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Explain the daily operation of the business, its location, equipment, people, processes,
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VI. Operational Plan
Explain the daily operation of the business, its location, equipment, people, processes,
and surrounding environment.
How and where are your products or services produced?
Explain your methods of:
• Production techniques and costs
• Quality control
• Customer service
• Inventory control
• Product development
What qualities do you need in a location? Describe the type of location you’ll have.
Physical requirements:
• Amount of space
• Type of building
• Zoning
• Power and other utilities
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,
and shipping centers?
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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, 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 the space 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)
• Number of employees
• Type of labor (skilled, unskilled, and professional)
• Where and how will you find the right employees?
• Quality of existing staff
• Pay structure
• Training methods and requirements
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• 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?
• What kind of inventory will you keep: raw materials, supplies, finished goods?
• Average value in stock (i.e., what is your inventory investment)?
• Rate of turnover and how this compares to the industry averages?
• Seasonal buildups?
• Lead-time for ordering?
Identify key suppliers:
• Names and addresses
• Type and amount of inventory furnished
• Credit and delivery policies
• History and 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?
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• 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; that is, 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 the following table:
Total Current 30 Days 60 Days 90 Days Over 90 Days
Receivable Aging
You will need a policy for dealing with slow-paying customers:
• When do you make a phone call?
• When do you send a letter?
• When do you get your attorney to threaten?
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Managing Your Accounts Payable
You should also age your accounts payable, what you owe to your suppliers. This helps
you plan whom to pay and when. Paying too early depletes your cash, but paying late
can cost you valuable discounts and can damage your credit. (Hint: If you know you
will be late making a payment, call the creditor before the due date.)
Do your proposed vendors offer prompt payment discounts?
A payables aging looks like the following table.
Total Current 30 Days 60 Days 90 Days Over 90 Days
Accounts Payable

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  • Explain the daily operation of the business, its location, equipment, people, processes,

    Table of Contents 1.0 EXECUTIVE SUMMARY................................. 2 2.1 GENERAL COMP

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    Attachment: Business Plan.doc