6 | The Operations Plan

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Chapter 6

The Operations Plan


 

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Focus Area 1

Introducing the Operations Plan

Stack of envelopes and pieces of paperIntroduction

The operations plan is where you show that you understand how to make your product or provide your service. This is where you explain how you will do the work, how your business will be managed, and where your business will be located. The operations plan has information about:

  • The business location
  • Licensing, registration, and insurance requirements
  • Major inputs and operating costs
  • Production methods
  • Management methods

If you are unsure how to navigate this site, click on the Website Navigation heading at the very top of the page.

You can download a print-only version of Chapter 6: The Operations Plan (PDF) for reference.

Neighborhood from aboveFacilities

The facilities section includes:

  • Physical location of the business
  • Lot specifications
  • Site ownership or lease arrangements

Click on the Facility Specifications button to learn more.

 

Legal formsLegal Requirements

Businesses must meet the requirements of the U.S. Internal Revenue Service (IRS) and local municipalities to get a business license. All businesses need to be registered at the federal, state, and local levels.

Depending on where you live and what your business does, you may also need special licenses and permits to operate.

Click on the buttons below to learn about Business Set-Up, Licensing, and Insurance.

 

Calculator and penInputs

The inputs section of the operations plan describes the main costs of running your business.

Operating costs are usually broken into three types: 

  • Capital expenditures are costs for things you need to get your business ready to open. They are usually one-time only costs for things that last a long time, like machines.
  • Fixed operating costs are costs you always pay, even if you don’t sell anything. They are generally recurring costs, such as rent, utilities, or insurance.  
  • Variable operating costs are how much it costs for you to produce your product or service. These costs are higher if you make a lot of your product, and smaller if you make less.

You already estimated these costs on the Start-Up Costs Inventory Worksheet from Chapter 3: Business Feasibility.

Click on the Capital Expenditures, Fixed Costs, and Variable Costs buttons to learn more about each type of operating cost. Click on the Quiz Yourself button to practice identifying different types of costs.

 

iPad checkout machineProduction Methods

The production methods section describes what you will do to make your product or provide your service, and how you will sell it.  In this section, you should describe: 

  • Your methods, tools, and equipment, and how and when you use them
  • How long it takes to produce the product or service
  • Where you will do your work, and how much room you need to do each work activity
  • How valuable items are stored or protected (such as in a locked safe or out of the elements)
  • The labor needed to produce your product or provide your service
  • Your methods for monitoring quality
  • Your methods for meeting environmental and safety regulations
  • How you will manage and track your inventory
  • How your product or service will be distributed or sold

Click on the Production Methods Example button to see an example.

 

Hand signing formManagement

The management section describes how you will manage your business. It includes descriptions of how you will do things like:

  • Generate an invoice
  • Follow-up on unpaid invoices (accounts receivable)
  • File receipts and other paperwork
  • Track money received and money spent (bookkeeping)
  • Reconcile the business’s checkbook and credit card records
  • Pay the business’s bills (accounts payable)
  • Do the taxes
  • Offer credit terms to customers
  • Keep personal and business expenses separate

In order to complete some of these management activities, you may use different types of workers.

Click on the Workers button to learn more. Click on the Management Methods Example button to see an example.

 

Finger touching iPad screenReview

The operations plan is where you describe how you will make and deliver your product or service. A good operations plan describes:

  • Your business location and building facilities
  • Business licensing and insurance requirements
  • Your business operating costs and other related costs
  • A description of your production process
  • A description of your management methods

Click on the Prepare button for ideas to get started.

Counselors, click on the Counselor Review button for things to consider as you discuss the business operations with your client.

 

Focus Area 2

Check Your Understanding

Question mark on paperChecking the Operations Plan

This section helps you check your understanding of the material covered in this chapter. First, click on the Check Your Understanding button and go through the questions on the slides. Write down your answers on a separate piece of paper. Check your answers in the Review Your Answers button.