How to Write an Operations Plan Section of Your Business Plan
Your business plan is an elaborate set of instructions stating how to run your business to achieve objectives and goals. Each section describes a part of the process to reach your desired goal. Similarly, the operations plan section of your business plan explains the production and supply of your product.
An operational plan is formed to turn plans into actions. It uses the information you gathered from the analysis of the market, customers, and competitors mentioned in the previous parts of your business plan and allows for the execution of relevant strategies to achieve desired results.
In this article, you will learn how to create an operational plan, its key elements, and an example to help get started to draft one for your business plan.
What is an operational plan?
An operational plan is an in-depth description of your daily business activities centered towards achieving the goals and objectives described in the previous sections of your business plan. It outlines the processes, activities, responsibilities of various departments, and the timeframe of the execution.
The operations section of your business plan explains in detail the role of a team or department in the collective accomplishment of your goals. In other words, it’s a strategic allocation of physical, financial, and human resources towards reaching milestones within a specific timeframe.
A well-defined operation plan section of your business plan should be able to answer the following questions:
- Who: Who is responsible for a specific task or department?
- What: What are the tasks that need to be completed?
- Where: Where will these operations take place?
- When: When should the tasks be completed? What are the deadlines?
- How: How will the tasks be performed? Is there a standard procedure?
- How much: How much is it going to cost to complete these tasks?
Why do you need an operational plan?
An operational plan is essentially an instruction manual about the workings of your business. It offers an insight into your business operations. It helps investors assess your credibility and understand the structure of your operations and predict your financial requirements.
An operational plan reflects the real-time application of a business plan.
Internally, an operational plan works as a guide, which helps your employees and managers to know their responsibilities. It also helps them understand how to execute their tasks in the desired manner—all whilst keeping account of deadlines.
It helps identify and cut the variances between planned and actual performance and makes necessary changes. It helps you visualize how your operations affect revenue and gives you an idea of how and when you need to implement new strategies to maximize profits.
How to create an operational plan
Creating an operational plan has two major stages, both addressing different aspects of your company. The first stage includes the work that has been done so far, whereas the second stage describes it in detail.
In this stage, you mention what you’ve done to get your business operations up and running. Explain what you aim to change and improvise in the processes. These are the elements your development section will contain:
- Production workflow: Explain all the steps involved in creating your product. This should be a highly informative, elaborate description of the steps. Here, you also mention any inefficiencies that exist and talk about the actions that need to be taken to tackle them.
Write down the risks involved in the productions and potential problems you may face later down the line. State the safety measures employees take to avoid any misfortune while working. Explain how you store hazardous material and discard waste.
- Membership: It is essential to include this information to convey to the reader that you are aware of the organizations and associations in your industry. If you are a member of any, make sure to mention them. You can also include the names of the association you wish to be a part of. Finally, here you can also elaborate on the laws and regulations that you abide by in your industry.
- Supply chains: Here, you mention the vendors you work with to sell your products. Give a quick rundown of the agreements you signed with them. Mention the terms and conditions, prices, and timeframe of the contract. You can also mention if you have any backup suppliers if the existing ones fail to fulfill the requirements.
- Quality control: Describe the measures you’re taking to assure and verify the quality of the end product. If you are working towards getting a product certification, explain the steps you take to meet the set standards.
The development stage acquaints the reader with the functioning of your business, while the manufacturing stage describes the day-to-day operation.
This includes the following elements:
- Outline of daily activities: Create an outline of the day-to-day activities of the production process. This includes the hours of operation, days business will be open, and whether the business is seasonal or not.
- Location: Mention the location of your business, other branches you have, and their locations. You may also include images or drawings of the buildings, lease documents, real estate agreements, and other relevant documents. If you include these in your plan, mention why they’re crucial.
- Tools and equipment: Describe the tools and machinery you use. You should also include the cost of the equipment; these will be important to predict financial requirements.
- Assets: List down all your assets. These include land, buildings, tools, machinery, vehicles, and furniture. Include a legal description and the value of these assets.
- Special requirements: If you require any additional facilities like water supply, power requirements, you mention them here. Specify what you need to do or have already done to acquire permissions for these requirements.
- Raw materials: Mention your raw material suppliers. If you need any extra materials, you can also include that in your operational plan. Here, you also mention the contracts and agreements with your suppliers.
- Productions: Explain the production process and the time required for you to produce one unit. Include the factors that may disrupt the production flow. Further, mention your strategies to tackle these inefficiencies to avoid delays in manufacturing.
- Inventory: Here, you state the process of storing manufactured products, managing the stock and costs of the storage spaces. Stringent management of inventory is essential to maintain product quality and assure customer satisfaction.
- Feasibility: Specify any tests that your product has undergone. This can include prototype tests, product or service tests, price testing, etc.
- Cost: Include the pricing strategy for your products or services. You can also include the final prices of your products.
Operations plan essentials
Now that you have understood the contents of an operations plan and how it should be written, you can continue drafting one for your business plan. But before doing so, take a look at these key components you need to remember while creating your operations plan.
- Your operations plan is fundamentally a medium for implementing your strategic plan. Hence, it’s crucial to have a solid strategic plan to write an effective operations plan.
- Focus on setting SMART goals and prioritizing the most important ones. This helps you create a clear and crisp operational plan. Focusing on multiple goals will make your plan complicated and hard to implement.
- To measure your goals, use leading indicators instead of lagging indicators. Leading indicators is a metric that helps you track your progress and predict when you will reach a goal. On the other hand, lagging indicators can only confirm a trend taking the past as input but cannot predict the accomplishment of a goal.
- It is essential to choose the right Key Performance Indicators (KPIs). It is a good practice to involve all your teams while you decide your KPIs.
- An operational plan should effectively communicate your goals, metrics, deadlines, and all the processes.
Now you’re all set to write an operations plan section for your business plan. To give you a headstart, we have created an operations plan example.
Operational plan example
Operations plan by a book publishing house
Save capital spent on the raw materials for book pages
Negotiate with the raw materials supplier to reduce the price
Increase the number of books proofread by 10%
Improve cover page quality
Repair (if not replace) the faulty machine that prints the covers of the books
Track and accomplish goals with an operations plan
Drafting the operations plan section of your business plan can be tricky due to the uncertainties of the business environment and the risks associated with it. Depending on variables like your market analysis, product development, supply chain, etc., the complexity of writing an operational plan will vary.
The core purpose here is to put all the pieces together to create a synergy effect and get the engine of your business running. Create an effective operational plan to convey competence to investors and clarity to employees.