A business plan introduces an enterprise to prospective investors and financiers. A key element of the business plan is the operating plan that describes a company’s operational functions. Every business, regardless of the product or service it provides or the merchandise it sells, has an operations function. Operations are the processes through which raw materials, labor and other resources are converted to products, information or services that bring value to customers. The operating plan describes the processes and activities required to produce these outputs and fulfill the company’s mission.
When to Include an Operating Plan
An operating plan is an important component of a business plan, especially if the company’s operations are unique, complicated or extremely technical. The plan is also included if a firm’s success is determined by its operations, if company operations are undergoing a major overhaul or if the company’s operations may be unfamiliar to the business plan’s reader. The operational plan describes the inner workings of the company's processes and a realistic assessment of the business issues and risks involved in providing the company's goods and services.
Overview of the Operating Plan
To provide readers with a deeper understanding of the company processes that create value for customers, the operating plan describes the development of the product or service the company creates and sells. The plan also describes how that value is created by explaining the company’s operating functions and detailing the human, financial and other assets needed to conduct those operations. The operating plan should include the company’s target market demographics, and to support the company’s probability of future success, the operating plan needs to explain the company’s distinctive advantages. This could include relatively low operating costs, an exceptional location or efficient distribution channels. The operational plan must present all of this information without making unrealistic or unfounded assertions regarding the company's future prospects.
Bringing an Operating Plan Together
Gathering information and preparing the operating plan for a business plan can be accomplished with a few steps. Company leadership starts with a review that describes how the company’s operating procedures were developed and what the company’s operations will be going forward. For example, it would discuss initiatives such as a newly-procured location may grant the company increased competitive advantage, access to shipping and distribution facilities, suppliers or a technical labor force.
The operating plan next describes details such as policies and procedures that guide employee work efforts. The more technical or complicated the processes, the more detailed the description of the processes in the operating plan. Also discussed are the company’s operating facilities and its layout, including buildings, equipment, vehicles and machinery. The plan also describes the company’s purchasing function, including the acquisition of raw or finished components or specially designed parts, and its inventory management procedures for raw materials, work in process and finished goods inventory. Also important is a description of the company’s quality control and customer service procedures.
Summarizing the Operating Plan
Provide readers with the option to review an operating plan summary, rather than reading the entire operating plan detail. The summary presents the main points of the operating plan, or the company’s major operating functions. Consequently, the summary is created only after the operations plan is completed.