Components of a Business Plan

• Key questions answered by operating plans:
  
  • What are your facility plans?
    
    • Where will your facility be located?
      
      • Expressed as a set physical location
        
      • Expressed as a set of requirements and characteristics
        
    • How large will your facility be and why must it be this size?
      
    • How much will it cost to buy or lease your facility?
      
    • What utility, parking, and other costs must you pay for this facility?
      
    • What expansion plans must be factored into the facility requirements?
      
    • What transportation and storage issues must be addressed by facility decisions?
      
    • What zoning and other legal issues must you deal with?
      
    • What will be the layout for your facility and how will this best accommodate customer and employee requirements?
      
  
  
  • What constraints are you operating under that will restrict your capacity to produce and sell your product?
    
    • Given these constraints, what is your operating capacity (in terms of production, sales, etc.)?
      
  • What is the work flow plan for your operation?
    
  • What work will your company do and what work will you outsource?

Operations Timeline

• When will you make the preparations, such as registering the business name and purchasing equipment, to start the venture?
  
• When will you begin operations and make your first sales?
  
• When will other milestone events occur such as moving operations to a larger facility, offering a new product line, hiring new key employees, and beginning to sell products internationally?
  
• Sometimes it is useful to include a graphical timeline showing when these milestone events have occurred and are expected to occur

Completing the operation plans further adds to the overall business plan.

Business Structure and Other Set-up Elements

• Somewhere in your business plan you must indicate what legal structure your venture will take. Your financial statements, risk management strategy, and other elements of your plan are affected by the type of legal structure you choose for your business. For example, all partnerships should have a clear agreement outlining the duties, expectations, and compensation of all partners as well as the process of dissolution. Please Note: Spreadsheet templates are formatted for corporations and will need to be formatted for other forms of businesses.
  • Sole Proprietorship
  • Partnership
  • Limited Partnership
  • Corporation
  • Cooperative
• As part of your business set-up, you need to determine what kinds of control systems you should have in place, establish necessary relationships with suppliers and prior to your start-up, and generally deal with a list of issues like the following. Many of your decisions related to the following should be described somewhere in your business plan:
  • Choose name
  • Check zoning, equipment prices, suppliers, etc.
  • Choose location
  • Arrange lease terms, leasehold improvements, signage, pay deposits, etc.
  • Get business license, permits, etc.
  • Set up banking arrangements
  • Set up legal and accounting systems (or professionals)
  • Order equipment, locks and keys, furniture, etc.
  • Recruit employees, set up payroll system, benefit programs, etc.
  • Train employees
  • Test the products/services that will be offered
  • Test the systems for supply, sales, delivery, and other functions
  • Decide on graphics, logos, promotional methods, etc.
  • Order business cards, letter head, etc.
  • Clearly communicate suppliers, why they are preferred, and set up necessary agreements
  • Buy inventory, insurance, etc.
  • Revise business plan
  • .... And many more things ... including, when possible, attracting purchased orders in advance of start-up through personal selling (by the owner, a paid sales force, independent representatives, or by selling through brokers wholesalers, catalog houses, retailers), a promotional campaign, or through other means

Start-up

• What is required to start-up your business including the purchases and activities that must occur before you make your first sale?
  
• When identifying capital requirements for start-up a distinction should be made between fixed capital requirements and working capital requirements

Fixed Capital Requirements

• What fixed assets, including equipment and machinery, must be purchased so your venture can conduct its business?
  
• This section may include a start-up budget showing the machinery, equipment, furnishings, renovations, and other capital expenditures required prior to operations commencing
  
  • If relevant you might include information showing the financing required ... fixed capital is usually financed using longer-term loans

Working Capital Requirements

• What money is needed to operate the business (separately from the money needed to purchase fixed assets) including the money needed to purchase inventory and pay initial expenses?
  
• This section may include a start-up budget showing the cash required to purchase starting inventories, recruit employees, conduct market research, acquire licenses, hire lawyers, and other operating expenditures required prior to starting operations
  
  • If relevant you might include information showing the financing required ... working capital is usually financed with operating loans, trade credit, credit card debt, or other forms of shorter-term loans

Risk Management Strategies

• Include descriptions of the organization's risk exposure
  
  • Enterprise – liability exposure for things like when someone accuses your employees or products you sell of injuring them.
    
  • Financial – securing loans when needed and otherwise having the right amount of money when you need it
  • Operational – securing needed inventories, recruiting needed employees in tight labour markets, customers you counted on not purchasing product as you had anticipated, theft, arson, natural disasters like fires and floods, etc.
    
• Always include descriptions of the planned strategies for managing each of the risks identified. Identify potential risk exposures, their consequences, risk potential, and mitigation strategies (Figure 8).
  
  • Avoid – choose to avoid doing something, outsource, etc.
    
  • Reduce – through training, assuming specific operational strategies, etc.
    
  • Transfer – insure against, outsource, etc.
    
  • Assume – self insure, accept, etc.
    

Figure 8 – Risk Management Strategies

Completing a risk management plan further adds to the overall business plan.

Operating Processes

• What operating processes will you apply?
  
• Depending upon the type of business for which you are creating your plan you will need to describe different things:
  
  • Retail and wholesale operations
    
    • How will you ensure your cash is managed effectively?
      
    • How will you schedule your employees?
      
    • How will you manage your inventories?
      
    • If you will have a workforce, how will you manage them?
      
    • etc.
      
  • Service operation
    
    • How will you bill out your employee time?
      
    • How will you schedule work on your contracts?
      
    • etc.
      
  • Manufacturing operation
    
    • How you will manufacture your product (process flow, job shop, etc.?)
      
    • How will you maintain quality?
      
    • How will you institute and manage effective financial monitoring and control systems that provide needed information in a timely manner?
      
    • How will you manage expansion?
      
    • etc.
      

Facilities

• May include planned layouts for facilities

Organizational Structure

• May include information on Advisory Boards or Board of Directors from which the company will seek advice or guidance or direction
  
• May include an organizational chart
  
• Can be a nice lead-in to the Human Resources Plan