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Business Plan Guide:
9. Operational Plans

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Cover all aspects of distribution, service provision, support and/or production operations within this section.

Suggested Length & Structure:

Depending on the nature and scale of your business,this section may need 2-4 pages. Keep under one page for a basic/short plan.

The subsections below are for general guidance only. They could result in some undesirable duplication or overlap. Accordingly, you may prefer to:

  • Amalgamate some of them.
  • Use less obtrusive sub-headings like Locations & Facilities:
  • Delete all sub-headings and cover all relevant matters in a series of short paragraphs.

9.1. Locations & Facilities

Indicate locations and main facilities. Describe plant/office/facilities capacity & utilization (past, present and future).

Where multiple locations are involved, use simple tables to summarize them. For example, a home-delivery pizza business might cover the following:

 
 
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Description of Premises

Address

Floor
Area

Take
Out
(Y/N)?

Main In-store Facilities

Owned or Leased?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.2. Operating Methods/Procedures

Describe major elements of production/ operations/ distribution. Use simple diagrams to illustrate processes or complex relationships.

For example, in the case of a producer, highlight the main processes and activities and discuss use of materials, capacities & utilization, staffing levels, productivity, quality issues, energy consumption, waste, inventory-building, transport/distribution and so on.

Use simple tables as per the following example showing first-year inventory projections. It was copied and pasted directly from Exl-Plan's built-in Textual Summary Report (more information) as a “picture”.


This table was "pasted in" as picture from Exl-Plan, PlanWare's Excel-based financial planner.

Briefly describe systems for product costing, quality control, production management, maintenance, customer support etc. Use simple tables to summarize and place any important detail in an appendix.

Explain transport/distribution arrangements and related costs.

9.3. Capital Expenditure Projections

Specify investments to date (if not covered in 4. Present Status) and plans. Distinguish between mandatory and discretionary expenditure. If appropriate, include or append maps, charts, pictures etc.

Where relevant, cost justify investments by indicating their expected return-on-investment. In simplest terms, this could be the payback interval e.g. if expenditure of $50,000 could generate incremental cost saving of $100,000 a year, then the payback would be 6 months.

Summarize planned capital expenditure:

Years to end xxMonth:

20XX
($000)

20XX
($000)

20XX
($000)

20XX
($000)

Project #1

 

 

 

 

Project #2

 

 

 

 

Project #3

 

 

 

 

Total Capital Expenditure

 

 

 

 

Where appropriate, summarize the planned funding of this expenditure:

Years to end xxMonth:

20XX
($000)

20XX
($000)

20XX
($000)

20XX
($000)

New equity

 

 

 

 

New Loans

 

 

 

 

Internal Cash Flow

 

 

 

 

Total Capital Expenditure

 

 

 

 

9.4. Operating Cost Projections

Segment costs as variable, semi-variable and fixed. Indicate costings for key products/services and specify individual gross margins. Discuss break-even points at operating unit and product levels.

If appropriate, specify unit costs for key inputs such as materials, labor, payroll, power, communications, environmental services etc. and forecast how these might move in the future due to inflation, currency rates etc.

9.4.1. Purchases& Materials

This subsection could be important for production and distribution businesses.

Identify key services, materials or goods to be purchased for either production or resale. Outline plans for sourcing them. For key items, indicate specifications, prices, taxes/duties, purchasing arrangements and credit terms. Discuss likely future price trends.

For distribution businesses (wholesale and retail), describe the range of goods to be purchased, explain about shelf life and inventory, and discuss mark up percentages used to help arrive at selling prices.

In the case of production businesses (manufacturing and service businesses with significant expenditure on bought-in items), explain the composition of material (or bought-in components or services) within finished products (i.e. the bill of materials) and discuss such matters as procurement, material utilization, inventories and unit material costs.

9.4.2. Direct Labor

Confine these head count projections to labor and staff directly or indirectly involved in operations/production. In other words, restrict these projections to personnel involved in creating output for sale or whose numbers vary (fully or partly) with output levels. Present the head count projections for staff engaged in sales & marketing, R&D, management & administration in other subsections.

Indicate the organization structure, human resources (head counts, grades, skills, training etc.) relating to production, warehousing, distributions, maintenance, quality control, customer support etc. Where appropriate, convert part-time numbers to full-time equivalents. If practicable, specify labor productivity trends based on the projected sales volumes and head count levels.

Use simple tables to summarize and place detail in appendices. The following table could be used for a production venture.

Years to end xxMonth:

20XX

20XX

20XX

20XX

Head count - Direct production

 

 

 

 

Head count - Indirect production

 

 

 

 

Head count - Maintenance

 

 

 

 

Head count - Utilities

 

 

 

 

Head count - Quality

 

 

 

 

Head count - Warehousing

 

 

 

 

Head count - Transport

 

 

 

 

Head count - Supervision

 

 

 

 

Head count - Management

 

 

 

 

Total head count

 

 

 

 

Total production (000 units/year)

 

 

 

 

Output/person (Units)

 

 

 

 

This table might be used to determine total and unit payroll costs:

Years to end xxMonth:

Payroll Cost
($000/person)

20XX
($000)

20XX
($000)

20XX
($000)

20XX
($000)

Direct production

 

 

 

 

 

Indirect production

 

 

 

 

 

Maintenance

 

 

 

 

 

Utilities

 

 

 

 

 

Quality

 

 

 

 

 

Warehousing

 

 

 

 

 

Transport

 

 

 

 

 

Supervision

 

 

 

 

 

Management

 

 

 

 

 

Total payroll cost

 

 

 

 

 

Total production (000 units/year)

 

 

 

 

Payroll cost/Unit ($)

 

 

 

 

The next table might apply to a software business.

Years to end xxMonth:

20XX

20XX

20XX

20XX

User support

 

 

 

 

Routine product maintenance

 

 

 

 

Production & dispatch

 

 

 

 

Supervision

 

 

 

 

Management

 

 

 

 

Total head count

 

 

 

 

The following table summarizes shorter term head counts (for all staffing grades). It was copied and pasted directly from Exl-Plan's built-in Textual Summary Report (more information) as a “picture”.


This table was "pasted in" as picture from Exl-Plan, PlanWare's Excel-based financial planner.

The tables above are presented for illustrative purposes. In practice, they may be more appropriately located in an appendix.

9.4.3. Other Direct/Variable Costs

Use this subsection to introduce any significant other direct or variable costs such as power, water, etc. if they are significant to the production or distribution process.

Where relevant, forecast consumption/ utilization rates for key items and use these to project their total costs.

9.4.4. Total & Unit Costs

Use this subsection to pull together all the direct costs relating to operations, distribution and production. Use simple tables with short explanations.

The following table might be used for a production or distribution business:

Years to end xxMonth:

20XX

20XX

20XX

20XX

Sales projections (units)

 

 

 

 

Sales projections ($000)

 

 

 

 

Materials & bought-in components (or cost of goods for resale) ($000)

 

 

 

 

Direct labor ($000)

 

 

 

 

Other direct costs ($000)

 

 

 

 

Total direct cost ($000)

 

 

 

 

Average direct cost per unit ($)

 

 

 

 

Average selling price ($/unit)

 

 

 

 

Average direct cost as % average selling price

 

 

 

 

Where the product mix does not lend itself to averaging, it might be necessary to replicate this type of table (in an appendix) for each major product group and then summarize the overall results in this subsection.

The following table might suit a "pure service" business to summarize its operating costs:

Years to end xxMonth:

20XX

20XX

20XX

20XX

Sales projections (billable hours)

 

 

 

 

Sales projections ($000)

 

 

 

 

Direct labor ($000)

 

 

 

 

Other direct costs ($000)

 

 

 

 

Total direct cost ($000)

 

 

 

 

Average direct cost per hour ($)

 

 

 

 

Average selling price ($/hour)

 

 

 

 

Average direct cost as % average selling price

 

 

 

 

For businesses with several offerings, it would be useful to summarize margins for each offering as shown in the table below copied and pasted directly from Exl-Plan's built-in Textual Summary Report (more information) as a “picture”.


This table was "pasted in" as picture from Exl-Plan, PlanWare's Excel-based financial planner.

Note: Free-Plan, a comprehensive 150-page Business Plan Guide and Template based on this business plan guide, can be downloaded for free here.


Additional Help

The Exl-Plan range of Excel-based financial planners can be used to generate detailed projections for costs, expenses, inventory and credit as part of the process of developing fully-integrated financial projections (income statements, cash flows, balance sheets etc.) for up to seven years ahead. All the charts and tables presented above were copied directly from output reports within Exl-Plan.

The more powerful versions of Exl-Plan can handle up to ten different revenue/cost streams and can generate separate projections of gross margin and working capital requirements for each stream.

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