From lab to market – part 2: writing a business plan

A business plan without a solid market analysis isn’t a business plan, it’s a wish list! Investors will want to understand the scope of the opportunity, who else is working in that space and why your solution has a defensible opportunity.

When we talk about the market, it really depends on what market you are talking about. There are two markets that you will focus on, because they are what investors will be waiting to see.

Total Addressable Market (TAM) is the potential market that accounts for every customer in that sector. It measures total demand, regardless of competition, capacity or location constraints. For example, the global TAM of antimicrobial resistance had a value of £6bn by 2025, and is expected to grow at an annual rate of 5.5%.

The Marketable Available Market (SAM) is basically what part of the market your company can target, based on its geography, product, competition and connections. For example, the UK SAM for microbiological testing equipment with a special knowledge of mycobacteria had a value of £34m in 2025. Businesses can be very interested to see what you can find in the short and long term, and they will be impressed that you have done your research and know your environment.

Competition map. Knowing your enemy is the first step they teach you in the art of war. Identify direct competitors (doing what you do), indirect competitors (solving the same problem in a different way) and potential future competitors. In some cases, you can find potential deals from a thorough review. For each, examine their strengths, weaknesses, prices and market conditions.

Then clearly define your competitive advantage. What is the difference? Is your technology fast? More accurate? Is it very cheap on a scale? Do they have a weakness that you already have a solution for? These are the questions that turn scientific breakthroughs into powerful business propositions.

A business plan for innovation does not need to be a 100-page document. It needs to be clear, concise, evidence-based and risk-aware. In addition to the market and competition analysis we mentioned above, the key elements of each business plan can be found below.

Basic features

Executive Summary: A clear description of the problem you are solving and why it is important.

Technology: Your Technology Readiness Level (as described in the first section), evidence base and innovation process.

Market opportunity: Overview of Target Market, Available Market, customer segments and proven pain points from your findings.

Intellectual property and security: IP ownership, licensing arrangements and any freedom of inspection.

Competitive landscape: A clear assessment of the competitive landscape and your unique position.

Business model: How will you reach customers, generate revenue and at what margin.

Category: Founders, mentors, key roles, and, seriously, any gaps and how you’re going to fill them.

Finances: How much do you need, what will you use it for and what benefits will it bring.

Finally, investors will be waiting to see some predictions about your financial performance, so they can assess the return on investment they may have in the future. Most early stage investors know that financial projections for a pre-revenue company are highly speculative.

Build your projections from the bottom up: how many customers can you realistically get in the first year? How many products can you produce and promote during that year? At what price? At what cost? Do your competitor analysis to guide what to expect. This is more reliable than top-down estimates that use a percentage of the global market.

A business plan is a sequence of data that tells the story of your business now the market. Markets change, the economy changes and so does the evidence you used to build it, so a successful business plan is one that never stops changing. It doesn’t matter if you were right about the future. The important thing is that you have thought enough to be able to adapt as circumstances change.