How to Create an Operating Plan for Your Business Plan

Apr 26, 2023 | Uncategorized

What is an operating plan?

An operating plan outlines how a business will manage its day-to-day operations. It includes information on the physical facilities and equipment needed for production, the manufacturing and business process, inventory management, personnel, regulatory compliance, risk management, and financial projections.

The operating plan is essential to the business plan.  It will provide a comprehensive overview of how the business will function to achieve its goals. It serves as a roadmap for the business owner, investors, and stakeholders to understand the company’s operations and to guide informed decisions.

Beyond defining an operating plan, this post will detail what to include in each section. For example, you’ll find a functional operating plan template, operating plan examples, and details about how to write an operational plan for your business plan.

Using the information provided, you’ll be well-positioned to create an operational plan that helps you meet your business goals.

How is an Operating Plan Different from a Strategic Plan?

An operating plan outlines how a business will manage its day-to-day operations. It is a tactical plan that covers a short-term period of one year or less and focuses on implementing the company’s strategies to achieve its goals. The operating plan deals with the practical aspects of the business, such as production, sales, marketing, and finances with details for each specific department.

On the other hand, a strategic plan is a comprehensive document that outlines long-term company goals and objectives, along with the strategies and tactics required to achieve them. It is a high-level plan that covers a more extended timeframe of three to five years or more. The strategic plan deals with the big-picture aspects of the business, such as market analysis, competitive positioning, growth opportunities, and risk management.

Simple Outline of an Operating Plan

An operating plan will cover the following categories of information. We’ll expand on each category in more detail in the operating plan template below. Plus, we’ll elaborate on how to customize the operating plan for your business and industry.

  • Physical facilities and equipment
  • Manufacturing process
  • Inventory management
  • Personnel
  • Regulatory compliance
  • Risk management
  • Financial projections

Eight Essential Sections for Your Operating Plan Template

The operating plan template below covers the eight essential elements that should be included in your business plan. The aim is to provide an overview so that you capture all the essential information in your business plan operating plan.

You’ll see things that do not apply to your business or industry. The section that follows, provides industry-specific ideas for fine-tuning your plan.

1. Overview of Operations

  • Briefly introduce the company’s operations, including its products/services, location, and any unique aspects of the operations.

2. Facilities and Equipment

  • Describe the business’s physical location, including any facilities or equipment necessary for operation.
  • Discuss any costs associated with the facilities or equipment, and how they will be acquired.

3. Production and Manufacturing

  • Outline the process for creating the company’s products or delivering its services.
  • Discuss any suppliers or vendors necessary for production and any agreements or contracts.

4. Inventory Management

  • Describe how inventory will be tracked and managed, including any software or systems used.
  • Discuss any potential issues with inventory, such as spoilage or obsolescence.

5. Personnel

  • Detail the roles and responsibilities of employees, including management positions and any necessary training.
  • Discuss any employment contracts, benefits, or compensation plans.

6. Regulatory Compliance

  • Explain any regulations or legal requirements the business must comply with, such as licensing or permitting.
  • Discuss any potential legal or regulatory issues that could affect the business.

7. Risk Management

  • Identify potential business risks, such as natural disasters or supply chain disruptions.
  • Discuss any contingency plans in place to address these risks.

8. Financial Projections

  • Include financial projections related to the operating section of the business plan, such as expected revenue and expenses and how they will be managed.
  • Summarize your break-even analysis, and discuss any capital requirements for the business.

Overall, the operating section of a business plan should provide a comprehensive review of how the business will operate and manage its day-to-day operations.

Fine Tuning the Operating Plan for Specific Types of Businesses

Effective operational plans will differ depending on the type of business due to variations in their operations, facilities, equipment, personnel, and regulatory requirements.

Multiethnic group of workers standing together, employment concept

The examples below help to illustrate the latitude you can take when drafting your plan:

  1. Restaurant: An operating plan for a restaurant would focus on issues such as food preparation, kitchen management, menu design, customer service, and staff training. An operating plan for a restaurant will cover food safety regulations, health inspections, and inventory management.
  2. Software company: An operating plan for a software company would focus on issues such as product development, project management, quality control, and customer support. The plan should address rapid technological change, intellectual property protection, and software testing and debugging.
  3. Candle manufacturer: An operating plan for a manufacturing business would focus on issues such as raw material sourcing, production processes, quality control, and marketing and sales. The plan would need to address the unique challenges of the manufacturing industry, such as supply chain management, environmental regulations, and product packaging and labeling.
  4. Used car dealership: An operating plan for a used car dealership would focus on vehicle acquisition, pricing, sales and marketing, and customer service. It should also address vehicle maintenance and repair, financing and insurance, and compliance with state and federal regulations.

To determine what to include in an operating plan for their industry, business owners can research best practices and industry standards, consult with experts in their field, and seek guidance from industry associations.

They can also analyze their business’s specific needs and challenges and tailor their operating plan accordingly. By developing a comprehensive and realistic operating plan, business owners can ensure their business is well-positioned for success.

Restating Other Parts of Your Business Plan – Stay in Sync

It’s common for an operating plan to briefly mention certain aspects of a business that are covered in more detail elsewhere in the business plan. For example, the revenue forecast may be mentioned in the operating plan, but the financial or sales sections will provide more detailed information on how that revenue will be generated. However, it’s crucial to ensure that everything is consistent across all sections of the plan. The numbers and information presented must be accurate and match up in order to avoid confusion and maintain credibility.

Business plans and operating plans are dynamic documents that should be updated regularly as a company grows and evolves. It’s important to remember that any updates or changes made to one section of the plan should be considered with what has already been written in other areas. This will ensure that the plan remains consistent and cohesive and that any changes made are in line with the overall goals and objectives of the company.

Regularly reviewing and updating the plan will also ensure that it remains relevant and valuable as a guiding document for the business.

Operating Plan Example for a Retail Business

The operating plan below follows the business plan outline we provided. You’ll see that the operational plan for a business plan primarily demonstrates that you have thought through the most critical aspects of operating the business.

However, it does not have to be an operating manual explaining all the details as long as your operating plan conveys that you understand the business operations.

Portrait Of Female Owner Of Independent Clothing And Gift Store With Digital Tablet

Overview of Operations

Our company, Sporting Goods Resale, is a retail business selling high-quality, gently used sporting goods. We will be located in a busy shopping center in downtown Anytown, USA, and will offer a wide variety of products for athletes of all ages and skill levels.

Facilities and Equipment

Our store will occupy a 2,000 square foot space in the shopping center, which we have leased for five years. The space has will be fully renovated to suit our needs, including shelving and display cases. Other resource requirements include purchasing the necessary equipment, including cash registers and point-of-sale software.

Production and Manufacturing

We will not manufacture any products but purchase gently used sporting goods from individuals and sell them in-store. Our purchasing process will be streamlined, and we will offer fair prices to customers looking to sell their used equipment.

Inventory Management

We will use a computerized inventory management system to track our products. We will have an efficient process for accepting and sorting items we purchase and will dispose of any items that do not meet our quality standards. In addition, we will regularly review our inventory and adjust prices as necessary to ensure profitability.

Personnel

Our store will be staffed by a team of six employees, including a store manager, an assistant manager, and four sales associates. All employees will be trained on how to appraise used sporting goods, customer service, and store operations. We will offer competitive wages and benefits to attract and retain top talent by working with an outside human resources advisory firm.

Regulatory Compliance

We will ensure compliance with all local, state, and federal regulations related to retail operations. This will include obtaining all necessary licenses and permits and ensuring we are up-to-date on sales and other tax requirements.

Risk Management

We will have a contingency plan in place in case of emergencies, such as power outages or natural disasters. We will also have security measures in place to prevent theft and damage to our inventory.

Financial Projections

Based on market research, we project $750,000 in revenue for our first year of operations, with expenses of $600,000. Our break-even point is $500,000 in revenue. We will have adequate working capital to cover our startup costs and will regularly review our financials to ensure we are meeting our goals.

Overall, we believe that Sporting Goods Resale will be a successful retail business that fills a gap in the market for high-quality, affordable used sporting goods. Our efficient operations and knowledgeable staff will set us apart from our competitors and ensure our long-term success.

Operating Plan Example for a Manufacturing Business

To demonstrate the differences between businesses from different industries, we recommend you read through this manufacturing business operating plan, even if you’re in another sector. Take note of how a sense of experience and confidence in how the company will be operated is conveyed.

Serious confident industrial workers in overalls and safety goggles standing at workbenches and examining particleboard in assembly shop of furniture factory

Overview of Operations

FurnitureCraft will specialize in creating high-quality and customizable furniture for residential and commercial use. Our facility will be located in a suburban area, and we will pride ourselves on our attention to detail and personalized customer service.

Facilities and Equipment

Our manufacturing facility will include a 20,000-square-foot warehouse that will house all of our equipment and materials. We will acquire six CNC machines, three table saws, and a variety of other equipment necessary for our operations. We will also purchase a fleet of delivery trucks for transporting finished products to customers. The costs associated with our facility and equipment have been accounted for in our startup budget.

Production and Manufacturing

Our furniture will be made using a combination of handcrafted techniques and modern technology. We will source our materials from trusted suppliers, and our manufacturing process will include cutting, shaping, sanding, and finishing. We will have agreements in place with our suppliers to ensure that we have a steady supply of materials.

Inventory Management

We will use a software system to track our inventory, which will allow us to manage our materials and finished products efficiently. Our system will also alert us to any potential issues with inventory, such as items that are at risk of spoilage or obsolescence. We aim to keep a lean inventory to reduce waste and minimize costs.

Personnel

Our team will include skilled craftsmen and craftswomen, as well as management staff, to oversee operations. We will provide training to all employees to ensure that they are able to perform their roles effectively. Our employment contracts will include competitive salaries, health benefits, and paid time off.

Regulatory Compliance

We will be required to comply with regulations related to health and safety, as well as environmental regulations. We will obtain all necessary permits and licenses to operate our business, and we will regularly monitor our operations to ensure compliance.

Risk Management

We have identified potential risks to our business, such as supply chain disruptions and natural disasters. We will have contingency plans in place to address these risks, such as working with multiple suppliers and having emergency response plans.

Financial Projections

Our financial projections indicate that we will break even within the first year of operations, with expected revenue of $2 million and expenses of $1.8 million. We plan to reinvest profits into our business to expand our product offerings and increase our market share. We will secure funding for our startup costs through a combination of investors and loans.

For More Help

There are several authorities and resources that individuals can turn to for credible advice on developing an operating plan. Here are a few for you to consider.

  • Small Business Administration (SBA): The SBA provides free resources and advice for small businesses, including guidance on creating an operating plan.
  • SCORE: SCORE is a non-profit organization that provides free business advice and mentoring services. They offer guidance on developing an operating plan, as well as other aspects of starting and running a business.
  • Business consultants and coaches: Hiring a business consultant or coach can provide valuable guidance on developing an operating plan tailored to your specific business needs.
  • Industry associations and trade groups: Industry associations and trade groups often provide resources and guidance specific to their industry. These resources can be useful in developing an operating plan that takes into account industry-specific factors.

It’s important to ensure that any sources of advice or guidance are credible and reputable. It’s also important to consider the specific needs and goals of your business when seeking guidance on developing an operating plan.

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