet, and cash flow statement to find trends to estimate the next 3-5 years.

You can create easy trendlines in excel to predict future revenue, profit and loss, cash flow, and other changes in year-over-year performance. This will show your expected performance assuming business continues as normal.

If you are seeking an investment, then the business is probably not going to continue as normal. Depending on the financial plan and the purpose of getting financing, adjustments may be needed to the following:

Higher Revenue if expanding business
Lower Cost of Goods Sold if purchasing inventory with bulk discounts
Adding interest if utilizing financing (not equity deal)
Changes in expenses
Addition of financing information to the cash flow statement
Changes in Earnings per Share on the balance sheet

Financial modeling is a challenging subject, but there are plenty of low-cost courses on the subject. If you need help planning your business financial documentation take some time to watch some of them.

Make it a point to document how you calculated all the changes to the income statement, balance sheet, and cash flow statement in your business plan so that key team members or investors can verify your research.

Financial Projections For A Startup Business Plan

Unlike an existing business, a startup doesn’t have previous success to model its future performance. In this scenario, you need to focus on how to make a business plan realistic through the use of industry research and averages.

Mike gave the following advice in his interview:

Financial Forecasting Mistakes

One of the things a lot of inexperienced people use is the argument, “If I get one percent of the market, it is worth $100 million.” If you use this, investors are likely to file the document under bad business plan examples.

Let’s use custom t-shirts as an example.

Credence Research estimated in 2018 there were 11,334,800,000 custom t-shirts sold for a total of $206.12 Billion, with a 6% compound annual growth rate.

With that data, you can calculate that the industry will grow to $270 Billion in 2023 and that the average shirt sold creates $18.18 in revenue.

Combine that with an IBIS World estimate of 11,094 custom screen printers and that means even if you become an average seller, you’ll get .009% of the market.

Here’s a table for easier viewing of that information.

A table showing yearly revenue of a business

The point here is to make sure your business proposal examples make sense.

You’ll need to know industry averages such as cost of customer acquisition, revenue per customer, the average cost of goods sold, and admin costs to be able to create accurate estimates.

Our simple business plan templates walk you through most of these processes. If you follow them you’ll have a good idea of how to write a business proposal.

How to Write a Business Plan Step 9. Business Plan Example of Funding Requests

What is a business plan without a plan on how to obtain funding?

The Small Business Administration has an example for a pizza restaurant that theoretically needed nearly $20k to make it through their first month.

In our video, How to Start a $500K/Year T-Shirt Business (Pt. 1 ), Sanford Booth told us he needed about $200,000 to start his franchise and broke even after 4 months.

Freshbooks estimates it takes on average 2-3 years for a business to be profitable, which means the fictitious pizza company from the SBA could need up to $330k to make it through that time and still pay their bills for their home and pizza shop.

Not every business needs that much to start, but realistically it’s a good idea to assume that you need a fairly large cushion.

Ways to get funding for a small business

There are a variety of ways to cover this. the most common are:

Bootstrapping – Using your savings without external funding.
Taking out debt – loans, credit cards
Equity, Seed Funding – Ownership of a percentage of the company in exchange for current funds
Crowdsourcing – Promising a good for funding to create the product

Keep reading for more tips on how to write a business plan.

How funding will be used

When asking for business financing make sure to include:

How much to get started?
What is the minimum viable product and how soon can you make money?
How will the money be spent?

Mike emphasized two aspects that should be included in every plan,

How to Write a Business Plan Resources

Here are some links to a business plan sample and business plan outline.

Sample plan

It’s also helpful to follow some of the leading influencers in the business plan writing community. Here’s a list:

Wise Plans – Shares a lot of information on starting businesses and is a business plan writing company.
Optimus Business Plans – Another business plan writing company.
Venture Capital – A venture capital thread that can help give you ideas.

How to Write a Business Plan: What’s Next?

We hope this guide about how to write a simple business plan step by step has been helpful. We’ve covered:

The definition of a business plan
Coming up with a business idea
Performing market research
The critical components of a business plan
An example business plan

In addition, we provided you with a simple business plan template to assist you in the process of writing your startup business plan. The startup business plan template also includes a business model template that will be the key to your success.

Don’t forget to check out the rest of our business hub .

Have you written a business plan before? How did it impact your ability to achieve your goals?

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9 Key Elements of an Effective Business Plan
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How to Write a Business Plan
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Step-By-Step Guide to Write Your Business Plan + Template
How to create a perfect Business Plan? Steps to create a successful plan

COMMENTS

5 Brilliant Ways to Defend Your Business From Competitors
The Five Furious Forms. (a.k.a. The Five Relevant Startup Competitive Defense Positions) 1. Expertise (a.k.a. What you know): Master your craft to such an extent that savvy foes stay out of your ...
6 Critical Questions Your Business Plan Must Answer
6. What do you need to get started? For many potential partners and investors, this is the bottom line. All businesses have to start somewhere, but that starting line varies dramatically from ...
Writing a Business Plan & Protecting Your Idea
First, create the business plan. A plan structures your idea. It lets you think through your market assumptions, product, distribution, management and financial needs. Even if you never need to ...
Defensive Business Strategy: When failure is not an option
The objective of a defensive business strategy is to fend off aggressive attacks. If you don't have a defensive strategy or if you fail to stop an attack, you incur a substantial problem because you put your business at risk. The consequences of a failed defensive strategy are much more severe than a failed growth strategy.
In Defense of the Business Plan
A business plan is essentially a document that presents the entrepreneurs vision and execution plans with its associated risks and rewards for consumption of investors. The goal is to help investors assess the business and make an informed decision. It is essentially an analysis and communication tool for the entrepreneur to provide the ...
How to legally protect a business idea
The first step to legally protect a business idea is fairly straightforward: you want to register ownership of your intellectual property. Intellectual property refers to the ownership of intellectual creations, ideas, and concepts. Common examples of business IP include brand logos and names, inventions, product design, and more.
10 Steps For Strategic Planning To Defend Your Future
Step 3: Explain. Explain the exercise to everyone by describing all the steps, so that all participants are on the same page about the process. Step 4: Your Anticipated Future. Consider what the ...
50 Questions Your Business Plan Should Answer
S adly, most investors don't read business plans. However, writing one is the only way you will be able to answer the following 50 questions which an investor will ask you:
How to Protect Your Business Idea
Register the entity and the domain name. Registering the entity protects your business name to some extent, as long as you are the first in the world. It can cost as little as $50. Registering the domain name, if you have a good one, protects you for that domain but not against copycats with similar names.
7 Ways to Protect your Business's Competitive Advantage
And once you have identified and developed an advantage that puts your small business in the lead, protecting those advantages becomes a high priority. With that in mind, here are seven ways to protect specific types of competitive advantages so you can outpace your competitors for the win. 1. BECOME THE BRAND OF CHOICE.
Asset Protection for the Business Owner
The goal of the plan is to protect your business assets within the framework of your business operations. Protecting your business is both allowed and encouraged, using honest, legal concepts and ...
Strengthen your cybersecurity
Here is a list of measures that all businesses can take to improve their cybersecurity. Create a cybersecurity plan. The Federal Communications Commission (FCC) offers a cybersecurity planning tool (The Small Biz Cyber Planner 2.0). This tool can help you build a custom strategy and cybersecurity plan.
10 Best Ways to Protect your Business idea in South Africa
Protect Your Computers. You also have to protect your computers, email accounts, and social media accounts from unauthorized access by hackers. Hackers can easily break into your accounts to steal important information about your business or product ideas for themselves. 8. Sign Non-Compete Agreements
How to Protect Your Business From Being Hacked
Set up firewalls on all business networks, including those of remote employees. Use an Intrusion Detection / Prevention System (IDPS) to analyze network traffic. Follow best practices for configuring your wireless access point and networks. Consider requiring remote employees to use an encrypted virtual private network (VPN).
How to Protect Your Interests When Sharing Your Business Plan
The only method of protecting trade secrets is through contracts and non‐disclosure agreements that specifically detail the trade secret to be protected. No other legal form of protection exists. If you have any concerns about sharing your business plan with anyone outside your circle of trust, including employees or investors, consider ...
Cybersecurity for Small Business
PROTECT YOUR SMALL BUSINESS. Learn the basics for protecting your business from cyber attacks. The business cybersecurity resources in this section were developed in partnership with the National Institute of Standards and Technology, the U.S. Small Business Administration, and the Department of Homeland Security.
Use a Contingency Plan to Protect Your Business [2024] • Asana
A contingency plan is similar to a project risk management plan or a crisis management plan because it also helps you identify and resolve risks. However, a business contingency plan should cover risks that span multiple projects or even risks that could affect multiple departments. To create a contingency plan, identify and prepare for large ...
How to protect a business idea: the 4 types of protection
This type of protection are signs that distinguish the products or services of one trader from another. They can take many forms, such as, words, slogans, logos, shapes, colors, sounds, symbols, distinct product names or marks or even a combination of these elements. Trademarks are registered for specific products of a certain class.
Avoid Getting Sued: 8 Ways to Protect Your Small ...
Once the contract is in place, one of the better ways to avoid being sued is simply to follow it. 7. Communicate clearly and often. The importance of clear communication applies not only to your employees but to your customers and suppliers as well. Sometimes things go wrong through no fault of your own.
Write your business plan
A good business plan guides you through each stage of starting and managing your business. You'll use your business plan as a roadmap for how to structure, run, and grow your new business. It's a way to think through the key elements of your business. Business plans can help you get funding or bring on new business partners.
How to Write a Business Plan (Plus Examples & Templates)
How to Write a Business Plan Step 1. Create a Cover Page. The first thing investors will see is the cover page for your business plan. Make sure it looks professional. A great cover page shows that you think about first impressions. A good business plan should have the following elements on a cover page: