PBU0035 Introduction to Business Plan Topic 4

Faculty of Business / Faculty of Management

(FOB / FOM)

PBU0035
Introduction to Business Plan

Foundation in Management

NOTES

Topic 4: Management Plan & Operations Plan

FOSEE, MULTIMEDIA UNIVERSITY (436821-T)

Cyberjaya Campus, Jalan Multimedia, 63100 Cyberjaya.
Melaka Campus, Jalan Ayer Keroh Lama, 75450 Melaka.

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PBU0035 Introduction to Business Plan Topic 4

Topic 4 Management Plan and Operations Plan

A) MANAGEMENT PLAN
 Many investors and others look first at the executive summary, and then go directly
to the management team section to assess the strength of the people starting the firm
 There is a prevalent belief that unless a proposed new venture has a strong
management team, little else matters
 It’s often not the idea or market that wins funding among competing plans, but the
perception that one management team is better prepared to execute their idea than
the others
 Investors tend to evaluate management teams in the context of the type of business
they’re proposing and the type of funding or financing they’re seeking
 The management team section should be crisp and to the point, with material such as
resumes of key employees placed in an appendix

1) Management Team
 The management team of a new firm typically consists of the founder and a
handful of key management personnel
 The description should be largely factual but should be presented in a way that
makes it easy to visualize where the firm is today and where it plans to be in the
foreseeable future in regard to key management team personnel
 Indicate the name or names of the founders, how many employees the company
has, where the major gaps are, and how quickly the company will be adding
personnel

a) Management Team Personnel

o A brief profile of each member of the management team should be
provided starting with the founder or founders
 Title of the position
 Duties and responsibilities of the position
 Previous industry and related experience
 Previous successes
 Education background
o Certain attributes of a management team should also be highlighted if they
apply in your case
 Team members who’ve worked together before are preferred because it
usually means that they get along personally and trust one another
 The skills and ability of the members of the team should complement
one another rather than reinforce a single skill or competency

b) Management Team Ownership and Compensation

o You must also fully disclose the ownership structure of the new venture
and the compensation of the members of the management team
o List each owner, his percent ownership in the company, and his base
compensation
o Finally, it should be clear how the money for the firm has been raised so
far

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c) Common Mistakes to Avoid

o Do not place unqualified friends or family members in key management
positions
o Do not adopt a “one-man team” philosophy
o Be sure to disclose management team skill or competency gaps

2) Board of Directors
 If a new venture organizes as a corporation, it is legally required to have a board
of directors, which is a panel of individuals elected by the corporation’s
shareholders to oversee the management of the firm
 Technically a board of directors has three responsibilities: (1) appoint the firm’s
officers, (2) declare dividends, and (3) oversee the affairs of the corporation
 If you include this section in your plan, you should list your board members and
provide a brief bio for each member

a) Provide Guidance
o Providing guidance and support to the managers of the firm is the most
useful role of the board of directors
o Boards can also help fill competency gaps within the company
o If a firm gets investment capital, the investor will normally occupy a seat
on its board of directors

b) Lend Legitimacy
o Providing legitimacy for a firm is another important function of a board of
directors
o Investors like to see management teams, including the board of directors,
that have people with enough clout to get their foot in the door with
potential suppliers and customers
o If a company does not currently have a board of directors, it may be
prudent to indicate that the firm anticipates having a board of directors at
some point in the future

3) Company Structure
 Even if you are a small firm, you should outline how the company is currently
structured and how it will be structured as it grows
 The most effective way to illustrate a company’s structure and lines of authority
and accountability is to include an organizational chart in the plan
 An organizational chart is a graphic representation of how authority and
responsibility are distributed within the company
 Companies are generally organized along functional, product, or geographical
lines
 There may be some unfilled boxes on the organizational chart, consistent with the
“gaps” in management personnel shown in the skill profile
 If your firm has more than one founder, you should comment on the specific role
that each founder will take on as the firm moves forward
 Some business plans complement their discussion of company structure with a
brief analysis of how the firm will be managed from a leadership, motivation, and
corporate culture point of view

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B) OPERATIONS PLAN
 If you are developing a non-existent product, you’ll need to include a section that
describes the design and development of the product
 If you’re opening a more traditional business, then you don’t normally need a section
on product design and development; simply product-relevant information in the
operations section
 Your readers want an overall sense of how the business will be developed but
generally are not looking for detailed explanations
 The most important rule of thumb is to focus on the aspects that are either essential to
the success of your business or that set you apart from competitors
 The operations plan section of the business plan outlines how your business will be
run and how your product or service will be produced

1) Operations Model and Procedure

 The primary objective of this section is to show that you have a firm grasp on the
operational details of launching and running your business
 An useful way to illustrate how a product or service is produced is to include an
operations flow diagram
 An operations flow diagram shows the key steps in the production of a product or
the delivery of a service
 Some issues need to be singled out and discussed in more detail in this section:
o An explanation of how your inventory will be stored and how frequently it
will be turned over
o A description of the length and nature of your product’s production cycle
o An explanation of where bottlenecks are likely to occur and how you will
handle them
o An explanation of how you will handle seasonal production loads
o An explanation of how your quality control will be managed
o An explanation of how your after-sale service, if applicable, will be handled

2) Business Location
 This section describes the geographic location of the business
 There are several specific instances in which a business’s location is a critical
factoring its capability to operate efficiently and effectively:
o Proximity to qualified labor
o Closeness to suppliers
o Access to transportation, such as a major airport or an interstate highway
o Access to international shipping alternatives
o Proximity to customers with a profile conducive to a firm’s business
o Access to favorable state and local tax rates
o Access to economic incentives for locating in a certain area
o Proximity to high-quality community in terms of public education,
recreational opportunities, health care, and the arts to attract a high-quality
workforce
 You should describe the rationale for your location in this portion of your business
plan

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3) Facilities and Equipment

 You should list your most important facilities and equipment and briefly describe
how they will be (or have been) acquired
 If you will be producing your own product, you should describe the production
facility that you have or are looking for
 This is particularly important for a business-to-business start-up, especially if you
are an OEM (original equipment manufacturer)
 You may also want to comment on the degree to which you will hold foreign
partners accountable for the working conditions in their factories and for their
environmental standards
 If your business is projecting fairly rapid growth, you should comment on how
you will be able to grow within your existing facilities or how you plan to
transition from your existing facility to a larger one

4) Operations Strategy and Plans

 This section deals with strategic and longer term issues pertaining to your
operations strategy
 An important issue that is normally covered is the portion of your production
process that you will perform in house as opposed to the activities that will be
done by others
 Although it sounds simple, the task of actually finding reliable partners and
managing the operations flow can be complex
 It may be helpful to include a sentence or two in this part of your plan that clearly
makes the link between your business strategy and your operations strategy

5) Product (or Service) Development Plan

 Many seemingly promising start-ups never get off the ground because their
product development efforts stall or the actual development of a product or service
turns out to be more difficult than anticipated
 A start-up must have a credible plan for ramping up the production of a product to
satisfy the sales estimates in its financial projections

a) Development Status and Tasks

o Most products follow a logical path of development that includes product
competition, prototyping, initial production, and full production
o If you have involved prospective customers in testing early versions of
your product and services, you should briefly comment on the process
you’ve used and the results to date
o If you are in the very early stages and have only an idea, you should
explain how a prototype will be made. A prototype is the first physical
depiction of a new product.
o In some instances, a computer-generated, virtual prototype, which is
less expensive than a physical prototype, is sufficient
o There is typically a direct correlation between how far you are from having
an actual product or service that can be sold in quantity to how risky your
business is perceived to be
o One nice touch that dresses up a business plan is to provide a picture of
your product if it exists or an artist’s rendition of what the product (or
service setting) will look like after it’s developed
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b) Challenges and Risks

o You should be very candid and transparent in identifying any major
anticipated design and development challenges (and risks) for two reasons:
 Your reader will anticipate that challenges and risks exist and will want
to know what they are
 Your reader will want to see evidence that you are aware of the risks
and challenges that exist
o You should discuss the possible impact of challenges on the development
of your product, the costs involved, and the timeline for bringing your
product or service to market

c) Costs
o This section should provide a budget for the remaining design and
development work that needs to be done to bring your product or service
to market
o The budget should include the costs of labor, material, consulting fees,
prototyping, usability testing, and so on
o In most cases, exceeding your design and development budget will be one
of the risks disclosed in the challenges and risks section

d) Intellectual Property
o This section should describe any patents, trademarks, copyrights, or trade
secrets that you have secured or plan to secure
o If you have not taken action on intellectual property issues yet, you should
get legal advice so you can discuss your plans in this area
o Intellectual property is any product of human intellect that is intangible but
has value in the marketplace
o A trade secret is any formula, pattern, physical device, idea, process, or
other information that provides the owners of the information with a
competitive advantage
o The primary rule of thumb for deciding if intellectual property should be
protected is to determine whether it’s related to a firm’s competitive
advantage
o Although trademarks and copyrights can be obtained fairly inexpensively,
patents are expensive to obtain, which poses a challenge for many start-ups

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