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 operations. 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 outputs, such as products, information or services that are of value to customers. In turn, the operating plan describes the processes and activities required to produce the output and fulfill the company’s mission.
Factors That Determine the Inclusion of an Operating Plan
An operating plan is a component of a business plan 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.
Information Required to Prepare an Operating Plan
To provide the reader of a business plan an understanding of the company processes that create value for customers, an operating plan describes the product or service the company creates and the goods it sells. The plan also describes how that value is created by explaining the company’s operating functions and describes the human, financial and other assets needed to conduct those operations. To give this information context, the operating plan also describes the company’s location and that of its target market. To infer a basis of the company’s probable success, the operating plan also explains the company’s distinctive advantage, which might be relatively low operating costs, an exceptional location or efficient distribution channels. To do so, the operation plan also identifies the factors that determine if a company’s operations are successful.
Steps to Prepare an Operating Plan
Gathering information and preparing an operating plan for inclusion in a business plan can be accomplished with a few steps. A new company creates a situational review that describes how the company’s operating procedures were developed and what the company’s operations will be. Because company success may be dependent on its location, the operating plan describes the company’s site and why it picked that spot for its operations. For example, a location may grant the company a competitive advantage, access to shipping and distribution facilities, suppliers or a technical labor force.
The operating plan next describes 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.
The Inclusion of an Operating Plan Summary
Readers may appreciate the option to review an operating plan summary, rather than read an entire operating plan. The summary presents the essence of the operating plan or a summary of the company’s major operating functions. Consequently, the summary is created after the operations plan is completed.
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