Operation Plan for a store

Business Plan Guide Part 3

This is your final guide to give comprehensive direction to your business plan! This guide will cover: the operations plan, financial plan, appendices/exhibits, and the executive summary (remember this actually goes first in your plan but should be the last section your compile). By now you should already have a solid business concept and business model, a deep understanding of the competitive environment and identification of competitors, as well as some excellent marketing concept.

If anything is unclear please see me. We will continue to have limited class time dedicated to the final project. Use this time wisely and take advantage of being able to ask all the questions you may have about your final project.

The Operations Plan Section of the Business Plan

When writing the business plan, the operations plan section describes the physical necessities of your business's operation, such as your business's physical location, facilities, and equipment. Depending on what kind of business you'll be operating, it may also include information about inventory requirements, suppliers, and a description of the manufacturing process.

Keeping focused on the bottom line will help you organize this part of the business plan; think of the operating plan as an outline of the capital and expense requirements your business will need to operate from day to day.

You need to do two things for your reader of the business plan in the operations section: show what you've done so far to get your business off the ground (and that you know what else needs to be done) and demonstrate that you understand the manufacturing or delivery process of producing your product or service.

So divide the operating section of the business plan into two parts, starting with the Stage of Development section.

Stage of Development Section

When you're writing this section of the operations plan, start by explaining what you've done "to date" to get the business operational, followed by an explanation of what still needs to be done. The following should be included:

· Production Workflow - A high-level, step-by-step description of how your product or service will be made, identifying the problems that may occur in the production process. Follow this with a subsection titled "Risks" that outlines the potential problems that may interfere with the production process and what you're going to do to negate these risks. If any part of the production process can expose employees to hazards describe how employees will be properly trained in dealing with safety issues. If hazardous materials will be used described how these will be safely stored, handled, and disposed of.

· Industry Association Memberships - Show your awareness of your industry's local, regional, or national standards and regulations by telling which industry organizations you are already a member of and/or which organizations you plan to join and telling what steps you've taken to comply with the laws and regulations that apply to your industry. 

· Supply Chains  - An explanation who your suppliers are and their prices, terms, and conditions. Describe what alternative arrangements you have made or will make if these suppliers let you down.

· Quality Control  - An explanation of the quality control measures that you've set up or are going to establish. For example, if you intend to pursue some form of quality control certification such as ISO 9000, describe how you will accomplish this.

Production Process Section

While you can think of the Stage of Development part of the operations plan as an overview, the Production Process section lays out the details of your business's day to day operations.

Remember, your goal for writing this section of the business plan is to demonstrate your understanding of the manufacturing or delivery process for your product or service, so you need to let the readers of your business plan know that.

Make sure you include all these details of your business's operation:

· General: Do an outline of your business's day to day operations, such as the hours of operation, and the days the business will be open. If the business is seasonal, be sure to say so.

· The physical plant: What type of premises are they and what are the size and location? If it's applicable, include drawings of the building, copies of leaseagreements, and/or recent real estate appraisals. You need to show how much the land or buildings required for your business operations are worth and tell why they're important to your proposed business.

· Equipment: The same goes for equipment. Besides describing the equipment necessary and how much of it you need, you also need to include its worth and cost and explain any financing arrangements.

· Assets : Make a list of your assets, such as land, buildings, inventory, furniture, equipment, and vehicles. Include legal descriptions and the worth of each asset.

· Special requirements: If your business has any special requirements, such as water or power needs, ventilation, drainage, etc., provide the details in your operating plan, as well as what you've done to secure the necessary permissions, such as zoning approvals.

· Materials: Tell where you're going to get the materials you need to produce your product or service and explain what terms you've negotiated with suppliers.

· Production: Explain how long it takes to produce a unit and when you'll be able to start producing your product or service. Include factors that may affect the time frame of production and how you'll deal with potential problems such as rush orders.

· Inventory: Explain how you'll keep track of inventory.

· Feasibility: Describe any product testing, price testing, or prototype testing that you've done on your product or service.

· Cost: Give details of product cost estimates.

When you're writing this section, you can use the headings above as subheadings and then provide the details in paragraph format. If a topic does not apply to your particular business, leave it out.

The best part is that once you've worked through this business plan section, you'll not only have a detailed operations plan to show the readers of your business plan but have a convenient list of what needs to be done next to make your business a reality.

Writing the Business Plan: The Financial Plan

The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of three financial statements: the income statement, the cash flow projection and the balance sheet and a brief explanation/analysis of these three statements.

This article will guide you in the preparation of each of these three financial statements.

Before you begin, however, you must gather the financial data you will need including all of your expenses.

Taking Stock of Expenses

Think of your business expenses as two cost categories; your start-up expenses and your operating expenses. All the costs of getting your business up and running should be considered start-up expenses. These expenses may include:

· Business registration fees

· Business licensing and permits

· Starting inventory

· Rent deposits

· Down payments on property

· Down payments on equipment

· Utility setup fees

This is just a sample of startup expenses; your own list will expand as soon as you start to itemize them.

Operating expenses are the costs of keeping your business running. Think of these as your monthly expenses. Your list of operating expenses may include:

· Salaries (including your own)

· Rent or mortgage payments

· Telecommunication expenses

· Utilities

· Raw materials

· Storage

· Distribution

· Promotion

· Loan payments

· Office supplies

· Maintenance

Once again, this is just a partial list. Once you have listed all of your operating expenses, the total will reflect the monthly cost of operating your business. Multiply this number by 6, and you have a six-month estimate of your operating expenses. Adding this amount to your total startup expenses list, and you have a ballpark figure for your complete start-up costs.

Now you can begin to put together your financial statements for your business plan starting with the income statement.

The Income Statement

The income statement is one of the three financial statements that you need to include in the financial plan section of the business plan. It shows your revenues, expenses, and profit for a particular period - a snapshot of your business that shows whether or not your business is profitable. Revenue - Expenses = Profit/Loss.

While established businesses normally produce an income statement each fiscal quarter, or even once each fiscal year, for the purposes of the business plan, an income statement should be generated more frequently - monthly for the first year.

Below is an income statement template for the first quarter for a service-based business. It is followed by an explanation of how to adapt this income statement template to a product-based business.

YOUR COMPANY NAME Income Statement for the 1st quarter of (year)
	Jan	Feb	Mar	Total
REVENUE
Services
Service 1
Service 2
Service 3
Service 4
Total Services
Miscellaneous
Bank Interest
Total Miscellaneous
TOTAL REVENUE
EXPENSES
Direct Costs
Materials
Equipment Rentals
Salary (Owner)
Wages
Pension Expense
Workmen's Compensation Expense
Total Direct Costs
General and Administration (G&A)
Accounting and Legal Fees
Advertising and Promotion
Bad Debts
Bank Charges
Depreciation and Amortization
Insurance
Interest
Office Rent
Telephone
Utilities
Credit Card Commissions
Credit Card Charges
Total G&A
TOTAL EXPENSES
NET INCOME BEFORE INCOME TAXES
INCOME TAXES
NET INCOME

Not all of the categories in this income statement will apply to your business. Eliminate those that do not apply, and add categories where necessary to adapt this template to your business.

To use this template as part of your business plan or each quarter, set it up as a table and fill in the appropriate amounts for each item for each month. 

If you have a product-based business, the revenue section of the income statement will look different. Revenue will be called sales, and you should account for any inventory. Here is an example showing how to calculate the cost of inventory in the revenue section for a product-based business:

Company Name Income Statement for the 1st quarter of (year)
	Jan	Feb	Mar	Total
REVENUE
Sales	$3000	$4,100	$4,300	$11,400
Cost of Goods Sold
Opening Inventory	$1000	$1500	$1500	$4000
Purchases	$1000	$1200	$1200	$3400
Freight	$200	$300	$350	$850
Minus Closing Inventory	-$1200	-$1000	-$900	-$3100
Total Cost of Goods Sold	$1000	$2000	$2150	$5150
Gross Profit	$2000	$2100	$2150	$6250

The expense portion of the income statement, however, is similar to the template above.

The cash flow projection is the next financial statement that you need to include in the financial section of your business plan.

The Cash Flow Projection

The cash flow projection shows how cash is expected to flow in and out of your business. For you, it is an important tool for cash flow management because it indicates when your expenditures are too high or you might need a short-term investment to deal with a cash flow surplus. As part of your business plan, the cash flow projection will show how much capital investment your business idea needs.

For investors, the cash flow projection shows whether your business is a good credit risk and if there is enough cash on hand to make your business a good candidate for a line of credit, a short-term loan, or a longer-term investment.

Do not confuse the cash flow projection with the cash flow statement. The cash flow statement shows the flow of cash in and out of your business. In other words, it describes the cash flow that has occurred in the past. The cash flow projection shows the cash that is anticipated to be generated or expended over a chosen period in the future.

While both types of cash flow reports are important business decision-making tools for businesses, only the cash flow projection needs to be in the business plan. You should include cash flow projections for each month over one year in the financial section of your business plan.

There are three parts to the cash flow projection. The first part details your cash revenues. Enter your estimated sales figures for each month. Only enter the sales that are collectible in cash during each month you are detailing.

The second part of the cash flow projection lists your cash disbursements. Take the various expense categories from your ledger and list the cash expenditures you actually expect to pay that month for each month.

The third part of the cash flow projection is the reconciliation of cash revenues to cash disbursements. As the word "reconciliation" suggests, this section shows an opening balance, which is the carryover from the previous month's operations. The current month's revenues are added to this balance; the current month's disbursements are subtracted, and the adjusted cash flow balance is carried over to the next month.

Here is a template for a cash flow projection that you can use for your business plan (or later when your business is up and running):

YOUR COMPANY NAME CASH FLOW PROJECTIONS
	Jan	Feb	Mar	Apr	May	Jun
CASH REVENUE
Revenue from Product Sales
Revenue from Service Sales
TOTAL CASH REVENUES
CASH DISBURSEMENTS
Cash Payments to Trade Suppliers
Management Draws
Salaries and Wages
Promotion Expense Paid
Professional Fees Paid
Rent/Mortgage Payments
Insurance Paid
Telecommunications Payment
Utilities Payments
TOTAL CASH DISBURSEMENTS
CASH FLOW
OPENING CASH BALANCE
CLOSING CASH BALANCE

 

CASH FLOW = TOTAL CASH REVENUES - TOTAL CASH DISBURSEMENTS

OPENING CASH BALANCE = CLOSING CASH BALANCE from the previous month

CLOSING CASH BALANCE = OPENING CASH BALANCE + CASH FLOW

Once again, to use this template for your own business, delete and add the appropriate revenue and disbursement categories that apply to your business.

When building your cash flow projection, a common pitfall is being over-optimistic about your projected sales. Terry Elliott's article, 3 Methods of Sales Forecasting, will help you avoid this and provides a detailed explanation of how to do accurate sales forecasting for your cash flow projections.

The balance sheet if the last financial statement that needs to be included in your business plan.

The Balance Sheet

The Balance Sheet reports your business' net worth at a particular point in time. It summarizes all the financial data about your business in three categories; assets, liabilities, and equity.

· Assets are tangible objects of financial value that are owned by the company.

· A liability is a debt owed to a creditor of the company.

· Equity is the net difference when the total liabilities are subtracted from the total assets.​

Retained earnings are earnings kept by the company for expansion; that is, not paid out as dividends.

Current earnings are earnings for the fiscal year up to the balance sheet date (income - the cost of sales and expenses).

All accounts in your general ledger are categorized as an asset, a liability, or equity. The relationship between them is expressed in this equation: Assets = Liabilities + Equity.

For your business plan, you should create a pro forma balance sheet that summarizes the information in the income statement and cash flow projections. A business typically prepares a balance sheet once a year.

Here is a template for a balance sheet that you can use for your business plan (or later when your business is up and running):

YOUR COMPANY NAME BALANCE SHEET as of __________ (Date)
ASSETS	$	LIABILITIES	$
Current Assets	Current Liabilities
Cash in Bank		Accounts Payable
Petty Cash		Vacation Payable
Net Cash		Income Tax Payable
Inventory		Customs Fees
Accounts Receivable		Pension Payable
Prepaid Insurance		Union Dues Payable
Total Current Assets		Medical Payable
		Workers Compensation Payable
		State/Provincial Tax Payable
Fixed Assets:		Total Current Liabilities
Land
Buildings		Long-term Liabilities
Less Depreciation		Long-term Loans
Net Land & Buildings		Mortgage
		Total Long-term Liabilities
Equipment
Less Depreciation		TOTAL LIABILITIES
Net Equipment
		EQUITY
		EARNINGS
		Owner's Equity - Capital
		Owner - Draws
		Retained Earnings
		Current Earnings
		Total Earnings
		TOTAL EQUITY
TOTAL ASSETS		LIABILITIES AND EQUITY

 

Once again, this template is an example of the different categories of assets and liabilities that may apply to your business. The balance sheet reproduces the accounts in your General Ledger. Modify the categories in the balance sheet template to suit your own business.

Once your balance sheet is complete, write a brief analysis for each of the three financial statements. The analysis should be short with highlights rather than in-depth analysis. The financial statements themselves (the income statement, cash flow projections, and balance sheet) should be placed in your business plan's appendices.

Appendices and Exhibits

In addition to the sections outlined above, at the end of your business plan you will also want to include any additional information that will help establish the credibility of your business idea, such as marketing studies, photographs of your product, and/or contracts or other legal agreements pertinent to your business.

Executive Summary of the Business Plan

How to Write an Executive Summary That Gets Your Business Plan Read

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BY  SUSAN WARD

 

Updated November 06, 2018

Definition:

An executive summary of a business plan is an overview. Its purpose is to summarize the key points of a document for its readers, saving them time and preparing them for the upcoming content.

Think of the executive summary as an advance organizer for the reader. Above all else, it must be clear and concise. But it also has to entice the reader to read the rest of the business plan.

This is why the executive summary is often called the most important part of the business plan. If it doesn’t capture the reader's attention, the plan will be set aside unread - a disaster if you've written your business plan as part of an attempt to get money to start your new business. (Getting startup money is not the only reason to write a business plan; there are other just-as-important reasons.)

Because it is an overview of the entire plan, it is common to write the executive summary last (and writing it last can make it much easier).

What Information Goes in an Executive Summary?

The information you need to include varies somewhat depending on whether your business is a startup or an established business.

For a startup business typically one of the main goals of the business plan is to convince banks, angel investors, or venture capitalists to invest in your business by providing startup capital in the form of debt or equity financing. In order to do so you will have to provide a solid case for your business idea which makes your executive summary all the more important. A typical executive summary for a startup company includes the following sections:

· The business opportunity - describe the need or the opportunity.

· Taking advantage of the opportunity - explain how will your business will serve the market.

· The  target market  - describe the customer base you will be targeting.

· Business model - describe your products or services and and what will make them appealing to the target market.

· Marketing and sales strategy - briefly outline your plans for marketing your products/services.

· The competition - describe your competition and your strategy for getting market share. What is your competitive advantage, e.g. what will you offer to customers that your competitors cannot?

· Financial analysis - summarize the financial plan including projections for at least the next three years.

· Owners/Staff - describe the owners and the key staff members and the expertise they bring to the venture.

· Implementation plan - outline the schedule for taking your business from the planning stage to opening your doors.

For established businesses the executive summary typically includes information about achievements, growth plans, etc. A typical executive summary outline for an established business includes:

· Mission Statement – Articulates the purpose of your business. In a few sentences describe what your company does and your core values and business philosophy.

· Company Information – Give a brief history of your company - describe your products and/or services, when and where it was formed, who the owners and key employees are, statistics such as the number of employees, business locations, etc.

· Business Highlights – describe the evolution of the business - how it has grown, including year-over-year revenue increases, profitability, increases in market share, number of customers, etc.

· Financial Summary – if the purpose of updating the business plan is to seek additional financing for expansion, then give a brief financial summary.

· Future goals – describe your goals for the business. If you are seeking financing explain how additional funding will be used to expand the business or otherwise increase profits.

How Do I Write an Executive Summary of a Business Plan?

Start by following the list above and writing one to two sentences about each topic (depending on whether your business is a startup or an established business). No more! 

The Easy Way of Writing One

Having trouble getting started? The easiest way of writing the executive summary is to review your business plan and take a summary sentence or two from each of the business plan sections you’ve already written.

If you compare the list above to the sections outlined in the Business Plan Outline, you’ll see that this could work very well.

Then finish your business plan’s executive summary with a clinching closing sentence or two that answers the reader’s question, “Why is this a winning business?”

For example, an executive summary for a pet-sitting business might conclude: “The loving on-site professional care that Pet Grandma will provide is sure to appeal to both cat and dog owners throughout the West Vancouver area.”

(You may find it useful to read the entire Pet Grandma executive summary example before you write your own.)

Tips for Writing the Business Plan’s Executive Summary

© The Balance, 2018.

· Focus on providing a summary. The business plan itself will provide the details and whether bank managers or investors, the readers of your plan don’t want to have their time wasted.

· Keep your language strong and positive. Don’t weaken your executive summary with weak language. Instead of writing, “Dogstar Industries might be in an excellent position to win government contracts”, write “Dogstar Industries will be in an excellent position...”

· Keep it short - no more than two pages long. Resist the temptation to pad your business plan’s executive summary with details (or pleas). The job of the executive summary is to present the facts and entice your reader to read the rest of the business plan, not tell him everything.

· Polish your executive summary. Read it aloud. Does it flow or does it sound choppy? Is it clear and succinct? Once it sounds good to you, have someone else who knows nothing about your business read it and make suggestions for improvement.

· Tailor it to your audience. If the purpose of your business plan is to entice investors, for instance, your executive summary should focus on the opportunity your business provides investors and why the opportunity is special. If the purpose of your business plan is to get a small business loan, focus on highlighting what traditional lenders want to see, such as management's experience in the industry and the fact that you have both collateral and strategies in place to minimize the lender's risk.

· Put yourself in your readers’ place... and read your executive summary again. Does it generate interest or excitement in the reader? If not, why?

Remember, the executive summary will be the first thing your readers read. If it's poorly written, it will also be the last thing they read, as they set the rest of your business plan aside unread!