The Operations Plan

The operations plan explains how the work will be done, how the business will be managed, and the business's location. It also describes the manufacturing process including materials used in the process and employees and their duties.

Inputs

"Inputs" are materials, suppliers, and arrangements with suppliers. This section describes them and lists prices, volume discounts, and payment options that might influence the decision to trade with a higher-priced vendor.

Facilities

"Facilities" include location of the business and its physical layout. This section describes the location, features of the building and site, ownership, lease arrangement, remodeling needed (and costs), other businesses in the area, and zoning. It discusses why the location was selected and its advantages and disadvantages. It should include a floor plan. Questions that should be answered here include: Is the business located outside of the home? Is parking adequate? Are modifications necessary to accommodate the business owner's disability or to ensure ADA compliance? 

Although many people want to work from their homes, even service businesses can benefit from an outside location. When drop-in traffic is important (as with toy or clothing stores), it is often better to pay higher rent for a good location because the owner can save money on advertising. Click here for principles for a successful home-based business.

 

Advertising can not overcome a poor location.

Operating Costs

This section describes, and lists costs for, all utilities (heat, light, telephone and water) to be used by the business for production and operation.

Licenses, Permits, Zoning, Insurance, Taxpayer Number, and Corporation Status

The types of licenses, permits, insurances, and taxes paid vary according to the business. But it is likely that a business will require one or more of these to operate. Some neighborhoods do not allow home-based businesses, while others allow them if there is not a large increase in neighborhood traffic. Some business locations are unable to handle operations that discharge large amounts of water. City, county, state, or federal permits may be required for discharging water or smoke into the environment. Many businesses need federal and state tax identification numbers. Businesses with employees must pay workers' compensation. It is wise to insure the business and business vehicle(s) against fire, theft, robbery, vandalism, accident liability, product liability, and disability. An incorporated business must have state corporation status.

Capital Equipment

Capital equipment includes permanent items that the business keeps and uses for many years. These include equipment, furniture, and fixtures needed to start and run the business. This section describes each piece, discusses why it is necessary, and lists its cost and supplier. 

Production Methods

This section describes both the tools used for making the products or performing the service and the work space(s), including the amount of room needed for each employee; the labor needed to produce the product or provide the service; methods for monitoring quality; and methods for complying with environmental and safety regulations. 

Management Methods

This section describes how the business will be managed. It discusses the business owner's knowledge, skills and experience for completing day-to-day business functions and obtaining specialized services. 

Many of your consumers will have the knowledge and skills needed to provide a service, produce a product, or consult on a topic but may also lack the daily organizational and management skills needed to run a business (e.g., managing inventory, composing and processing correspondence, scheduling appointments and assignments, answering phones, filing, meeting payroll, or bookkeeping). Some business owners will develop adequate skills; but others either will need to hire employees, engage a professional service, or prevail upon experienced, skilled family members.

Another option for acquiring needed skills is to develop a partnership with someone who possesses complementary skills. Certain specialized business functions such as writing contracts, obtaining leases, and preparing taxes may require professional help.

Employees

This section describes staffing requirements for both production and business management. It discusses the type of work to be done, qualifications needed for the job(s), recruitment plans for filling open positions, wage rates, and benefits package(s).

Outside Services

This section describes the types and costs of outside services provided by non-employees, such as lawyers, bookkeepers, CPAs, and business managers.

Chapter 6 Business Plan Study Guide: Operations Plan

1. Only manufacturing businesses should be discussed in the Operations section. 
   T_____ F_____ 
   
   
2. Working at home provides many benefits for a fledgling business and for people with disabilities. This arrangement is the best choice for businesses owned by people with disabilities. T_____ F_____ 
   
   
3. Selecting the right location is critical to a business's success when drop-in traffic creates sales. T_____ F_____ 
   
   
4. In order for a person to run a business, he or she should have the following skills:
   a.  Keep the books
   b.  Do the filing
   c.  Place orders
   d.  All of the above
   e.  None of the above-the owner can arrange for others to do these tasks
   
   
5. The operations plan (does not/does) discuss staffing requirements and job qualifications.
   
   
6. The business's location always should be described in the "Operations Plan" even if the location is one of its marketing tools. T_____ F_____ 

Study Guide Answers: Chapter 6 - The Operations Plan

© July 1998, 1st Revision June 1999, 2nd Revision February 2001