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The operations and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
In fact, within the operations plan you'll develop the next set of financial tables that will supply the foundation for the "Financial Components" section. The financial tables that you'll develop within the operations plan include:. There are two areas that need to be accounted for when planning the operations of your company.
The first area is the organizational structure of the company, and the second is the expense and capital requirements associated with its operation. The organizational structure of the company is an essential element within a business plan because it provides a basis from which to project operating expenses. This is critical to the formation of financial statements, which are heavily scrutinized by investors; therefore, the organizational structure has to be well-defined and based within a realistic framework given the parameters of the business.
Although every company will differ in its organizational structure, most can be divided into several broad areas that include:. These are very broad classifications and it is important to keep in mind that not every business can be divided in this manner. In fact, every business is different, and each one must be structured according to its own requirements and goals. Terence P. McGarty in his book, Business Plans That Win Venture Capitalwriting a service business plan, lists four stages for organizing a business:, writing a service business plan.
Organize these tasks into departments that produce an efficient line writing a service business plan communications between staff and management. Establish the function of each task and how it will relate to writing a service business plan generation of revenue within the company. Once you have structured your business, writing a service business plan, however, you need to consider your overall goals and the number of personnel required to reach those goals.
In order to determine the number of employees you'll need to meet the goals you've set for your business, you'll need to apply the following equation to each department listed in your organizational structure:.
In this equation, C represents the total number of customers, S represents the total number of customers that can be served by each employee, writing a service business plan, and P represents the personnel requirements. For instance, if the number of customers for writing a service business plan year sales is projected at 10, and one marketing employee is required for every customers, you would need 51 employees within the marketing department. Once you calculate the number of employees that you'll need for your organization, you'll need to determine the labor expense.
The factors that need to be considered when calculating labor expense LE are the personnel requirements P for each department multiplied by the employee salary level SL, writing a service business plan. Therefore, the equation would be:.
Once the organization's operations have been planned, the expenses associated with the operation of the business can be developed. These are usually referred to as overhead expenses.
Overhead expenses refer to all non-labor expenses required to operate the business, writing a service business plan. Expenses can be divided into fixed -- those that must be paid, usually at the same rate, regardless of the volume of business -- and variable or semivariable -- those which change according to the amount of business. In order to develop the overhead expenses for the expense table used in this portion of the business plan, you need to multiply the number of employees by the expenses associated with each employee.
Therefore, if NE represents the number of employees and EE is the expense per employee, the following equation can be used to calculate the sum of each overhead OH expense:, writing a service business plan. In addition to the expense table, you'll also need to develop a capital requirements table that depicts the amount of money necessary to purchase equipment you will use to establish and continue operations.
It also illustrates the amount of depreciation your company will incur based on all equipment elements purchased with a lifetime of more than one year. In order to generate the capital requirements table, writing a service business plan, you first have to establish the various elements within the business that will require capital investment. For service businesses, writing a service business plan, capital is usually tied to the various pieces of equipment used to service customers.
Capital for manufacturing companies, on the other hand, is based on the equipment required in order to produce the product. Manufacturing equipment usually falls into three categories: testing equipment, assembly equipment, and packaging equipment. With these capital elements in mind, you need to determine the number of units or customers, in terms of sales, that each equipment item can writing a service business plan handle.
This is important because capital requirements are a product of income, writing a service business plan, which is produced through unit sales. In order to meet sales projections, a business usually has to invest money to increase production or supply better service. In the business plan, capital requirements are tied to projected sales as illustrated in the revenue model shown earlier in this chapter. This leads us to another factor within the capital requirements equation, and that is equipment cost.
If you multiply the cost of equipment by the number of customers it can support in terms of sales, it would writing a service business plan in the capital requirements for that particular equipment element. Therefore, you can use an equation in which capital requirements CR equals sales S divided by number of customers NC supported by each equipment element, multiplied by the average sale ASwhich is then multiplied by the capital cost CC of the equipment element.
Given these parameters, your equation would look like the following:. The capital requirements table is formed by adding all your equipment elements to generate the total new capital for that year. During the first year, total writing a service business plan capital is also the total capital required. For each successive year thereafter, total capital TC required is the sum of total new capital NC plus total capital PC from the previous year, less depreciation Donce again, from the previous year.
Therefore, your equation to arrive writing a service business plan total capital for each year portrayed in the capital requirements model would be:. Keep in mind that depreciation is an expense that shows the decrease in value of the equipment throughout its effective lifetime.
For many businesses, depreciation is based upon schedules that are tied to the lifetime of the equipment. Be careful when choosing the schedule that best fits your business. Depreciation is also the basis for a tax deduction as well as the flow of money for new writing a service business plan. You may need to seek consultation from an expert in this area.
The last table that needs to be generated in the operations and management section of your business plan is the cost of goods table. This table is used only for businesses where the product is placed writing a service business plan inventory. For a retail or wholesale business, cost of goods soldor cost of salesrefers to the purchase of products for resale -- the inventory. The products that are sold are logged into cost of goods as an expense of the sale, while those that aren't sold remain in inventory.
For a manufacturing firm, cost of goods is the cost incurred by the company to manufacture its product. This usually consists of three elements:. As in retail, writing a service business plan, the merchandise that is sold is expensed as a cost of goods, while merchandise that isn't sold is placed in inventory.
Cost of goods has to be accounted for in the operations of a business. It is an important yardstick for measuring the firm's profitability for the cash-flow statement and income statement. In the income statement, writing a service business plan, the last stage of the manufacturing process is the item expensed as cost of goods, but it is important to document the inventory still in various stages of the manufacturing process because it represents assets to the company.
This is important to determining cash flow and to generating the balance sheet. That is what the cost of goods table does. It is one of the most complicated tables you'll have to develop for your business plan, but it is an integral part of portraying the flow of inventory through your operations, the placement of assets within the company, and the rate at which your inventory turns. In order to generate the cost of goods table, you need a little more information in addition to what your labor and material cost is per unit.
You also need to know the total number of units sold for the year, the percentage of units which will be fully assembled, the percentage which will be partially assembled, and the percentage which will be in unassembled inventory. Much of these figures will depend on the capacity of your equipment as well as on the inventory control system you develop. Along with these factors, you also need to know at what stage the majority of labor is performed.
Part six of seven. Tomorrow, we'll cover the financial factors that go into your plan. Tips are updated daily at am PST or EDT. Entrepreneurs require more than just money, which is why we aim to empower you, as well as act as a catalyst for value creation. Video Webinars Start A Business Subscribe Books. search person. Franchise Home Franchise Ranking Business Opportunities List Franchises For Sale Franchise Suppliers Directory.
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