May  2006      Vol. 15, No. 5  REAP HOME PAGE  A publication of the Center for Rural Affairs    
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An Effective Operations Plan Will Help Your Business

BY JEFF REYNOLDS, REAP PROGRAM CO-DIRECTOR

We all know that having a Business Plan for our businesses is not only important, it is a mandatory requirement if we expect to increase our chances of operating successfully. Carefully thinking out the smallest details can be a huge advantage and difference maker in whether we are successful.

That’s where your operations plan comes in. An operations plan needs to consider the most basic business functions you perform for your business.

WHAT IS AN OPERATIONS PLAN
The Operations section of your business plan describes how you execute the basic functions of your business. The book Business Plan in a Day by Rhonda Abrams states that the Operations section of your business plan is not intended to be an operation manual, but is a brief overview demonstrating that you understand the “nitty-gritty” details that make your business work.

Abrams explains that if you operate a very small business with simple operations, you can omit this section from your business plan. Even so, you should include a paragraph or two in your Company Description section outlining your basic operations.

Operational considerations for your small business are likely to include the following:

>> Location and Facilities -- Describe the benefits of your location and facilities.

Example: My business location has easy access off Highway 77 in the middle of town. There is ample parking for customers, and our building is easily seen and identifiable by travelers.

>> Production and Quality Control -- Describe your production process and methods utilized to ensure consistent quality control.

Example: My business purchases inventory from the premier suppliers in our field. We compare the quality of the product from various suppliers on an ongoing basis. Customers are continually surveyed as to their satisfaction with our merchandise.

>> Inventory Control -- Describe the way in which you manage inventory levels to insure the highest profits possible.

Example: Our inventory is inspected every three months. Any item that has been on the shelf for more than three months is pulled for clearance. After it has been on clearance for two weeks, we move it to our inventory for outlet purchase pickup.
 
>> Supply and Distribution -- Describe your relationships with key suppliers and items such as credit terms, etc.

Example: Since our business is smaller, we purchase cooperatively with several other businesses. This practice allows our business to purchase inventory at a lower cost.

>> Order Fulfillment and Ongoing Customer Service -- Explain how you get your product or service to the customer and detail how customer service is handled.

Example: We rely on in-store sales for order fulfillment, and train all of our personnel on top-notch customer service at our store.

>> Equipment and Technology -- Discuss ways your equipment and technology improves efficiency, saves money, and/or gives your business a competitive edge.

Example: We plan to add a shopping cart to our website that will allow customers to make purchases directly from our website.

>> Financial Control Systems -- You will want to be sure your business has procedures in place surrounding all financial matters. Items such as how invoices are sent out, bills paid, profit and loss statements reviewed, and other business procedures are thought out in this section.

OTHER ITEMS TO CONSIDER
In putting together your Operations Plan, you will also want to consider these items:

  • Identify and prioritize goals.
  • Establish an accounting system.
  • Establish a filing system for keeping important papers.
  • Set up procedures that trace and control the flow of cash.
  • Establish control of accounts receivable.
  • Establish inventory controls.
  • Establish procedures and policies in operating the business.
  • Identify responsibilities of all job titles and positions associated with the business.
  • Identify uncontrollable variables.
  • Honestly assess the downside of the risks involved.
  • Identify any legal liability problems.
  • Establish a backup plan.
  • Efficient operation equals higher profit margin

The Operations section of your business plan does not need to be overly detailed. You will want to save the specific information for your “internal” businesses operations manual.

Understanding and the ability to describe the inner workings of your business shows that you know how to operate your business on a day-to-day basis. There is no question that an efficient operation leads to higher profits and ultimate success for your business, which is the goal of every business!

REAP staff are available if you need help in this area or any other area concerning your startup or existing small business. REAP is here to help you in the areas of small loans, technical assistance, and training/networking opportunities.

The REAP staff directory shows contact information for REAP Business Specialists throughout the state.


Contact: Jeff Reynolds, REAP Program Co-Director for more information, jeffr@alltel.net or 402.656.3091. Information for this article is from Business Plan in a Day by Rhonda Abrams.
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