VI. Operational Plan Explain the daily operation of the business, its location, equipment, people, processes,

VI. Operational PlanExplain the daily operation of the business, its location, equipment, people, processes,and surrounding environment.ProductionHow and where are your products or services produced?Explain your methods of:• Production techniques and costs• Quality control• Customer service• Inventory control• Product developmentLocationWhat 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 utilitiesAccess: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?Page 17 of 31Include a drawing or layout of your proposed facility if it is important, as it might be fora manufacturer.Construction? Most new companies should not sink capital into construction, but if youare planning to build, costs and specifications will be a big part of your plan.Cost: Estimate your occupation expenses, including rent, but also includingmaintenance, utilities, insurance, and initial remodeling costs to make the space suityour needs. These numbers will become part of your financial plan.What will be your business hours?Legal EnvironmentDescribe 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)Personnel• 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 requirementsPage 18 of 31• 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?Inventory• 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?SuppliersIdentify key suppliers:• Names and addresses• Type and amount of inventory furnished• Credit and delivery policies• History and reliabilityShould 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 withchanging costs?Credit Policies• Do you plan to sell on credit?Page 19 of 31• Do you really need to sell on credit? Is it customary in your industry andexpected 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 ispayment due?• Will you offer prompt payment discounts? (Hint: Do this only if it is usual andcustomary in your industry.)• Do you know what it will cost you to extend credit? Have you built the costs intoyour prices?Managing Your Accounts ReceivableIf you do extend credit, you should do an aging at least monthly to track how much ofyour money is tied up in credit given to customers and to alert you to slow paymentproblems. A receivables aging looks like the following table:Total Current 30 Days 60 Days 90 Days Over 90 DaysAccountsReceivable AgingYou 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?Page 20 of 31Managing Your Accounts PayableYou should also age your accounts payable, what you owe to your suppliers. This helpsyou plan whom to pay and when. Paying too early depletes your cash, but paying latecan cost you valuable discounts and can damage your credit. (Hint: If you know youwill 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

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