Last month, we discussed how to position your small business for success by focusing on the five pillars every small business needs to function and operate successfully. To recap, these included information technology, accounting, human resources, sales/marketing and operations.
Really, for any business, an operations plan is its foundational pillar. Your operating plan describes how you will structure your company and how you will actually carry out everything you detail in your business plan. As with most things in life, a plan is meaningless without an execution strategy!
The objective of an operations plan is for the business owner to be able to walk through the process of the daily business operation. For a manufacturer, the operations plan can include plans for ordering, storing, selling and producing or, for a service company, the operations plan can describe how its services are offered and performed.
An operations plan is not only important to you as the small business owner. It is also important to investors, management and your employees. Don’t assume that anyone else knows how to run your business on a day-to-day basis unless you have clarified your expectations.
Here are a few key components to include in a business’ operations plan.
Where will your business be located and why will this location and the surrounding area be effective? Do you own or lease the property? If you’re likely to outgrow the space, how will you handle a move or expansion?
If you are a virtual business, explain why you have chosen to operate this way. Additionally, a contingency plan of action should be included if your business is highly sensitive to weather conditions or factors that are beyond your control.
Supply and inventory management
Outline which companies will be your suppliers and vendors and what terms you have established. Will they extend credit to your business and, if so, how much and on what conditions? If you are working with a single supplier, you may have little bargaining power with regard to price and delivery schedule.
Maintain good relationships with your suppliers so you can effectively manage your inventory. Too much inventory wastes money and too little can cause you to lose out on sales.
Production and distribution
An effective operations plan will also describe each major state of production, including any outsourced processes and the technology used. Don’t assume the person reading your plan understands all of your industry’s jargon and acronyms, so keep it simple. Detail what and how much you are producing and how long that process takes. What are your methods of quality control, and how will you distribute and sell your product or service?
The people executing your operations plan are your team of managers and employees. Outline who they are, what their qualifications are and what their responsibilities will be. Include an organizational chart and what legal form of ownership it will use (sole proprietorship, partnership, LLP, LLC, corporation, etc.) and the chain of command. What is your company’s business philosophy and culture and why are they critical to your success?
As you develop each component of your operating plan, be sure to examine the benefit to your customers, what competitive advantage or disadvantage your firm has in that area and how you will deliver quality customer service. You should also include some general projections of your expectations to change and grow over time to meet the demand for increased sales.
Over the life of the business, the manner in which you do business changes significantly, as you address competitors, changes in technology, the economy and marketing trends. In addition, your business may grow from a small one- or two-person operation into a larger scale business with the need for additional space and staff.
Remember that an operations plan is a living document — you’ll need to keep changing and updating as you grow and learn — but the key is to develop a plan and then execute it.
Cherelle Cortez is the diversity manager at the Rives E. Worrell Co., a JE Dunn Construction Company. She can be reached at Cherelle.Cortez@jedunn.com or 912-354-1386.