Operating tasks that give business plan life and credibility

Abdulkadir succeeded in pitching his business plan to a USIU consortium of funding partners. Investors loved his unique take on the food value chain and solutions to customer pain points.

However, prior to funding, the prospective partners desired Abdulkadir to first incorporate an operating plan into his business plan. Inasmuch, he turned to his former graduate school classmates for advice.

Continuing now into the fifth week of the Business Talk mini-series on business plan writing, we probe deeper elements of the Hudnut Business Plan Template and find how to incorporate operating plans into business plans. Business plans often represent strategic directions over a three to five year period.

Operating plans, on the other hand, tend to offer more specific detailed task lists of activities that are expected in the next 12 months to accomplish broader business plan goals.

Investors and global incubators increasingly prefer that aspects of a detailed operating plan get included in the business plan. Investors essentially want to see if you know how to “walk the talk” of your business plan.

While the marketing plan section of the business plan might highlight a phrase such as “bring manufacturing operations closer to clients to reduce client turnaround time”, the operating plan component would actually detail HOW that would be accomplished.

So, an operating plan in the Hudnut model identifies key operational strategies for a business venture, such as production, research and development, supply chain relationships, as well as land, plant, and capital equipment needs.

Abdulkadir faced enormous challenges of procuring live raw materials through support from community groups throughout Northern Kenya, collecting all raw materials in the northeast of the country, processing and packaging in the East, and then selling the products in Nairobi and Mombasa. Naturally stakeholders desired to know HOW such seemingly monumental tasks could get accomplished.

Start with the operational strategies. How long will the entire supply chain take to get his products to market? Are there methods to reduce the time taken as the business venture proceeds into future months and years? Customers do not want to wait long amounts of time in order to receive their desired products or services.

Further, how dependable will the operations be? Just because in trial runs you may get the whole process down to a one-week timeline does not mean that you can be that consistent every time thereafter.

One major criticism of Kenyan supply chains is our lack of dependability. Ever walk into your favourite grocery store on a Saturday expecting to buy your preferred product only to find out that it is out of stock and the attendants simply say to “try back again next week”?

Such poor planning makes customers go elsewhere. So investigate and then detail in your plan how dependable is your supply chain from raw materials sourcing to packaging to processing to warehousing to transport to even security. Delineate all of it.

Also, how will Abdulkadir ensure adherence to quality standards throughout the process? Just stating “the operation will be Kebs compliant” is not sufficient.

What minimum quality standards will be followed? How many quality inspectors are required? What stages receive quality checks? Would an outside firm be brought in periodically to confirm quality controls?

Next, you should highlight any research and development that you need in your business. Some firms like Simlaw Seeds, Amiran, DHL, Coca-Cola all invest heavily in research and development into seemingly static industries.

So innovation is not only required in the high technology space of mobile apps, websites, and handheld devices. Do not just assume that you must invest in research and development at the beginning of your business start-up.

You should invest continually in maintenance R&D as well as predicting periodic full revamping of your product lines at certain intervals in the future depending on your industry.

Gantt charts

Then, what land must you lease or purchase in order to operationalise your business plan? Do you need to build any structures? Could you just lease premises so as to start lean? What special equipment must you purchase or lease?

Abdulkadir, as an example, would need slaughtering and refrigeration equipment. Get specific with what you need to acquire in order to make your plan a reality.

Many busy business professionals do not feel that they have time to sit down and write beautiful essays about operational tasks and plans. So many firms simply present many aspects of the operating plan in the form of Gantt charts.

If you are unfamiliar with Gantt charts, please take a moment and Google “Gantt charts.”

You first categorise your desired activities such as quality, dependability, among others and then list the tasks in each section. Then you assign a timeframe on the right side of the Gantt chart as to when those tasks should be accomplished.

Finally, feeding into the financial projections later in the business plan, and discussed next week in Business Talk, does the operating plan support the stated costs of goods sold and operating expenses? Is the operating plan operationally cost efficient as compared to the industry?

Other nations publish average margins per industry and company size, like the Risk Management Association in the United States. Since Kenya does not retain such depth of widely available figures yet, check on comparable industries in other countries and call Kenyan bankers to ask about anonymous margin figures here.

You want to show how your plan compares with others in the industry. In summary, learn how to author operating plans. Business plans look more credible with them included.

If you have additional business plan writing tips, please share your assessments with fellow Business Daily readers at #KenyanExecutives on Twitter.

Prof Scott is the Director of the New Economy Venture Accelerator (NEVA) at USIU’s Chandaria School of Business, www.ScottProfessor.com, and may be reached on: [email protected] or follow on Twitter: @ScottProfessor.