Operational Plan

Manufacturing/deployment plan
Information and communications technology plan
o Staffing needs
o Training requirements
o Intellectual property plan
o Acquisition plan
o Organizational learning plan
Cost allocation model

The plan outlines how one would service their clients cost effectively.

A. Manufacturing/deployment Plan

Supply chain requirements

Production inputs
Facility requirements - size, layout, capacity, location
Equipment requirements
Warehousing needs for raw materials, finished goods
Space requirements

B. Information and Communications Technology Plan

Systems needed
Operations: Billing, HR, SCM, CRM, Knowledge bases, etc.
Websites: internal, public
Security and privacy requirements
Hardware requirements
Off-the-shelf software needed
Custom development requirements

B.1 Staffing needs

List of roles
Management structure
Head count approval
For each role
Job descriptions
Number of employees
 Proposed compensation
Availability
Training plan

B.2 Training requirements

Training requirements should look to address two issues - a benefit to motivate staff and developing
the capability of the organization to deliver the business objectives. Ideally all training requirements
should be based on as an assessment of the business plan objectives, the required competence and
capability to deliver these objectives and understanding of the current capacity and capability of the
organization. Simple question to ask to assess the appropriateness of the training - as a result of the
training how much better will the organization be at delivering its objectives. Remember that training
covers a wide range of activities from project work and on the job training to professional
qualifications. Most learning takes place outside of formal training activities.

B.3 Intellectual Property Plan

Intellectual property inventory

Portfolio development plan

B.4 Acquisition plan

Some business plans gain competitive advantage by buying companies up and down the value chain.
Some gain competitive advantage by buying up companies and consolidating them. Sometimes a
business plan will seek to earn a superior return by adding superior management talent to an existing
weak company.
When acquisitions form a major part of the business strategy, the acquisition plan needs to be
included in the business plan.

Acquisition strategy
Proposed acquisition targets
Effect on market structure (if consolidation plan is being proposed)

B.5 Organizational learning plan

The organizational learning plan discusses what lessons will be learned from the marketing,
operational, and finance plans and how those lessons will be consolidated to gain strategic
advantage.

Market sensing - organization's method for collecting information about customers (George Day)
Strategic Staircase - the accumulation of future competencies by building on existing
competencies. (Michael Hays, Costas Markides)
 C. Cost allocation model
If variable costs play an important role in the business plan, it may be helpful to include a cost
allocation model. This is particularly true if one has a unique business model that creates competitive
advantage by transforming traditionally fixed costs into variable costs.

Fixed cost
Variable costs Operational plan

Writing The Business Plan

The Operating Plan Section of the Business Plan

When writing the business plan, the operating plan section describes the physical necessities of your
business' operation, such as your business' physical location, facilities and equipment. Depending on
what kind of business you'll be operating, it may also include information about inventory
requirements and 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 your readers in the operating section of the business plan: show what
you've done so far to get your business off the ground (and that you know what else needs to be
done) and demonstrate that you understand the manufacturing or delivery process of producing your
product or service.

So divide the operating section of the business plan into two parts, starting with the Stage of
Development section.

In this section, describe how your product or service will be made, and identify the problems that may
occur in the production process.

Then show your awareness of your industry's standards and regulations by telling which industry
organizations you are already a member of and/or which organizations you plan to join, and telling
what steps you've taken to comply with the laws and regulations that apply to your industry.

Explain 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.

Explain the quality control measures that you've set up or are going to establish.

When you're writing this section of the operating plan for the business plan, start by explaining what
you've done "to date" to get the business operational, followed by an explanation of what still needs to
be done. Follow this with a subsection titled "Risks" that outlines the potential problems that may
interfere with the production process and what you're going to do to negate these risks. The rest of
the development stage part of the operating plan will be divided into subsections such as "Industry
Association Membership", "Suppliers" and "Quality Control".
The second section of the operating plan part of the business plan is the Production Process section.
Details of how to prepare and write this section of the business plan are on the next page.

While you can think of the Stage of Development part of the operating plan as an overview,
the Production Process section lays out the details of your business' day to day operations.

Remember, your goal for writing this section of the business plan is to demonstrate your
understanding of the manufacturing or delivery process for your product or service, so you need to let
the readers of your business plan know that you've crossed all your 'tees'.

Make sure you include all these details of your business' operation:

General: Do an outline of your business' day to day operations, such as the hours of operation, and
the days the business will be open. If the business is seasonal, be sure to say so.

The physical plant: What type of premises are they and what is the size and location? If it's
applicable, include drawings of the building, copies of lease agreements, and/or 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.

Equipment: 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.

Assets: 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, such as zoning approvals.

Materials: Tell 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.

Production: 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 how you'll
deal with potential problems such as rush orders.

Inventory: 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.

Cost: Give details of product cost estimates.

When you're writing this section of the business plan, you can use the headings above as
subheadings and then provide the details in paragraph format. If a topic does not apply to your
particular business, leave it out.
 The best part is that once you've worked through this business plan section, you'll not only have a
detailed operating plan to show the readers of your business plan but have a convenient list of what
needs to be done next to make your business a reality

OPERATIONAL PLAN
Explain the daily operation of the business, its location, equipment, people, processes, and surrounding
environment.

Production

How and where are your products/services produced?

Explain your methods of:

Production techniques & costs

Quality control
Customer service
Inventory control
Product development

Location

What qualities do you need in a location? Describe the type of location you will have.

Physical requirements:

Space; how much?

Type of building
Zoning
Power and other utilities

Access:

Is it important that your location be convenient to transportation or to suppliers?

Do you need easy walk-in access?

What are your requirements for parking, and proximity to freeway, airports, railroads, shipping centers?

Include a drawing or layout of your proposed facility if it is important, as it might be for a manufacturer.

Construction?

Most new companies should not sink capital into construction, but if you are planning to build, then costs and
specifications will be a big part of your plan.

Cost:

Estimate your occupation expenses, including rent, but also including: maintenance, utilities, insurance, and
initial remodeling costs to make it suit your needs. These numbers will become part of your financial plan.

What will be your business hours?

Legal Environment
Describe the following

Licensing and bonding requirements

Permits
Health, workplace or environmental regulations
Special regulations covering your industry or profession
Zoning or building code requirements
Insurance coverage
Trademarks, copyrights, or patents (pending, existing, or purchased)

Personnel

Number of employees
Type of labor (skilled, unskilled, professional)
Where and how will you find the right employees?
Quality of existing staff
Pay structure
Training methods and requirements
Who does which tasks?
Do you have schedules and written procedures prepared?
Have you drafted job descriptions for employees? If not, take time to write some. They really help
internal communications with employees.
For certain functions, will you use contract workers in addition to employees?

Inventory

What kind of inventory will be kept: raw materials, supplies, finished goods?
Average value in stock (i.e., what is your inventory investment)?
Rate of turnover and how this compares to industry averages?
Seasonal buildups?
Lead-time for ordering?

Suppliers

Identify key suppliers.

Names & addresses

Type & amount of inventory furnished
Credit & delivery policies
History & reliability

Should you have more than one supplier for critical items (as a backup)?

Do you expect shortages or short term delivery problems?

Are supply costs steady or fluctuating? If fluctuating, how would you deal with changing costs?

Credit Policies

Do you plan to sell on credit?

Do you really need to sell on credit? Is it customary in your industry and expected by your clientele?
If yes, what policies will you have about who gets credit and how much?

How will you check the creditworthiness of new applicants?

What terms will you offer your customers; i.e., how much credit and when is payment due?

Will you offer prompt payment discounts (hint: do this only if it is usual and customary in your industry).

Do you know what it will cost you to extend credit? Have you built the costs into your prices?

Managing your Accounts Receivable

If you do extend credit, you should do an aging at least monthly, to track how much of your money is tied up
in credit given to customers, and to alert you to slow payment problems. A receivables aging looks like this:
Table 2: Accounts Receivable Aging

You will need a policy for dealing with slow paying customers.

When do you make a phone call?

When send a letter?

When get your attorney to threaten?

Managing your Accounts Payable

You should also age your Accounts Payable, what you owe to your suppliers. This helps you plan who to
pay and when. Paying too early depletes your cash, but paying late can cost you valuable discounts and
damage your credit. (Hint: if you know you will be late making a payment, call the creditor before the due
date. It tends to relax them.)

Are prompt payment discounts offered by your proposed vendors?

A payables aging looks like this:

Table 3: Accounts Payable Aging

Operational Plan
Terra Engineering
The following section will identify the proposed operational plan for Terra Engineering. Included are the
general operating procedures, human resources, insurance, and working capital requirements of the
business. Also included is a table outlining the office space requirements, asset acquisition and an outline
of Terra Engineering's operational workflow.

General Operating Hours

Terra Engineering intends to operate Monday thru Friday from 9 am to 5 pm. Terra Engineering will be
operational year round.

Human Resources

Mr. Johnson and Mr. Smith will be the sole employees of Terra Engineering for the first two years of
operation. When additional human resources are needed, Terra Engineering has identified the persons
qualified and able to assist on a contract basis for the same rate as the owner. They include:

Mr. Wes Aaron, and environmental engineering technician will be sub-contracted to complete work as
needed. It is estimated that Mr. Aaron will eventually be hired full time by Terra Engineering once demand
warrants growth.

Mrs. Leanne White holds a Masters in Environmental Engineering and will also be sub-contracted to
perform work for the company. Eventually, Terra Engineering intends to hire Mrs. White full time.

Mr. Charles Pearson holds a Bachelors of Science Degree in Environmental Engineering and has a vast
technical experience base in the environmental assessment area and will be retained when needed.

Once the business reaches 60% of its operational capacity this will represent 1300 hours, Terra
Engineering will offer the above environmental professionals full time positions. Also at this time, an
administrative assistant will be sought.

A professional user of Auto Cad will be sought to perform various jobs for the company. It is unknown at
this time who will fill this position, however, job advertisements will be put in the local papers and
organizations to attract a good pool of respondents.

Once hired, all employees will be covered by the Workers Safety and Insurance Board and covered for
Employment Benefits.

Insurance Requirements

Terra Engineering will have to incur costs for business liability insurance. The estimated cost for this
requirement is $4,000 per year.

Operating Capital Requirements

Due to the demands imposed at start up, Terra Engineering will require that the business have sufficient
working capital to meet all operational responsibilities of the business for the first three months.

It is estimated that the business will need approximately $20,000 in working capital to sustain and ensure
the business meets all opening and on-going financial obligations.

Also, throughout the year there tends to be periods of low activities. Consequently, the company will
experience financial pressures during these months. While much of this time will be spent developing
proposals and marketing strategies, there will be a need to maintain sufficient working capital to cover
these periods.

A long term strategy to maintain a positive cash flow during these periods will be to diversify the company
and develop environmental training programs for certain communities. These training programs will be
given during these months.
Office Requirements and Asset Acquisitions

Terra Engineering will lease office space on located at:

459 Duncan Avenue, Suite 1003

Detroit, Michigan

The office space is leased and will accommodate the necessary office equipment such as computers, fax
machine, photo copier, and other engineering equipment. This facility will require an estimated $5,000 to
renovate in a style that is aesthetically pleasing to the clients as well as the owners.

These facilities will be leased at $500 per month. In addition, Terra Engineering will require specialized
environmental equipment. These are the estimated costs associated with those investments:

Office Renovations $5,000

Office Equipment and Furniture $6,000
Specialized Field Equipment $27,000
Specialized Software $10,000
Total Capital Costs $48,000

The above noted capital purchases will increase work effectiveness, enhance professionalism and will
prepare the business for the forecasted demand for services. Further, the equipment may be leased out to
partner associates during times of low activity.

Operational Workflow

As with any consulting firm, the operational workflow for the business is quite uniform and simple to follow.
The following is a step by step outline of how contracts are completed on a regular basis:

Step 1 Terra Engineering will respond to a request for proposal (RFP) with a professionally prepared
proposal for service;

Step 2 At this point, the potential contract is awarded to either Terra Engineering or other companies
which submitted proposals for services. Therefore, communication is made by the contract to the
successful consulting firm. If Terra Engineering is successfully selected to perform the work, the contract is
then triggered to begin;

Step 3 Terra Engineering will collect a deposit from the client and will begin the project. Deposit values
vary depending upon the size and location of the project;

Step 4 Terra Engineering will go ahead and start the project while keeping communication with the client.
Once the project reaches 60% - 70% completion, funds will be given to the business by the client to
complete the rest of the work;

Step 5 Once the work is completed to the satisfaction of both, Terra Engineering and the client, the final
payment for the contract will be made.

The above operational workflow is very standard, easy to understand and within industry's norm.

Terra Engineering will accept cash, cheque and visa payments. These payments are well within industry
standards. The business will provide credit to larger account holders.

It is estimated that the length and terms of payments are net 30 for all clients. This will allow the business
to avoid cash flow problems. Late payment charges are 2% of the projects outstanding balance.