I constantly come up with business ideas. In fact, I have so many of them that it is difficult to keep track and their number grows by the day. Here are just a few examples: selling ultra comfy hybrid mopeds at a very low price (of course), selling imitation designers’ wedding dresses, buying a boat and providing short voyages for senior citizens as part of a mach making business, and the list goes on and on. Honestly I haven’t explored most of my ideas (which in my case is a good thing) beyond figuring out who my target market will be and this, even, is an overstatement.  Nevertheless, when I talk about my new business idea I get excited and  most often carried away, after all my idea is brilliant, I am going to make lots of money, and it even won’t be too difficult to implement….Or would it?

The questions start popping in my head: ‘Hmmm, I can find some manufacturing facility in China to manufacture my mopeds, but how? and then how will I get the mopeds to port?, how much would it cost to  transport them?, what about taxes and fees?, where will I store them?, how will I sell them?’ and on and on. If I wrote a business plan about selling ultra comfy hybrid mopeds, the answers to theses questions will go into the Operations Plan – section of my business plan. However at this point my business ideas usually die. But, yours, don’t have to. This article aims to explain to you what is an Operations Plan, what information should be included in the Operations Plan, and why it is important.

How will you run your business?

From my experience as I consultant and a business plan reviewer I am amazed to see how many entrepreneurs put so much emphasis on all the other sections of their business plan(which is a good thing) but lack to adequately explain how exactly they are planning to run their business.  This is where the operations plan comes into place – it’s  goal is to tell the readers what are the physical necessities for your business to be successful, such as facilities, offices, manufacturing, suppliers, etc. You need to carefully think of the nuts and bolts of your operations plan and describe them in as much detail as possible if you will be using the document for the company’s internal use. But If you will be using your business plan to get funding for your business it is important that you don’t boar your readers with all the nitty-gritty details, rather convince them that you have a good grasp of the big picture and you have a carefully thought out plan of how you will run your business.

What should the Operations Plan cover?

Some possible questions to answer in your operations plan, include:

• Production plan – where, how, and all the details that go with it
• Patent protection or other means of intellectual property protection if applicable
• Organizational structure – who is doing what in the company
• Who will be your suppliers and vendors
• Distribution channels – how will you get the product to your customers
• Manufacturing requirements, such as facilities, equipment, outsourcing, licensing, etc.
• Inventory – How will you handle inventory, where will you store inventory
• Schedule of key activities

Of course depending on the nature of your business the complexity of your operations plan will be different and not all of the above questions will apply or you may need to think of questions that are not listed above. For example if you are planning to manufacture your own brand of mopeds you will have to think of suppliers and vendors for moped parts, manufacturing facilities, machines, workers, laws and regulations, and I am sure much more information which is way beyond me. If you are importing the mopeds then your operations plan will be completely different, then you will need to think of import issues, transportation, taxes, etc. I am sure you get the point. No matter what your business is, investors and business plan reviewers put much emphasis on the operations plan and a poorly written operations plan could definitely be a deal breaker.

Why is the operations plan so important?

As you see from my confessions about my own creative mind that comes up with business ideas for the sake of daydreaming I can very convincingly tell you why in theory selling comfy hybrid mopeds at a very low price might be a good business. But the fact is that I have no idea how I will  run my business and how I will get my product out of the productions stage to my customers. This, right away will give red flags to my potential investors. In fact they will not even read my business plan any further.  Of coarse the picture that I described is a bit exaggerated and I am sure that you have a much better idea of how you will run your business.  The Operations Plan is very important because the investors want to see how you will translate theory into reality. Investors are known to be risk takers, however they don’t chase after risk, on the contrary they want to take as little risk as possible and knowing that you have done your homework and you have a well thought out and realistic operations plan shows investors that you too are working on mitigating their risk.