What Role Will Operations Play in Your Company?

This will depend on the nature of your business. If you’re selling a consumer good, it will be important to make sure you can get your products to your clients at the time you promise. A service company relies on an operational plan to make sure customers are seen in an efficient manner. When writing your business plan, focus on where production and operational efficiencies are needed to help the company succeed, including buying power and economies of scale.

Where Will You Get Your Sourcing Materials?

This mostly applies for startups selling goods, rather than services. In this section of the business plan, spell out what raw materials are needed to make your product and from where you plan to get them. Sourcing can offer a huge cost advantage (or disadvantage) in the production stage, so it is important to do research on this. The price on commoditized products such as wood and plastic will likely be similar regardless of where you get them, but there could be a lot of variability if you require specialized materials.

Can You Outsource Any of This?

Sometimes the best production strategy is to let someone else handle it. As a startup, you’re unlikely to have the capital to build your own factory to produce your product, so outsourcing to a manufacturing company is probably already in your plans. Look for a manufacturer, either domestic or foreign, who has experience producing goods similar to yours. Companies such as UPS, FedEx and DHL are no longer just package-shipping companies: They all offer supply-chain management services to help firms who want to offload that responsibility, and whose scale makes them more efficient.

Balance Opportunity Cost with Surplus Charges

An accurate projection of the demand for your product is key to a successful operational strategy. Remember to consider opportunity costs when placing an order. If you’re selling sweaters for $50, and you run out, every person who wanted a sweater and couldn’t get one represents a missed opportunity of $50 in revenue. Of course, if you order too many sweaters, you’ll be left with surplus inventory.

In your business plans, offer ideas of how you will unload any surplus. For example, selling slow-moving items to a liquidator can bring in some additional revenue, while donating surplus goods to a nonprofit can yield a nice tax deduction. Both methods reduce the cost associated with maintaining the inventory, such as warehousing and handling or disposing of the items yourself.

Be Diligent

It’s not uncommon for entrepreneurs to get tripped up at this stage of planning. Many new business owners have minimal experience in operations and production. Whether you develop this strategy yourself or bring in a consultant to help, be sure your business plan clearly states the role operations will play in your company, who will be involved in establishing this infrastructure and what the potential costs are.

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From Daniel Richards
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Here’s a look at some of the available strategies for entrepreneurs:

Exit Strategies for Long-Term Involvement

• Let it run dry: This can work especially well in small businesses like sole proprietorships. In the years before you plan to exit, increase your personal salary and pay yourself bonuses. Make sure you are on track to settle any remaining debt, and then you can simply close the doors and liquidate any remaining assets. With the larger income, naturally, comes a larger tax liability.
• Sell your shares: This works particularly well in partnerships such as law and medical practices. When you are ready to retire, you can sell your equity to the existing partners, or to a new employee who is eligible for partnership. You leave the firm cleanly, plus you gain the earnings from the sale.
• Liquidate: Sell everything at market value and use the revenue to pay off any remaining debt. This is a simple approach, but also likely to reap the least revenue. Since you are simply matching your assets with buyers, you probably will be eager to sell and therefore at a disadvantage when negotiating.

Exit Strategies for Short-Term Involvement

• Go public: The dot-com boom and bust reminded everyone of the potential hazards of the stock market. While you may be sitting on the next Google, IPOs take much time to prepare and can cost anywhere from several hundred thousand to several million dollars, depending on the exchange and the size of the offering. However, the costs can often be covered by intermediate funding rounds.
• Merge: Sometimes, two businesses can create more value as one company. If you believe such an opportunity exists for your firm, then a merger may be your ticket to exit. If you’re looking to leave entirely, then the merger would likely call for the head of the other involved company to stay on. If you don’t want to relinquish all involvement, consider staying on in an advisory role.
• Be acquired: Other companies might want to acquire your business and keep its value for themselves. Make sure the offered sale price meshes with your business valuation. You may even seek to cultivate potential acquirers by courting companies you think would benefit from such a deal. If you choose your acquirer wisely, the value of your business can far exceed what you might otherwise earn in a sale.
• Sell: Selling outright can also allow for an easy exit. If you wish, you can take the money from the sale and sever yourself from the company. You may also negotiate for equity in the buying company, allowing you to earn dividends afterwards — it clearly is in your interest to ensure your firm is a good fit for the buyer and therefore more likely to prosper.

From Daniel Richards

Business planning is a vital component of starting and growing a successful enterprise. Many different templates and variations of business plans exist, so you must choose the right one for your purpose and your enterprise.

Who is the intended audience?

Some business plans are designed for internal audiences (owners, employees, Boards of Directors or Advisors, and senior management) for an existing organization for the purposes of implementing a growth strategy and may be referred to as a strategic plan. It can also serve as a guide solely for the owner of a new business to help clarify their vision and goals.

A business plan could also be for external audiences (investors, clients, suppliers, new hires, bankers and other lenders such as government) for the purposes of attracting financing, talent or suppliers for a new or existing business. A document for this audience may initially take the form of a condensed version of the larger business plan, especially for attracting funding. This version is known as the business opportunity document or business funding proposal and is typically followed by the business plan itself. Obtaining financing is a significant issue for many businesses and this tool can be an enormous advantage when approaching investors or lenders.

What goes in the business plan?

The business plan is a comprehensive document that is created to describe the future of the venture, consisting of:

* executive summary
* company history and background
* clear description of the business concept and value proposition
* marketing analysis including competitive analysis and market development plan
* production and operations assessment and development plan
* financial assessment and projections
* management and human resources assessment and plan
* implementation plan
* identification of resources
* proposed deal structure for investors (if appropriate)
* survival strategy describing inherent risks and mitigation strategies
* growth strategy
* exit strategy
* appendices

Some of these may be longer or shorter, or even optional, depending on the format and the intended audience.

The reader should be able to clearly understand what the value proposition is, why the business will succeed and how it is going to achieve this success. If the plan is being pitched to investors, the investor should understand as soon as possible what the proposed deal structure is and what the return will be. To do this you must support any claims and assumptions about what the business will do with realistic research. Unrealistic financial projections are a sure fire way to lose investors’ interest or for an owner to lose perspective.

How long should it be?

A typical business plan may consist of 20 pages although some business plans can be 100 pages or more, depending on the purpose of the plan, who the target is, and the nature of the business. For example, if the plan is going to be used to attract investors it may require more detail than if it was to be used internally to communicate a growth strategy, while if the business concept is relatively simple it may be conveyed more briefly than a more complicated enterprise.

Should I use a template? Or a consultant?

There are so many business plan templates to choose from that it’s tempting to simply cut and paste or hire outside consultants to write your business plan. However, it’s best for the owner(s) of an organization to write the plan, even if you decide to bring in outside help to review and refine it. Often entrepreneurs do not take the time, nor do they feel a business plan is necessary for their businesses to succeed. They often think that taking time to write a business plan is just impossible and would be a waste of time. But when they learn how the process could benefit their organization they are more likely to get started! Even if there is no immediate audience for the document itself, the planning process itself is invaluable.

Conclusion

A business plan is an easy way to communicate the business idea to the prospective audience, to assist in preventing problems, and to identify growth strategies, as well as a tool used in the search for funding. A business plan should be used as a tool for the entrepreneur to guide the business operations rather than a strict manual or blueprint to be adhered to and implemented exactly. The business plan can also be designed to help owners of businesses to clarify the strategy of a particular business and provide insight to manage risks.

Entrepreneurial training is becoming a significant component of many learning institutions in response to the escalating numbers of business start-ups worldwide. Business plan writing is being taught to would-be entrepreneurs more than ever before. New venture analysis is an integral part of the business plan creation process as is what to do with the opportunity once it is identified.

Although being a successful entrepreneur is attractive, over 70% of new businesses do not survive after year two. Having a business and knowing what to do with it are very separate issues and creating a well-executed business plan for the right reasons will enhance the odds that your venture will be one of the ones to succeed.

From Shelley Peever, MB