The Operating Plan Section of the Business Plan

Writing The Business Plan: Section 7

Business Planning
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When writing the business plan, the operating plan section describes the physical necessities of your business's operation, such as your business' physical location, facilities, and equipment. Depending on what kind of business you'll be operating, it may also include information about inventory requirements and 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.

You need to do two things for your reader of the business plan in the operating section: show what you've done so far to get your business off the ground (and that you know what else needs to be done) and demonstrate that you understand the manufacturing or delivery process of producing your product or service.

So divide the operating section of the business plan into two parts, starting with the Stage of Development section.

Stage of Development Section

When you're writing this section of the operating plan, start by explaining what you've done "to date" to get the business operational, followed by 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, and identify the problems that may occur in the production process.  Follow this with a subsection titled "Risks" that 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 properly trained in dealing with safety issues. If hazardous materials will be used described how these will be safely stored, handled and disposed of.
  • 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/or which organizations you plan to join, and telling what steps you've taken to comply with the laws and regulations that apply to your industry. 
  • Supply Chains - an explanation 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 operating 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, so you need to let the readers of your business plan know that you've crossed all your 'tees'.

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

  • General: Do an outline of your business's day to day operations, such as the hours of operation, and the days the business will be open. If the business is seasonal, be sure to say so.
  • The physical plant: What type of premises are they and what are the size and location? If it's applicable, include drawings of the building, copies of lease agreements, and/or  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, such as zoning approvals.
  • Materials: Tell 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 how you'll deal with potential problems 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.

The best part is that once you've worked through this business plan section, you'll not only have a detailed operating plan to show the readers of your business plan but have a convenient list of what needs to be done next to make your business a reality.