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Developing a business plan

By Charles Hopkins Published 04/7/2006 | Business and Finance

A business plan should have seven clear sections. These are: summary, concept section, market conditions, promotion costs, marketing strategy, manpower plans and exit strategy.

The summary should be short, and no more than a page. It should give a brief overview of your business strategy and the logic on which your business plan is based. It can mention the business development plan, the key people, the form of business organization and the financial objectives. The summary must be simple and easy to understand. It should focus on the main elements of your plan and avoid generalizations.

The concept section should explain your business strategy, and provide a clear description of your main product, or service and how it will beat the competition. It can also include any other information that can have a major impact on your business. For example, if you are planning to use a new type of distribution channel, you should explain this in the concept section.

The development process must be described if you are seeking financing for starting a new business or expanding an existing business.

You also need a market section that describes the market potential, competition, target segment, trends, etc. It should also describe your strategy for getting a competitive advantage, identify consumers for your products, and the ways you intend to target them.

You also need to identify the competing products or services, the reasons for their success and how they compare with your products or services. This is even more important for a start-up business, which has to compete with established businesses.

You also need to decide as to how you want to position your product. Do you want your customers to see your product as a low-cost substitute, or as a high quality premium product?

Another section that you need is on advertising and promotion plans and how they will help you communicate your product or service benefits to your target market.  This should be in tune with your marketing strategy and your business strategy.

All businesses cannot engage in research and development, because it is a long-term investment. Lenders and investors tend to have a short-term perspective and may not want to commit money for this purpose.

A section about the operations can describe how the major functions of the business will be conducted, more effectively than the competition.

The requirement of people can be described in another section. This section should state the skill levels of those who have already been recruited and give a timeline when the rest will be hired. Also include the resumes of key people, with their responsibilities.

Lenders and investors will want to know about the payback and exit period. Most of them may want your business to become profitable and to go public in 5 years, so that their investments will appreciate and become liquid. They usually want to have a cash-out option in 5 years.

A section about the financials will be needed to show the historical financial statements as well as the projections for 3 to 5 years. You may need to project different scenarios, depending on the complexity of the business, for the benefit of your lenders.