Writing the Operations Plan Section of the Business Plan

What is an operations plan?

In short, it lays out the who, what, when, and how of your daily operations over
the course of the next year. It is meant to define how human, financial, and
physical resources will be allocated to achieve short-term goals that support your
larger strategic objectives.
On a day-to-day basis, your operations plan will answer questions like:

 Who should be working on what?

 How will we allocate resources on a given task?
 What risks do we face at present?
 How can we mitigate those risks?

Put simply, your operations plan is a manual for operating your organization –
designed to ensure that you accomplish your goals. It’s a key piece of the puzzle
for any goal-oriented team. So what steps can you take to develop a strong
operations plan?

In your business plan, the operations plan section describes the physical necessities

of your business' operation, such as your physical location, facilities, and
equipment. Depending on what kind of business you'll be operating, it may also
include information about inventory requirements, suppliers, and a description of
the manufacturing process.

Keeping focused on the bottom line will help you organize this part of the business
plan. Think of the operating plan as an outline of the capital and expense
requirements your business will need to operate from day to day.

Stage of Development Section

When you're writing this section of the operations plan, start by explaining what
you've done to date to get the business operational, then follow up with an
explanation of what still needs to be done. The following should be included:

 Production workflow: A high-level, step-by-step description of how your

product or service will be made, identifying the problems that may occur in
the production process. Follow this with a subsection titled "Risks," which
outlines the potential problems that may interfere with the production
process and what you're going to do to negate these risks. If any part of the
production process can expose employees to hazards, describe how
employees will be trained in dealing with safety issues. If hazardous
materials will be used, describe how these will be safely stored, handled, and
disposed.
 Industry association memberships: Show your awareness of your
industry's local, regional, or national standards and regulations by telling
which industry organizations you are already a member of and which one
you plan to join. This is also an opportunity to outline what steps you've
taken to comply with the laws and regulations that apply to your industry. 
 Supply chains: An explanation of who your suppliers are and their prices,
terms, and conditions. Describe what alternative arrangements you have
made or will make if these suppliers let you down.
 Quality control: An explanation of the quality control measures that you've
set up or are going to establish. For example, if you intend to pursue some
form of quality control certification such as ISO 9000, describe how you will
accomplish this.

Production Process Section

While you can think of the stage of development part of the operations plan as an
overview, the production process section lays out the details of your business's
day-to-day operations. Remember, your goal for writing this section of the
business plan is to demonstrate your understanding of the manufacturing or
delivery process for your product or service.

Make sure you include all these details of your business' operations:

 General: Do an outline of your business' day-to-day operations, including

your hours of operation and the days the business will be open. If the
business is seasonal, be sure to say so.
  The physical plant: Describe the type, site, and location of premises for
your business. If applicable, include drawings of the building, copies of
lease agreements, and recent real estate appraisals. You need to show how
much the land or buildings required for your business operations are
worth and tell why they're important to your proposed business.
 Equipment: The same goes for equipment. Besides describing the
equipment necessary and how much of it you need, you also need to include
its worth and cost and explain any financing arrangements.
 Assets: Make a list of your assets, such as land, buildings, inventory,
furniture, equipment, and vehicles. Include legal descriptions and the worth
of each asset.
 Special requirements: If your business has any special requirements, such
as water or power needs, ventilation, drainage, etc., provide the details in
your operating plan, as well as what you've done to secure the necessary
permissions.
 Materials: State where you're going to get the materials you need to produce
your product or service and explain what terms you've negotiated with
suppliers.
 Production: Explain how long it takes to produce a unit and when you'll be
able to start producing your product or service. Include factors that may
affect the time frame of production and describe how you'll deal with
potential challenges such as rush orders.
 Inventory: Explain how you'll keep track of inventory.
 Feasibility: Describe any product testing, price testing, or prototype
testing that you've done on your product or service.
 Cost: Give details of product cost estimates.

When you're writing this section, you can use the headings above as subheadings
and then provide the details in paragraph format. If a topic does not apply to your
particular business, leave it out.

Once you've worked through this business plan section, you'll not only have a
detailed operations plan to show your readers, but you'll also have a convenient list
of what needs to be done next to make your business a reality.

Pros and Cons of a Business Plan

Should you create a business plan? Most people will say that you should have at
least some sort of outline that helps you guide your business. Yet sometimes an
opportunity is so great that you’ve just got to jump right in and grab it before it
disappears. If you want funding or growth to be sustainable, however, there is a
good chance that you’ll need to create a business plan of some sort in order to find
success. Here are some of the pros and cons of a business plan to consider as you
go about the process of creating and then running your business.

What Are the Pros of a Business Plan?

1.A business plan is a guide that you can use to make money.

2. By understanding what your business is about and how it is likely to perform,

you’ll be able to see how each result receive can impact your bottom line.

3.With comprehensive plans in place, you’ll be prepared to take action no matter

what happens over the course of any given day

4.It gives you a glimpse of the future.

A business plan helps you to forecast an idea to see if it has the potential to be
successful. There’s no reason to proceed with the implementation of an idea if it is
just going to cost you money, but that’s what you do if you go all-in without
thinking about things. Even if the future seems uncertain, you’ll still get a glimpse
of where your business should be.
5. You’ll know how to allocate your resources.
How much inventory should you be holding right now? What kind of budget
should you have? Some resources that your business needs to have are going to be
scare. When you can see what your potential financial future is going to be, you
can make adjustments to your journey so that you can avoid the obstacles that get
in your way on the path toward success.
6. It is necessary to have a business plan for credit.
In order for a financial institution to give you a line of credit, you’ll need to present
them with your business plan. This plan gives the financial institution a chance to
see how organized you happen to be so they can more accurately gauge their
lending risks. Most institutions won’t even give you an appointment to discuss
financing unless you have a formal business plan created and operational.
7. A business plan puts everyone onto the same page.
When you’re working with multiple people, then you’re going to have multiple
viewpoints as to what will bring about the most success. That’s not to say that the
opinions of others are unimportant. If there isn’t any structure involved with a
business, then people with a differing opinion tend to go rogue and just do their
own thing. By making sure that everyone is on the same page with a business plan,
you can funnel those creative energies into ideas that bring your company a greater
chance of success.
8. It allows others to know that you’re taking this business seriously.
It’s one thing to float an idea out to the internet to see if there is the potential of a
business being formed from it. Creating a business plan for that idea means you’re
taking the idea more seriously. It shows others that you have confidence in its
value and that you’re willing to back it up. You are able to communicate your
intentions more effectively, explain the value of your idea, and show how its
growth can help others.
9. It’s an easy way to identify core demographics.
No matter what business idea you have, you’re going to need customers in order
for it to succeed. Whether you’re in the service industry or you’re selling products
online, you’ll need to identify who your core prospects are going to be. Once that
identification takes place, you can then clone those prospects in other
demographics to continue a growth curve. Without plans in place that allow you to
identify these people, you’re just guessing at who will want to do business with
you and that’s about as reliable as throwing darts at a dartboard while blindfolded.
10. There is a marketing element included with a good business plan.
This allows you to know how you’ll be able to reach future markets with your
current products or services. You’ll also be able to hone your value proposition,
giving your brand a more effective presence in each demographic.

Business Plan Mistakes

Every business should have a business plan.

Unfortunately, despite the fact that many of the underlying businesses are viable,
the vast majority of plans are hardly worth the paper they're printed on.

Most "bad" business plans share one or more of the following problems:

1. The plan is poorly written. Spelling, punctuation, grammar and style are all
important when it comes to getting your business plan down on paper. Although
investors don't expect to be investing in a company run by English majors, they are
looking for clues about the underlying business and its leaders when they're
perusing a plan. When they see one with spelling, punctuation and grammar errors,
they immediately wonder what else is wrong with the business. But since there's no
shortage of people looking for capital, they don't wonder for long--they just move
on to the next plan.
Before you show your plan to a single investor or banker, go through every line of
the plan with a fine-tooth comb. Run your spell check--which should catch spelling
and punctuation errors, and have someone you know with strong "English teacher"
skills review it for grammar problems.

Style is subtler, but it's equally important. Different entrepreneurs write in different
styles. If your style is "confident," "crisp," "clean," "authoritative" or "formal,"
you'll rarely have problems. If, however, your style is "arrogant," "sloppy,"
"folksy," "turgid" or "smarmy," you may turn off potential investors, although it's a
fact that different styles appeal to different investors. No matter what style you
choose for your business plan, be sure it's consistent throughout the plan, and that
it fits your intended audience and your business. For instance, I once met a
conservative Midwest banker who funded an Indian-Japanese fusion restaurant
partly because the plan was--like the restaurant concept--upbeat, trendy and
unconventional.

2. The plan presentation is sloppy. Once your writing's perfect, the presentation

has to match. Nothing discourages investors more than inconsistent margins,
missing page numbers, charts without labels or with incorrect units, tables without
headings, technical terminology without definitions or a missing table of contents.
Have someone else proof-read your plan before you show it to an investor, banker
or venture capitalist. Remember that while you'll undoubtedly spend months
working on your plan, most investors won't give it more than 10 minutes before
they make an initial decision about it. So if they start paging through your plan and
can't find the section on "Management," they may decide to move on to the next,
more organized plan in the stack.

3. The plan is incomplete. Every business has customers, products and services,

operations, marketing and sales, a management team, and competitors. At an
absolute minimum, your plan must cover all these areas. A complete plan should
also include a discussion of the industry, particularly industry trends, such as if the
market is growing or shrinking. Finally, your plan should include detailed financial
projections--monthly cash flow and income statements, as well as annual balance
sheets--going out at least three years.

4. The plan is too vague. A business plan is not a novel, a poem or a cryptogram.
If a reasonably intelligent person with a high school education can't understand
your plan, then you need to rewrite it. If you're trying to keep the information
vague because your business involves highly confidential material, processes or
technologies, then show people your executive summary first (which should never
contain any proprietary information). Then, if they're interested in learning more
about the business, have them sign noncompeting and nondisclosure agreements
before showing them the entire plan. [Be forewarned, however: Many venture
capitalists and investors will not sign these agreements since they want to
minimize their legal fees and have no interest in competing with you in any case.]

5. The plan is too detailed. Do not get bogged down in technical details! This is
especially common with technology-based startups. Keep the technical details to a
minimum in the main plan--if you want to include them, do so elsewhere, say, in
an appendix. One way to do this is to break your plan into three parts: a two- to
three-page executive summary, a 10- to 20-page business plan and an appendix
that includes as many pages as needed to make it clear that you know what you're
doing. This way, anyone reading the plan can get the amount of detail he or she
wants.

6. The plan makes unfounded or unrealistic assumptions. By their very nature,

business plans are full of assumptions. The most important assumption, of course,
is that your business will succeed! The best business plans highlight critical
assumptions and provide some sort of rationalization for them. The worst business
plans bury assumptions throughout the plan so no one can tell where the
assumptions end and the facts begin. Market size, acceptable pricing, customer
purchasing behavior, time to commercialization--these all involve assumptions.
Wherever possible, make sure you check your assumptions against benchmarks
from the same industry, a similar industry or some other acceptable standard. Tie
your assumptions to facts.

A simple example of this would be the real estate section of your plan. Every
company eventually needs some sort of real estate, whether it's office space,
industrial space or retail space. You should research the locations and costs for real
estate in your area, and make a careful estimate of how much space you'll actually
need before presenting your plan to any investors or lenders.

7. The plan includes inadequate research. Just as it's important to tie your

assumptions to facts, it's equally important to make sure your facts are, well, facts.
Learn everything you can about your business and your industry--customer
purchasing habits, motivations and fears; competitor positioning, size and market
share; and overall market trends. You don't want to get bogged down by the facts,
but you should have some numbers, charts and statistics to back up any
assumptions or projections you make. Well-prepared investors will check your
numbers against industry data or third party studies--if your numbers don't jibe
with their numbers, your plan probably won't get funded.

8. You claim there's no risk involved in your new venture. Any sensible

investor understands there's really no such thing as a "no risk" business. There are
always risks. You must understand them before presenting your plan to investors
or lenders. Since a business plan is more of a marketing tool than anything else, I'd
recommend minimizing the discussion of risks in your plan. If you do mention any
risks, be sure to emphasize how you'll minimize or mitigate them. And be well
prepared for questions about risks in later discussions with investors.

9. You claim you have no competition. It's absolutely amazing how many

potential business owners include this statement in their business plans: "We have
no competition."

If that's what you think, you couldn't be further from the truth. Every successful
business has competitors, both direct and indirect. You should plan for stiff
competition from the beginning. If you can't find any direct competitors today, try
to imagine how the marketplace might look once you're successful. Identify ways
you can compete, and accentuate your competitive advantages in the business plan.

10. The business plan is really no plan at all. A good business plan presents an
overview of the business--now, in the short term, and in the long term. However, it
doesn't just describe what the business looks like at each of those stages; it also
describes how you'll get from one stage to the next. In other words, the plan
provides a "roadmap" for the business, a roadmap that should be as specific as
possible. It should contain definite milestones--major targets that have real
meaning for your business. For instance, reasonable milestones might be "signing
the 100th client" or "producing 10,000 units of product." The business plan should
also outline all the major steps you need to complete to reach each milestone.

Smoothing Out the Rough Spots

Once you know what mistakes not to make, there are still a few steps you need to
take to make your business plan "bulletproof." Be sure you . . .

 Think it through. You might have a great idea, but have you carefully
mapped out all the steps you'll need to take to make the business a reality?
Think about building your management team, hiring salespeople, setting up
operations, getting your first customer, protecting yourself from lawsuits,
outmaneuvering your competition, and so on. Think about cash flow and
 what measures you can take to minimize your expenses and maximize your
revenue.
 Do your research. Investigate everything you can about your proposed
business before you start writing your business plan--and long before you
start the business. You'll also need to continue your research while you write
the business plan, since inevitably, things will change as you uncover critical
information. And while you're researching, be sure to consult multiple
sources since many times the experts will disagree.
 Research your potential customers and competitors. Is your product or
service something people really want or need, or is it just "cool"? Study your
market. Is it growing or shrinking? Could some sort of disruptive technology
or regulatory change alter the market in fundamental ways? Why do you
think people will buy your product or service? If you don't have any
customers or clients yet, you'll need to convince investors that you have
something people really want or need, and more important, that they'll buy it
at the price you expect.
 Get feedback. Obtain as much feedback as you can from trusted friends,
colleagues, nonprofit organizations, and potential investors or lenders. You'll
quickly find that almost everyone thinks they're an expert and they all could
do a better job than you. This may be annoying, but it's just part of the
feedback process. You'll know when you're done when you've heard the
same questions and criticisms again and again and have a good answer to
almost everything anyone can throw at you.
 Hire professional help. Find a professional you trust to help guide you
through the entire process, fill in knowledge gaps (for instance, if you know
marketing but not finance, you should hire a finance expert), provide
additional, unbiased feedback, and package your plan in an attractive,
professional format.

Writing a business plan is hard work--many people spend a year or more writing
their plan. In the early, drafting stages, business plan software can be very helpful.
But the hard part is developing a coherent picture of the business that makes sense,
is appealing to others and provides a reasonable road map for the future. Your
products, services, business model, customers, marketing and sales plan, internal
operations, management team and financial projections must all tie together
seamlessly. If they don't, you may not ever get your business off
CHAPTER THREE
3.0 ORGANIZATION PLAN
3.1 Organization
1. Describe the proposed organization of your business
• Who will manage the business?
• Duties and responsibilities of manager
• Monthly salary for the manager
• Other incentives of manager
2. Draw an organization structure/chart for your business
3.2 Key Management Personnel
Describe the duties and responsibilities of key members of your proposed
management team
• Their duties and responsibilities
• Their salaries
• Their incentives
3.3 Other Personnel
1. Who are the other personnel?
• Number of employees
• Their job titles and Job descriptions
• The skills they should have
• Source of qualified personnel
2. How will you evaluate their performance and adequately remunerate them?
• What are your training plans for employees
• What are their salaries
• What incentives will you provide to your employees
3.4 Support Staff and Services
What support staff and services will you require
• Who will be your banker
• Who will be your accountant
• Who will be your lawyer
• Who will be your business or management advisor
• Where will you obtain your postal services
CHAPTER FOUR
4.0 Operational or Production Plan
4.1 Product or Service Design Development
Describe your intended product/service Design and Development.
• Design of your product/service and how you will develop it
• Cost of designing the product/service
• Technology you will use to design your product /service
• How to cope with changes in technology
4.2 Production/Operational Facilities
1. Describe the machinery and equipment you will require for your
operation/production
• Which equipment will be hired or leased, when and at what cost
2. Explain your plans for repairs and maintenance of machinery and
equipments
• Who will repair and maintain
• Availability of spare parts-supplier and cost
3. Describe the features of the workshop
• Cost of owning the workshop/business premises
• Draw a ground plan showing location of machinery and equipment &
operations
• Is there space for future expansion
4. Describe other fixed assets
4.3 Production Strategy
1. Monthly material requirements
• Availability throughout the year
• Transport of raw material and cost
2. Monthly labour materials
• Number of workers
• Their level of skills
• Cost of labour per month
3. Monthly production expenses
• Preliminary operational/production expenses
• Monthly production overheads
4. Overall operational/production cost
• Production/operational cost per unit
• Total cost of production in a given period
4.4 Production/operational Process
Describe in detail the operational/production process
• Exact production or operation steps
• External factors likely to affect operation/production process
• How will you minimize the effects of such factors

4.5 Government Regulation

Indicate the government regulation, compliances, and approvals that are likely to
affect your business
• Permits, Licenses, taxes, other approvals and compliances
• Cost involved