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How To Write the Operations Plan Section of the Business Plan
Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.
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Stage of Development Section
Production process section, the bottom line, frequently asked questions (faqs).
The operations plan is the section of your business plan that gives an overview of your workflow, supply chains, and similar aspects of your business. Any key details of how your business physically produces goods or services will be included in this section.
You need an operations plan to help others understand how you'll deliver on your promise to turn a profit. Keep reading to learn what to include in your operations plan.
Key Takeaways
- The operations plan section should include general operational details that help investors understand the physical details of your vision.
- Details in the operations plan include information about any physical plants, equipment, assets, and more.
- The operations plan can also serve as a checklist for startups; it includes a list of everything that must be done to start turning a profit.
In your business plan , the operations plan section describes the physical necessities of your business's operation, such as your physical location, facilities, and equipment. Depending on what kind of business you'll be operating, it may also include information about inventory requirements, 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 the reader of your business plan in the operations section: show what you've done so far to get your business off the ground and demonstrate that you understand the manufacturing or delivery process of producing your product or service.
When you're writing this section of the operations plan, start by explaining what you've done to date to get the business operational, then follow up with 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, identifying the problems that may occur in the production process. Follow this with a subsection titled "Risks," which 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 trained in dealing with safety issues. If hazardous materials will be used, describe how these will be safely stored, handled, and disposed.
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 which ones you plan to join. This is also an opportunity to outline what steps you've taken to comply with the laws and regulations that apply to your industry.
Supply Chains
An explanation of 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.
While you can think of the stage of the development part of the operations 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 business plan section is to demonstrate your understanding of your product or service's manufacturing or delivery process.
When writing this section, you can use the headings below as subheadings and then provide the details in paragraph format. Leave out any topic that does not apply to your particular business.
Do an outline of your business's day-to-day operations, including your hours of operation and the days the business will be open. If the business is seasonal, be sure to say so.
The Physical Plant
Describe the type, site, and location of premises for your business. If applicable, include drawings of the building, copies of lease agreements, and 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.
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.
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.
State 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.
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 describe how you'll deal with potential challenges such as rush orders.
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.
Give details of product cost estimates.
Once you've worked through this business plan section, you'll not only have a detailed operations plan to show your readers, but you'll also have a convenient list of what needs to be done next to make your business a reality. Writing this document gives you a chance to crystalize your business ideas into a clear checklist that you can reference. As you check items off the list, use it to explain your vision to investors, partners, and others within your organization.
What is an operations plan?
An operations plan is one section of a company's business plan. This section conveys the physical requirements for your business's operations, including supply chains, workflow , and quality control processes.
What is the main difference between the operations plan and the financial plan?
The operations plan and financial plan tackle similar issues, in that they seek to explain how the business will turn a profit. The operations plan approaches this issue from a physical perspective, such as property, routes, and locations. The financial plan explains how revenue and expenses will ultimately lead to the business's success.
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- Grasshopper
Operations Plan
- Lesson Materials Operations Plan Worksheet
- Completion time About 40 minutes
The operations section of your business plan is where you explain – in detail – you company's objectives, goals, procedures, and timeline. An operations plan is helpful for investors, but it's also helpful for you and employees because it pushes you to think about tactics and deadlines.
In the previous course, you outlined your company's strategic plan, which answers questions about your business mission. An operational plan outlines the steps you'll take to complete your business mission.
Your operations plan should be able to answer the following:
- Who – The personnel or departments who are in charge of completing specific tasks.
- What – A description of what each department is responsible for.
- Where – The information on where daily operations will be taking place.
- When –The deadlines for when the tasks and goals are to be completed.
- How much – The cost amount each department needs to complete their tasks.
In this session, we explain each item to include in your operations plan.
Goals and Objectives
The key to an operations plan is having a clear objective and goal everyone is focused on completing. In this section of your plan, you'll clearly state what your company's operational objective is.
Your operational objective is different than your company's overall objective. In Course One , you fleshed out what your strategic objective was. Your operational objective explains how you intend to complete your strategic objective.
In order to create an efficient operational objective, think SMART:
- Specific – Be clear on what you want employees to achieve.
- Measurable – Be able to quantify the goal in order to track progress.
- Attainable & Realistic – It's great to be ambitious but make sure you aren't setting your team up for failure. Create a goal that everyone is motivated to complete with the resources available.
- Timely – Provide a deadline so everyone has a date they are working towards.
Different departments will have different operational objectives. However, each department objective should help the company reach the main objective. In addition, operational objectives change; the objectives aren't intended to be permanents or long term. The timeline should be scheduled with your company's long-term goals in mind.
Let's look at the following example for a local pizza business objective:
- Strategic objective : To deliver pizza all over Eastern Massachusetts.
- Technology department operational objective : To create a mobile app by January 2017 to offer a better user experience.
- Marketing department operational objective : To increase website visitors by 50% by January 2017 by advertising on radio, top local food websites, and print ads.
- Sales department operational objective : To increase delivery sales by 30%, by targeting 3 of Massachusetts's largest counties.
Sales department operational objective: To increase delivery sales by 30%, by targeting 3 of Massachusetts's largest counties.
Production Process
After you create your objectives, you have to think strategically on how you're going to meet them. In order to do this, each department (or team) needs to have all the necessary resources for the production process.
Resources you should think about include the following:
- Suppliers – do you have a supplier (or more) to help you produce your product?
- Technology team: app developing software
- Marketing team: software licenses for website analytical tools
- Sales team: headsets, phone systems or virtual phone system technology
- Cost – what is the budget for each department?
In addition to the production process, you'll also need to describe in detail your operating process. This will demonstrate to investors that you know exactly how you want your business to run on a day-to-day basis.
Items to address include:
- Location – where are employees working? Will you need additional facilities?
- Work hours – will employees have a set schedule or flexible work schedule?
- Personnel – who is in charge of making sure department tasks are completed?
Creating a timeline with milestones is important for your new business. It keeps everyone focused and is a good tracking method for efficiency. For instance, if milestones aren’t being met, you'll know that it's time to re-evaluate your production process or consider new hires.
Below are common milestones new businesses should plan for.
When you completed your Management Plan Worksheet in the previous course, you jotted down which key hires you needed right away and which could wait. Make sure you have a good idea on when you would like those key hires to happen; whether it’s after your company hits a certain revenue amount or once a certain project takes off.
Production Milestones
Production milestones keep business on track. These milestones act as "checkpoints" for your overall department objectives. For instance, if you want to create a new app by the end of the year, product milestones you outline might include a beta roll out, testing, and various version releases.
Other product milestones to keep in mind:
- Design phase
- Product prototype phase
- Product launch
- Version release
Market Milestones
Market milestones are important for tracking efficiency and understanding whether your operations plan is working. For instance, a possible market milestone could be reaching a certain amount of clients or customers after a new product or service is released.
A few other market milestones to consider:
- Gain a certain amount of users/clients by a certain time
- Signing partnerships
- Running a competitive analysis
- Performing a price change evaluation
Financial Milestones
Financial milestones are important for tracking business performance. It's likely that a board of directors or investors will work with you on creating financial milestones. In addition, in startups, it's common that financial milestones are calculated for 12 months.
Typical financial milestones include:
- Funding events
- Revenue and profit goals
- Transaction goals
In summary, your operations plan gives you the chance to show investors you know how you want your business to run. You know who you want to hire, where you want to work, and when you expect projects to be completed.
Download the attached worksheet and start putting your timelines and milestones together on paper.
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How to Write a Business Plan Operations Plan [Sample Template]
What is a business operations plan, why write a business operations plan, writing a business plan operations plan section – sample template, writing a business operations plan for service firms and retail stores, writing a business operations plan for manufacturing companies, the production process, the supply chain, more on parts of a business plan.
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Here are a few examples of operations plans to help you get started creating your own: Example 1 Sadie's Clothing Company sets a goal to increase production by over 50% within one year. To meet this goal, Sadie would begin by developing a strategic plan that addresses components such as marketing, sales and operations.
You need to do two things for the reader of your business plan in the operations section: show what you've done so far to get your business off the ground and demonstrate that you understand the manufacturing or delivery process of producing your product or service. Stage of Development Section
Operations Plan. Lesson Materials Operations Plan Worksheet; Completion time About 40 minutes; The operations section of your business plan is where you explain – in detail – you company's objectives, goals, procedures, and timeline. An operations plan is helpful for investors, but it's also helpful for you and employees because it pushes ...
Example 1: Jane owns a marketing business and is looking to grow her company by 25% over the next two years by working with more clients. To meet this target, she creates an operational plan: Goal: 25% increase in business growth, measured in revenue. Timeline: Two years.
The business plan operations plan presents the company’s action plan for executing its vision. The operational plan details the processes that must be performed in order to serve customers every day. In other words, the short term processes. It also details the overall business milestones that the company must attain in order to be successful.