The success of your business plan may very likely hinge on your operational plan. Businesses rely on logistics to add capacity and meet goals. Your operational plan lays out a path from where you are to where you want to be, with specifics about how you're going to get there. If it's complete and useful, it will also address potential obstacles that could cause operational issues over time.
Steps in an Operational Plan
An operational plan is a clear and relevant road map for achieving business goals. The items in your operational plan show flow sequentially. They should include:
- Defining your current situation. If you understand where your business currently is in reference to its goals, you'll be well positioned to plan a reasonable and realistic trajectory. Assessing your current position includes understanding the operational issues you'll need to overcome.
- Charting your goals. Being as specific as possible about your short-, medium- and long-term goals helps in developing concrete steps for moving in the right direction in a manageable time frame. Your goals count as measurements of success, and they can in turn be re-evaluated if your desired outcomes change or if the goals themselves turn out to be unrealistic.
- Assessing risk. In a perfect world, all of your actions will proceed according to plan. In the real world, anything can happen to sabotage your strategies and upset your timing. Laying out potential operational problems in business prepares you to proactively address difficulties as they arise.
- Measuring progress. The more specific you are about articulating your goals, the better you'll be able to assess whether or not you've reached them. Instead of saying that you want your business to grow significantly, propose that your sales will increase by 20 percent per year over the next five years.
Operational Plan and Business Plan
An operational plan is only one section of a business plan, but it is the part that lays out how the overall strategy will be accomplished.
- Operational plan and company history: Your business plan will lay out how your company has gotten to its current position and who has been behind these historical developments. Your origins set the stage for your future plans, and telling your company's story can be an opportunity to show how your upcoming plans are natural extensions of an ongoing path.
- Operational plan and marketing plan: The marketing plan section of your business plan shows how you will create demand for your products and services. Your operational plan then shows how you will fulfill the demand that your marketing efforts generate and how you will field obstacles that arise. Your overall business plan offers an opportunity to explain the connection and balance between your marketing and operational strategies.
- Operational plan and financials. Your business plan will include current and projected financial statements. These will interface with your operational plan by showing how much cash you have available to make your plans materialize and how long it will likely take for you to pay off initial investments. Your profit and loss shows historical margins that could play out as you expand, your balance sheet shows whether your assets are liquid enough to take on new projects and your pro forma cash flow projection shows how you will pay for them.
Operational Plan Nuts and Bolts
Your operational plan deals with specifics and scenarios. The more time and effort you put into teasing out the details of how your venture will proceed and what you will need to make it work, the more useful your plan will be.
Show how your cash flow will cover upcoming operational needs and if you come up short, how you will make up the difference. Create backup plans and then create backup plans for your backup plans.
It's impossible to accurately predict every variable that could affect your operational plan. Developments such as changes in equipment technology and customer demand can require a shift in direction with a host of consequent adaptations. Use data from past operations and upcoming plans to predict outcomes as accurately as possible but also build in a degree of flexibility to handle these unforeseeable outcomes. Develop a range of contingency plans based on the possibilities you see as you review upcoming operational challenges.
What Are Operational Problems?
Operational problems are issues and variables that can interfere with achieving the outcomes outlined in your operational plan. If you run a delivery service, and road construction in your area slows traffic down to a crawl for weeks at a time, you'll encounter operational problems because you won't be able to get your deliveries to your customers within the promised time frame. Similarly, if your business manufactures shoes, and you're unable to source the right kind of leather, you'll have operational problems because production can't proceed without the necessary materials.
Some operational problems stem from inadequacies in your company's systems such as chronic understaffing, outdated equipment in desperate need of repair or information systems that are too primitive to handle the information you input. If you encounter ongoing problems in these areas, address issues by identifying potential solutions and drafting timelines for implementing them. Address these short-, medium- and long-term fixes in your business plan and budget for them accordingly.
Other operational difficulties are the result of circumstances beyond your control such as traffic and shifts in customer needs that diminish demand for your offerings and lead to inventory gluts. Although these operational challenges don't originate from within your business, you have the capacity to adapt to them. Be alert and recognize potential difficulties before they affect your operations in debilitating ways, and be proactive about implementing solutions that can limit the damage and even position you for positive changes in a constantly changing landscape.
Components of an Operational Plan
Your operational plan lays out the concrete ways your business will work toward achieving its mission and vision. Your business plan should present your mission and vision before proceeding toward the operational components. This approach will provide a clear foundation showing what you want to achieve as a basis for laying out the details of how you will get there.
- Concrete objectives: Your operational goals should be clear and measurable, providing a landscape for measuring progress and evaluating success. Although the goals you present should be tangible, they should be closely aligned with the intangible mission and vision you have presented. For example, if your mission is to create environmentally friendly products using sustainable production technologies, your specific goals could specify a target reduction in carbon footprint from your plant.
- Financial requirements: The operational plan you implement will cost money, and your business plan is the place to lay out how much capital outlay it will likely require and how much business you'll have to transact to recoup this investment. Use spreadsheets and plan for a variety of scenarios.
- Contingency plans: Because obstacles will inevitably get in the way of optimal operations, your operational plan is the place to lay out potential solutions. A lender or investor reviewing your business plan won't expect these predictions and solutions to be exactly accurate, but the process of presenting them is an opportunity to show that you're thoughtfully surveying the landscape and anticipating obstacles.
Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.