Posted: February 7th, 2023

2. Operating Environment In this section, you should include a few paragraphs

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2. Operating Environment
In this section, you should include a few paragraphs of general information to provide the needed perspective for the rest of your plan. This section should normally include some good references to secondary sources that you used to paint the overall picture of the operating environment in which your business will function.
3. Operations Plan
The following are some key questions that you should answer in the operations plan.
– How will your business be organized in a legal sense?
o Will it be a sole proprietorship, partnership, corporation, or co-operative?
o Will it be organized as a for-profit or a not-for-profit?
– What are your facility plans?
o Where will your facility be located?
§ The answer to this might be expressed as a set physical location, or it might be expressed as a set of requirements and characteristics.
o How large will your facility be and why must it be this size?
o How much will it cost to buy or lease your facility?
o What utility, parking, and other costs must you pay for this facility?
o What expansion plans must be factored into the facility requirements?
o What transportation and storage issues must be addressed by facility decisions?
o What zoning and other legal issues must you deal with?
o What will be the layout for your facility and how will this best accommodate customer and employee requirements?
– What constraints are you operating under that will restrict your capacity to produce and sell your product?
o Given these constraints, what is your operating capacity? This might be expressed in terms of units of production, sales, contracts completed, or in other terms.
– What is the workflow plan for your operation?
Figure 1. Workflow Diagram

– What work will your company do and what work will you outsource?
3.1. Operations Timeline
– It is often useful to include a timeline, in graphical or table form, showing when milestone events have occurred and are expected to occur.
– Milestone events are represented by the answers to questions like the following.
o When will you make the preparations, such as registering the business name and purchasing equipment, to start the venture?
o When will you begin operations and make your first sales?
o When will you move your operations to a larger facility?
o When will you offer a new product line?
o When will you hire new key employees?
o When will you begin selling your products internationally?
Figure 2. Operations Timeline – Sample 1

Figure 3. Operations Timeline – Sample 2
3.2. Start-Up
– What is required to start-up your business including the purchases and activities that must occur before you make your first sale?
– When identifying capital requirements for a start-up you should distinguish between your fixed capital requirements and operating capital (sometimes called working capital) requirements.
3.2.1. Fixed Capital Requirements
– What fixed assets, including equipment and machinery, must you purchase so your venture can conduct its business? Your fixed capital requirements generally include all of the assets you need to purchase for a start-up that can be depreciated.
– This section might include a start-up budget showing the machinery, equipment, furnishings, renovations, and other capital expenditures required prior to operations commencing.
– The best way to finance fixed capital requirements is often by attempting to match the financing term with the length of time the asset will be used by the company. Fixed assets generally last for a longer period of time, so they should be financed with longer-term loans or equity financing.
– Consider using a table like Table 1 to provide the necessary information about the fixed capital requirements your company has for start-up.

Fixed Capital Requirements for Start-Up (prices shown include taxes)
Depreciable Asset
Source
Quantity
Total Cost
Reception desk (Borders Plus Reception Package)
Source Office Furnishings online catalogue (Saskatoon office, #1 – 805 Circle Drive East).
htps://www.source.ca/desks-workstations/reception-desks
1
$1,053
Office chairs for employees (Coolmesh Value Seating)
Source Office Furnishings online catalogue
https://www.source.ca/office-chairs-seating/task-chairs
8
$1,048
Chairs for reception (Oliver mid-back swivel)
Source Office Furnishings online catalogue
https://www.source.ca/office-chairs-seating/reception-chairs-sofas
10
$3,085
Building Renovations (see Appendix G)
Quote from Acceleration Contracting Services (Saskatoon office, 548 Walter Crescent)

$89,458

Total Fixed Capital Requirements for Start-Up (including taxes)
$xxx
Table 1. Fixed Capital Requirements for Start-Up

3.2.2. Start-Up Expenses
– What expenses, if any, do you need to make prior to regular operations starting?
– This section might include a start-up budget showing the cash required to recruit employees, conduct market research, acquire licenses, hire lawyers, and pay for the other things required before making your first sales.
– The best way to finance operating capital requirements is usually by attempting to match the shorter-term utility of the assets or operating expenses with shorter-term financing methods, like trade credit, credit card debt, and using a short-term loan available through a line of credit.
– Consider using a table like Table 2 to list the start-up expenses along with the relevant information, like the sources for your information.

Start-Up Expenses
Cost
Source

Corporate Registry Fees (for-profit entities)
ICS
https://www.isc.ca/CorporateRegistry/Fees/Pages/default.aspx#CR-FP-NRS
· Registration of Business Name $50
· Incorporation fee $235
· Company Name and Trade-mark search $60
$345
New Commercial Business License
City of Saskatoon (requires annual renewal at 202x cost of $85)
https://www.saskatoon.ca/business-development/business-licenses/business-license-categories/commercial-business-license
$133

Total Start-Up Expenses (including taxes)
$xxx
Table 2. Start-Up Expenses

3.3. Risk Management Strategies
– Include descriiptions of the organization’s risk exposure in this section. Keep your plan simple and straightforward.
– Always include descriiptions of the planned strategies for managing each of the risks identified. Four risk management strategies follow.
o Avoiding – You can avoid risks by choosing to not do something, like choosing to not offer a delivery service to transport your products to your customers yourself.
o Reducing – You might reduce risks by providing training or undertaking specific operational strategies designed to improve safety.
o Transferring – Entrepreneurs might transfer risks by purchasing insurance (transferring the risk of financial loss to an insurer) or outsourcing some activities (transferring the risk to a contractor).
o Accepting (assuming) – You might accept risks by self-insuring a vehicle fleet against physical loss. Note that you should probably still purchase liability insurance to protect against loss from negligence. You might also accept the risk of getting a stone chip in your vehicle’s window by having a higher insurance deductible amount. Sometimes entrepreneurs choose to accept risks and simply choose to deal with any potential losses themselves when the costs of avoiding or transferring risks are high.
– In this or another section, you should describe your control processes. For example, you should describe how you will implement controls if your employees will:
o handle cash generated as part of their work,
o have access to your computer systems (customer lists, customer information, product information, financial information, etc.),
o do work out of your view,
o sign for incoming supplies or inventory,
o communicate directly with customers, the media, and others.
– Consider using a tool like the chart shown in Table 3 to summarize the risks you have identified along with your assessment of their potential consequences, possibility of occurring, and plans for dealing with them.
Risk Exposure
Risk Consequence
Risk Potential
Mitigation
Fire, flood, theft
Possibly devastating
Moderate
Purchase insurance and monitoring system
Bad debt
Lost income and profit
Moderate
Credit checks, registered security, legal contracts
Table 3. Risk Management Strategies

3.4. Operating Processes
– This is an important section of your plan. This is where you fully explain all of your operating processes.
– What you will need to describe in this section will depend upon the type of business for which you are creating your plan.
o Retail operation
§ How will you ensure your cash is managed effectively?
§ How will you schedule your employees?
§ How will you manage your inventories?
§ etc.
o Service operation
§ How will you bill out your employee time?
§ How will you schedule work on your contracts?
§ etc.
o Manufacturing operation
§ How you will manufacture your product (process flow, job shop, etc.?)
§ How will you source your raw materials?
§ etc.
– When you use charts like those that follow, always refer to them in the text of your plan so it is clear why they were included in the plan.
– It is also very important to format your charts correctly in your plan. They should generally not extend across more than one page. If the chart is so large that it must fall on two or more pages, be certain that the relevant labels and titles are included on all the pages.

Table 4. Projected XXX Purchases for Years 1-4

– When inserting charts that you extract from your Excel financial model, format the sheet first so that you eliminate the grid lines, re-size the columns so everything fits in the chart and also on the page in your business plan on which you positioned the charts. If it adds value, enhance your charts with colors, lines, and other features that make them pleasant to read and so that they follow a consistent format.

Table 5. Projected XXX Summary for Years 1-5

3.5. Facilities
– You might include diagrams of the planned layouts for your facilities in this section.
Figure 4. Retail Store Layout

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