Operational Plan
Following after the Marketing Plan, the Operational Plan Section of the Business Plan describes the daily operation of the business, its location, equipment, people, process, and the surrounding environment.
Production
How and where are your products or services produced? Explain:
Production techniques and costs
Quality control
Customer service
Inventory control
Product development
Location
What qualities do you need in a location? Describe the physical requirements:
Amount of space
Type of building
Zoning
Power and other utilities
Access to location: Is it important that your location be convenient to transportation or suppliers? Do you need an easy walk-in access?
Are there any requirements for parking and proximity to freeway, airports, railroads, and shipping centers?
If you can, include a drawing or layout of your proposed facility if it’s important, as it might be for the manufacturer.
Will there be any needed construction? The majority of new businesses should not put money into construction, but if you are planning to build, costs and specifications will be a big part of your business plan.
Cost: Give an estimate of your occupation expenses, including rent, maintenance, utilities, insurance, and initial remodeling costs to make the space fit your needs.
What are the determined business hours?
Legal Environment
Describe:
Licensing and bonding requirements
Permits
Health, workplace, or environmental regulations
Special regulations covering your industry or profession
Zoning or building code requirements
Insurance coverage
Trademarks, copyrights, or patents (pending, existing, or purchased)
Personnel
Number of employees
Type of labor (skilled, unskilled, and professional)
Where and how will you find employees’ right for the job?
Quality of existing staff
Pay structure
Training methods and requirements
Task assignments
Schedules and procedures
Job descriptions for each position
For certain functions, will you use contract workers in addition to employees?
Inventory
What kinds of inventory will you be keeping: raw materials, supplies, finished goods?
Average stock value (i.e., your inventory investment?)
Turnover rate and how it compares to the industry averages?
Seasonal buildups?
Lead-time for ordering?
Suppliers
Identify key suppliers:
Names and addresses
Type and amount of inventory furnished
Credit and delivery policies
History and reliability
Will you have more than one supplier for critical items (as a backup)?
Do you expect any shortages or short-term delivery problems?
Are supply costs steady or fluctuating? If they waver, how do you plan on compensating for it?
Credit Policies
Do you plan to sell on credit?
Is it necessary to sell on credit? Is it standard in your industry or expected by the customers?
If so, what policies will regulate credit applicants and rates?
What kinds of credit checks will you perform?
What are the terms offered to customers? (Credit rates and payment dates?)
Will you offer prompt payment discounts? (Only do this if it is customary in your industry)
Do you know what it will cost you to extend credit? Have you built the costs into your prices?
Managing Your Accounts Receivable
If you choose to extend credit, it is recommended to complete a monthly aging to track how much of your money is installed in credit given to customers, and alert you to slow payment problems.
A receivables aging looks like this:
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Total
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Current
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30 days
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60 days
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90 days
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+90 days
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Accounts Receivable Aging
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Anticipate the occasional slow paying customer by already having a policy in place.
When do you make a phone call?
When do you send a letter?
When do you get your attorney to threaten?
Managing Your Accounts Payable
As with the other account, Accounts Payable should also have monthly aging. This is what you owe your supplies and it helps you schedule who needs to be paid and when. Be aware that paying early can deplete your cash, but paying late causes you to forfeit any discounts and can damage your credit.
Tip: If you already know you will be making a late payment, notify the creditor before the due date.
Do your proposed vendors offer prompt payment discounts?
A payables aging looks like this:
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Total
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Current
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30 days
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60 days
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90 days
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+90 days
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Accounts Payable Aging
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Next section in the business plan: Management and Organization
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