Cover all aspects of distribution, service provision, support and/or production operations within this section.
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:
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:
Where appropriate, summarize the planned funding of this 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.
This table might be used to determine total and unit payroll costs:
The next table might apply to a software business.
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”.
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:
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:
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”.
Note: Free-Plan, a comprehensive 150-page Business Plan Guide and Template based on this business plan guide, can be downloaded for free here.
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.