Published August 10, 2011

Developing a Profitable Small Business Operational Plan

A wise old business philosopher once said: "Failure to plan is planning to fail." And while it is important for entrepreneurs and small business owners to develop a business plan for their venture, an operational plan is just as important.

An operational plan is not as comprehensive as a business plan. While the business plan gives full detail over all aspects of the business, the operational plan is more specific into how the business will function and detail the processes of that function.

Benefits of Having an Operational Plan

The operational plan, while intended to act as a guiding beacon, is also meant to be flexible. An operational plan can be written as an overall general business guidance, but also can and should be broken down into a yearly plan every 12 months. This allows a business owner and staff to follow a pre-conceived model toward business success.

Here are a few of the benefits of an operational plan:

  • Overall Guidance - An operational plan helps a business management team be proactive in their management objectives. Instead of reacting to business circumstances and crises as they happen, an operational plan helps influence and speed up decision making.
  • Business Model - What is the policy or process for ordering supplies? Who does the quality checks? Who's in charge of sales? The operational plan will be your business model for the entire process of business from initial marketing through production all the way to final sale.
  • Manage Tasks - A business must have a goal or goals, and to reach those goals, individual tasks must be met. Use the operational plan to help keep the business on track with its milestones.
  • Track Business Progress - Without a plan, there is no way to know how the business is meeting goals. At points during the year, management should sit down to evaluate how the business is progressing on its operational plan. Are the tasks being met on time? Is there a need to re-evaluate and modify the plan?

Elements of the Operational Plan

So what needs to be included in the small business operational plan? While there is no single template that every business uses, there are main elements found in the majority of plans. Here is an easy step-by-step strategy to create your operational plan.

Prioritize

First, what are the main priorities and goals of the business? This is where you will want to brainstorm goals and possible outcomes, and then focus on getting the main goals on paper. Prioritize them as you see fit.

You might start by asking questions such as "what market share do I want in 12 months?" "Can I increase business sales by 15%?" "Should I increase the range of products or services I offer?" "Are there ways of producing more while cutting back expenses?"

These questions will help you determine what it is you really want to achieve in your small business.

Set Milestones

Next, set the individual tasks and mini-goals you must reach in order to achieve the overall priority goals. But in doing so, set a timeline that these tasks must be met.

For instance, say you have an overall goal of increasing your sales margin. One of the tasks may be to reduce production waste and increase efficiency. You might set that mini-goal milestone to reach in 4-6 months so you can continue on your other tasks to improve sales margins.

Financial Data

Your operational plan should include a financial plan. How will you reach the goals if you don't know where the money will come from? Will your cash flow allow you to continue smooth operations? Will you need to acquire business loans to meet some soft spots in cash flow during the year? Are you expanding? Will you need additional investments capital to acquire equipment? Your financial data is your plan to pay for your business operation model.

An operational plan is just as important for small business as it is for giant worldwide corporations. Without a plan or model for conducting your business, you could be in trouble. Take the time to develop your small business operational plan so you have a guiding light for your processes.