How to Write a Business Plan Part III

573_3237887You have developed your business model and your marketing plan. Now, in Part III of my four-part series on how to write a business plan, it’s time to develop your operations plan, budget and sales projections. This is where you go from dreamer to business owner, folks! If your business is not designed to make money, you just have an expensive hobby.

The Operations Plan 

This section explains how you plan to operate the business. Managing your enterprise is serious work. As the boss, you need to orchestrate how the business will run while keeping costs down and maximizing profits. You need to have a clear process for delivery, handling customer complaints, determining how many employees you need, taking markdowns and so much more. If you are manufacturing a product, it is even more important to track all the raw materials, processes, finished and shipped goods and how to work your way through the many emergencies, large and small. Your business plan should include as much detail as you can so anyone can see how you expect things to work.

Running your business can be as simple as going to a big box retailer and stocking up on more hot dogs, rolls, condiments, napkins, soda, etc. for that week’s business. On the contrary, it can be as complicated as having shirts made by a foreign manufacturer, getting them through customs, price-tagged for sale, stocked in the store, scheduling help and so much more. Other issues include location, business permits, inventory management, power and communications needs, insurance requirements, additional construction needs and zoning requirements. Any of these areas can stop you from opening your doors and should be addressed as a detailed part of your plan. Personnel issues like pay, skill sets needed, training and total headcount should also be touched on as they have a direct impact on your operations plan and your financial projections.

If you have the time, I strongly recommend creating a process flow worksheet that outlines every activity from receipt of raw materials to final customer sale.

Operations, as you can see, is all about the details – some of which could keep you from opening your business. A page on your business operation will get you thinking about what it will take to get your business up and running.

  • What will be your top priorities?
  • How will you measure the results of your processes?
  • What is your plan for sources and uses of cash?
  • How will you manage growth proactively?

Your Management Team

One of the essential ingredients for a successful small business is the experience the business owner brings to the table. Highlighting your expertise and background is critical to giving your business credibility, particularly in the early years. My first business was a multimedia production company where my background as a television producer was a key element to my clients trusting me with their marketing projects. Your knowledge of your industry and your relationships with potential strategic alliances and customers will be an important asset to your business. You will probably start out as a management team of one. As your business grows, however, any new employees should bring with them skill sets that might include diverse business experiences, significant business contacts, demonstrated leadership and/or technical savvy.

Revenue Models/Cash Flow Projections  

The financial plan lays out your operational budget and sales expectations for your business. Typically, the first thing any investor or bank will want to know is at how much money your business will generate and how soon will it be profitable (you might have a need to know as well). You will need to create a tight, well thought out, realistic financial plan that includes the amount of personal financial risk you are putting on the table. If you are not comfortable with accounting, you should engage an accountant or a seasoned bookkeeper to help you pull together your initial financial projections. Once you start doing business, it’s a good idea to work alongside your accountant for a while; It’s the best way to get a grasp on the financial inner workings of your company. When it comes to developing sales projections, it is important to be conservative and realistic. I like to focus sales projections around 30-day goals.

Know your numbers and be able to defend them. The worst thing you can do is develop financial projections that don’t make sense, particularly if you plan to pursue funding. The plan should also include a cash-flow projection and a break-even analysis. The process of developing your financial plan will help you understand how many sales must be generated to cover your expenses and eventually make you a few pennies.

Your financial plan is your best estimate of your company’s financial future. It is an estimate because you really have no idea how your company will perform financially until you operate the business for six months to a year. Your plan should include a one-year operating budget and up to three years of company sales projections.

Review the other posts in this series:

  • Part I: Developing your business model
  • Part IIThe components of a business plan

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