A quote attributed to baseball great Yogi Berra should be top of mind for entrepreneurs interested in expanding their business: “If you don't know where you are going, you might wind up someplace else.” Do you know where your business is headed and how you’ll get there?
One way to reach future long and short term goals is to have a detailed strategic plan, and one important element to include in your strategic plan is the operational plan.
What is an operational plan?
An operational plan outlines the day-to-day basis of a department’s work. It establishes the daily operations of each department and aligns these operations with the business goals of the whole company.
When you take the steps to create an operational plan for your company, you should ensure that it addresses the below concerns:
- The delegation of tasks and strategic work shared among departments
- The delegation of the above to individual positions within a department
- Recurring deadlines for each task and strategy
- Costs anticipated for each task and strategy
Why is an operational plan important?
A thorough operational plan ensures that all your employees know their daily work requirements. It also tells your employees how to best complete their work within a specified timeframe. With these duties appropriately delegated and mapped out, your company can more easily achieve its business goals.
How do operational plans differ from strategic plans?
In some cases, operational plans and strategic plans are one and the same. In other cases, strategic plans are broader than operational plans. That’s because strategic objectives are long-term business goals, whereas operational objectives are milestones regarding the systems through which your company achieves its strategic goals. In either case, writing an operational plan is a key first step for developing a fruitful small business strategy.
Steps for how to write an operational plan
This section will help you determine what needs to be done to reach your vision. To get started, keep the SMART guidelines below in mind. Your plan should be:
When completed, your plan should clearly outline the day-to-day operations required to run your business successfully. The steps for how to write an operational plan are:
1. Focus on important goals
It can be tough for a busy entrepreneur to narrow down business goals. Prioritize the ones that are attainable and will help strengthen your business.
For example, if you own a bakery, you might set a reasonable goal of increasing business 20% by introducing new and creative menu items. An unattainable goal might be to relocate to an expensive high-rent neighborhood without a plan to increase profits and cover the higher expenses.
Lofty goals are great but you don’t want to cause frustration if they’re just not realistic. Create goals that can be reached with your current employees and available resources.
2. Set KPIs
Put key performance indicators (KPIs) in place to measure your success. KPIs can be financial, like increasing your net profit, or non-financial like increasing website traffic or improving customer service quality.
While there are a large range of KPIs you can measure, knowing where to focus your attention when evaluating your business can help you be more effective and use your time wisely. Small Business Trends has an article to help you choose the KPIs you should measure: 14 Key Performance Indicators That Matter.
3. Communicate and discuss KPIs with employees
Research from Harvard Business School found that 95% of a typical workforce doesn't understand the strategy and goals of the business they work for. How can employees perform at a high level if they don’t know this important information? You want your team to make the right decisions based on your operational plan to help you meet your objectives.
There are several ways to engage with your employees. You can hold a good old fashioned brainstorming session when you’re putting your operational plan together. You can also hold regular company-wide meetings to discuss where the company is headed.
The SmartBiz Loans team is updated on goals and where the company stands during a monthly OGSM meeting. OGSM stands for objectives, goals, strategies and measures. Management presents their results and employees are encouraged to ask questions and make comments.
4. Discuss the production process
Here’s where you outline how your product is produced or the resources needed to implement your services. The production process section of your operational plan may include:
- Necessary resources like computers, phone systems, and software
- Required equipment like machinery used for production of your product or service
- Assets may include:
- Cash and cash equivalents
- Special requirements you might need such as zoning permits, drainage, ventilation, etc.
- Materials you need to produce your product and the suppliers you’ll use to secure them.
5. Address costs
What funds are needed for your team to successfully complete their jobs and meet KPIs? Are there ways to reduce costs and still meet goals? Don’t forget to add in the costs of payroll taxes and benefits, equipment repair or replacement, and legal or other fees.
6. Set a budget?
Describe in detail your operating process and budget. Here’s where you can discuss outside funding and explore how much it would take for working capital, equipment, inventory, and other important areas. Speaking of working capital:
7. Develop a hiring plan
Even the most straightforward operational plan requires a trustworthy team to execute. That’s why your operational plan should explicitly outline your hiring practices. It should answer the following questions:
- Which positions does my business need, and by when will it need these roles filled?
- What does the ideal candidate for each position look like?
- How will my company find its new hires?
- What salary will I pay my employees?
- What benefits will I give my employees?
As mentioned earlier, you should also discuss your company’s goals and KPIs with your entire team. Once you’ve built a reliable team, you should also figure out when and where you’ll need your employees to work – and an operational plan is the perfect place to set these requirements.
8. Establish your work hours
Can you run your operation with employees working a typical 9 to 5 schedule during a 40 hour work week? Are there tasks that need to be completed in off hours? Let employees know when they are expected to work and if flexible hours are available. Remote work can help you retain employees as well.
9. Set employee location requirements
Do employees need to work in an office or onsite? Can work be performed remotely? Again, your employees need to know your expectations and how it fits in with the overall operational plan goals. Include the costs of rent and required insurance. If you run a home-based business, outline the tax breaks you might qualify for.
10. Address possible risk
The process of identifying risks, assessing those risks, and developing strategies to manage risks is known as risk management. Include a risk management plan within your operational plan. Reduce risks where possible and prepare contingency plans where necessary.
11. Set quality control measures
You don’t have to have a quality control team. Have one employee own quality control from beginning to end with a system of checks and balances in place.
12. Devise project management plans
To better control your products’ quality and optimize your production process, project management plans may prove helpful. Although no two projects are quite the same, adding loose project management plan templates or workflows to your operational plan can reduce operational inefficiencies that hinder you from achieving your goals.
For example, let’s say your company’s main source of revenue is light bulb production and sales. If you regularly develop new lights to sell, you’ll need a set of reliable constraints to work within every time you roll out a new product. These constraints can include product goals, production budget and timeline, and internal and external deliverables.
With a sturdy project management plan in place, you increase the likelihood of consistent quality, revenue, and new product releases. As such, successfully achieving your business goals may be easier.
13. Create timeline and milestones
Set project deadlines so your team is clear about their responsibilities and objectives. Clearly outline a timeline for meeting important milestones. Employee input can be valuable here. It’s good to know the bandwidth each team member has when working on deadlines.
SmartBiz Loans CEO Evan Singer has 20-plus years of business experience. He offers this advice to entrepreneurs in every stage of business planning:
“Remember that your plan doesn’t have to be perfect to achieve your goals. And possibly most importantly, don’t hesitate to ask for help. A financial professional or even members of your team can offer direction and advice if you’re feeling stuck.”