Operational Plan

Operational Plan

An Operational Plan benefits a business by being the single-point reference for all important company information. Content will vary from business to business, but the structure and main sections should be consistent, and include

  • Company Vision

  • Company History

  • Products and Services

  • Company Policies

  • Systems (Action Plans)

  • Position Statements

The documentation of your company’s day-to-day operational systems, policies and definitions is no small feat, but the rewards of doing it properly are great. Sure signs of a poorly-built operations manual are a haphazard format, covered in a thick layer of dust. Signs of a good ops manual are regular use by employees to get answers to process questions, and regular use by managers in training staff on company policies and procedures.

Operations Manual

Create your operations manual by gathering and / or defining the first items on the list above.

The operational plan deals specifically with the internal operations and equipment necessary to produce your product or service. The following are selected areas that need to be addressed in this section:


  • Where will your business be located?

  • What square footage is needed, in how many locations?

  • What type of space is it?

  • Office, warehouse, manufacturing, or a combination?

  • What is the advantage, if any, of your location?

  • At what point will the goals of the business exceed the above mentioned facilities?

Provide a layout of your facility in the appendices of your business plan.


  • Outline and describe the significant equipment needed, including cost.

  • What does the equipment do, how do the pieces function together, and how much can be produced?

  • Will you purchase or lease your equipment?

  • Why and from whom?

  • Be sure to include manufacturing equipment, vehicles, computers, and office equipment.


  • How many employees will you need?

  • Full-time?

  • Part-time?

  • Break them out by function, number of hours worked, and hourly pay.

  • Describe the skill sets needed.

  • What are the salaries of those in management, production, distribution, sales and administration?

  • Will you run multiple shifts?

  • What are your hours of operation?

  • What criteria is used to locate and hire quality employees?

Managing Talent

Management Tips

Manufacturing and Service Process:

Walk the reader through your manufacturing and service process from raw material through finished product.

  • Where will you obtain and store raw materials?

  • Outline your key suppliers, the purchasing process, and unique purchasing requirements.

  • Where will finished goods be stored, and what is the associated space and cost?

  • How will finished goods (or services) be distributed?

  • What is the lead time for the entire process?

  • How will quality be measured, controlled, and improved?

  • Explain the technology requirements for your manufacturing process.

Other questions to consider:

  • How will you keep track of inventory? Provide specific procedures and equipment used.

  • How will you maintain quality control? What are the procedures to ensure that you are providing the top quality product or service?

  • What type of insurance does your business need? Discuss the legal liability issues of your business.

Consider including a start-up schedule, or if you are currently in business provide a schedule as to how your future plans will progress over the next 12 to 18 months. You may wish to include a chart in your business plan that outlines the time frame associated with specific operational steps and goals.

Operational Plan - Common Mistakes

The following are among the most common mistakes found in the operations plan:

  • Failing to clearly outline the process by which you manufacture, distribute and sell your product or service.

  • Failing to account for all production costs (direct and indirect).

  • Failing to assess the manufacturing process in terms of manufacturing costs, taxes, shipping, installation, maintenance, serviceability, etc.

  • Failing to develop adequate inventory control and quality assurance guidelines.

  • Failing to identify all machinery and equipment needed.

  • Failing to properly plan the layout of the plant, the workflow process, and the material handling procedures.

  • Failing to properly outline personnel management, scheduling, and hiring practices.

  • Failing to properly plan for contingencies to meet production and staffing challenges.

  • Failing to plan for long term facility and equipment changes.

Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment.


How and where are your products/services produced?

Explain your methods of:

  • Production techniques & costs

  • Quality control

  • Customer service

  • Inventory control

  • Product development


What qualities do you need in a location? Describe the type of location you will have.

Physical requirements:

  • Space; how much?

  • Type of building

  • Zoning

  • Power and other utilities


  • 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, shipping centers?

Include a drawing or layout of your proposed facility if it is important, as it might be for a manufacturer.

Construction? Most new companies should not sink capital into construction, but if you are planning to build, then costs and specifications will be a big part of your plan.

Cost: Estimate your occupation expenses, including rent, but also including: maintenance, utilities, insurance, and initial remodeling costs to make it suit your needs. These numbers will become part of your financial plan.

What will be your business hours?

Legal Environment

Describe 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)


  • Number of employees

  • Type of labor (skilled, unskilled, professional)

  • Where and how will you find the right employees?

  • Quality of existing staff

  • Pay structure

  • Training methods and requirements

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?


  • What kind of inventory will be kept: raw materials, supplies, finished goods?

  • Average value in stock (i.e., what is your inventory investment)?

  • Rate of turnover and how this compares to industry averages?

  • Seasonal buildups?

  • Lead-time for ordering?


Identify key suppliers.

  • Names & addresses

  • Type & amount of inventory furnished

  • Credit & delivery policies

  • History & reliability

Should 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 with changing costs?

Credit Policies

  • Do you plan to sell on credit?

  • Do you really need to sell on credit? Is it customary in your industry and expected 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; i.e., how much credit and when is payment due?

  • Will you offer prompt payment discounts (hint: do this only if it is usual and customary in your industry).

  • Do you know what it will cost you to extend credit? Have you built the costs into your prices?

Inbound logistics

  • Is there a materials control system? How well does it work?

  • What type of inventory control system is there? How well does it work?

  • How are raw materials handled and warehoused?

  • How efficiently are raw materials handled and warehoused?


  • How productive is our equipment as compared to our competitors?

  • What type of plant layout is used? How efficient is it?

  • Are production control systems in place to control quality and reduce cost? How efficient and effective are they in doing so?

  • Are we using the appropriate level of automation in our production processes?

Outbound logistics

  • Are finished products delivered in a timely fashion to customers?

  • Are finished products efficiently delivered to customer?

  • Are finished products warehoused efficiently?

Marketing and sales

  • Is marketing research effectively used to identify customer segments and needs?

  • Are sales promotions and advertising innovative?

  • Have alternative distribution channels been evaluated?

  • How competent is the sales force? Is their level of motivation as high as it can be?

  • Does our organization present an image of quality to our customers?

  • Does our organization have a favorable reputation?

  • How brand loyal are our customers? Does our brand loyalty need improvement?

  • Do we dominate the various market segments we are in?

Customer service

  • How well do we solicit customer input for product improvement?

  • How promptly and effectively are customer complaints handled?

  • Are our product warranty and guarantee policies appropriate?

  • How effectively do we train employees in customer educations and service issues?

How well do we provide replacement parts and repair services?


  • Have we developed alternate source for obtaining needed resources?

  • Are resources procured in a timely fashion? At lowest possible cost? At acceptable quality level?

  • How efficient and effective are our procedures for procuring large capital expenditures resources such as plant, machinery, and buildings?

  • Are criteria in place for deciding n lease-versus-purchase decisions?

  • Have we established sound long-term relationship with reliable suppliers?

Technology development

  • How successful have our R&D activities been in product and process innovations?

  • Is the relationship between R&D employees and other departments strong and reliable?

  • Have technology development activities been able to meet critical deadlines?

  • What is the quality of our organization’s laboratories and other research facilities?

  • How qualified and trained are our laboratory technicians and scientists?

  • Does our organizational culture encourage creativity and innovation?

Human resources management

  • How effective are our procedures for recruiting, selecting, orienting, and training employees?

  • Are there appropriate employee promotion policies in place and are they used effectively?

  • How appropriate are reward systems for motivating and challenging employees?

  • Do we have a work environment that minimizes absenteeism and keeps turnover at reliable levels?

  • Are union-organization relations acceptable?

  • Do managers and technical personnel actively participate in professional organization?

  • Are levels of employee motivation, job commitment, and job satisfaction acceptable?

Firm infrastructure

  • Does our information system provide timely and accurate information on general environmental trends and competitive conditions?

  • Do we have good relationships with our stakeholders including public policy makers and interest groups?

  • Do we have a good public image of being a responsible corporate citizen?

Who Will Write Your Operational Plan?

A challenging component of the creation of an operations manual is defining tasks and accountabilities to specific job positions.

Start by listing all positions in your organization, and create a paper file location and a digital file location to store all documents pertinent to that job position. Once this document inventory has been established, you will be able to identify information gaps, and determine what materials still need to be developed.

These individual ‘Position Statements’ will describe where employees fit into the organization, for which systems they'll be held accountable, a list of work tasks that must be completed, the standards to which the work must comply, and what results employees will be expected to produce. Employees will be expected to 'sign off' on their position statement, and adhere to its requirements.

Additional factors to consider with regard to your operations manual are the scheduling of update sessions, and planning for distribution. Regular annual or bi-annual review sessions should be scheduled to ensure that elements of the ops manual are kept up-to-date. At these sessions, gather managers and administrative support members to do a quick review of the manual’s contents, make updates, add new material, remove out-dated content and redistribute the document.

A well-constructed, relevant operations manual becomes a company resource of key importance. Plan on keeping both digital and paper copies of your operations manual, and keep backup copies safe.

Who Runs Your Business?

Is your business operations-driven or customer-driven?

One word that is often used (even overused) is empowerment. Employees need to know they are empowered to make good decisions to help create great customer relations. And, it is important that there is a consistent effort to foster the empowerment culture, and that every employee, from top executives to virtually every area of a business know, understand and participate the culture.

Here are a few quick thoughts and ideas to become a customer driven organization.

  • Hire right -- The attitude is more important than the skill. You can train the skill. This is what companies like the Ritz Carlton and Nordstrom's are so famous for.

  • Constantly train -- Even if you spend five minutes every few days on something new, it is constant training and reinforcement of your business and customer philosophies.

  • Continually praise good behavior -- You have to actually talk to your employees. Let them know how well they are doing. Show appreciation for doing the right thing.

  • Public recognition -- Let other employees and customers know about the outstanding service your employees are creating. Build an environment that fosters this positive behavior.

  • Treat your employees the way you want them to treat your customers -- This is sort of an offshoot of the "Golden Rule" If you are constantly yelling at an employee, how can you expect him/her to turn around and be nice to a customer. You need to set an example.

Creating a truly customer focused and driven environment is not easy. It takes time and training. Employees need to trust that management will stand behind them and not fault them for making a wrong decision.

To truly create an empowering customer driven culture, employees should not be cited for making the wrong decisions. Incidents must be used as positive teaching examples to help all employees learn how to make the best decisions for their customers.

Operations Audit Checklist

  • External Physical / Visual Image

  • Internal Physical / Visual Image

  • Facility Condition / Status

  • Maintenance/ Upkeep

  • Purchasing

  • Parts/Materials / Supplies Handling

  • Storage / Warehousing

  • Physical Layout

  • Workflow - Production/Operation Controls

  • Standards and Quality

  • Capacity

  • Capacity Utilization

  • Scheduling

  • Controls and Supervision

  • Safety / OSHA

  • Process and Method

  • Compensation

  • Pay Scale / Prevailing Wage

  • Training

  • Learning / Knowledge Strategy

  • Incentive/Bonus Plan

  • Idle/Slowdown Time

  • Environment / Conditions

  • Tracking/ Data / IS Flow

  • Staffing Classification/Job Descriptions

  • Turnover / Recruitment / Needs.

A strong Business Plan may not guarantee success; but it could certainly prevent failure!

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