Along with your resource requirements, there are several other considerations you must make in creating your operational plan. Keeping these in mind will ensure the feasibility of your OP.
Now that you have an indication of the resources that you may need to make your plan a reality, it is time to determine exactly how much money you will need and how you might fund it. Financing the plan can be accomplished in several ways, so you need to look at the types of costs that make up your budget.
First, consider your fixed costs. This is the cost of actually acquiring the new equipment that you will need to make the plan happen. What land, buildings and machinery might you need? Then you need to consider those variable costs that allow you to actually put the plan into action on an ongoing basis. This might include wages, power, rent, telephone and any other working expense. These need to be covered by your initial financing until such a time that the organisation begins to pay its own way.
Your budget should be broken down into monthly or quarterly periods, which allow you to step back and look at how different times of the year may affect your expenses. Winter, for example, may require extra power for heating in the factory or shop. Training expenses are likely to be greatest during the first month or two, and after that, will reduce significantly.
Forecast the amount of money you expect to bring in monthly and compare this to your expenses. If you are not expecting to make a profit, this is capital that will need to be funded in some way to get the operation off the ground.
When you are preparing a new plan, you may want to paint as rosy a picture as you possibly can. You want people to say, ‘that looks great, let’s do it!’ However, from a business planning point of view, this can be a recipe for disaster. If you overpromise and underdeliver, you are going to be left wanting or needing more resources to actually get the plan back on track.
This means that it is better to be realistic about where you expect costs to be rather than promise too much and find yourself short of essential resources during the crucial initial months. Use your resources wisely and ensure that you have enough, so you do not find yourself seeking more.
A budget is a statement that represents estimated income and expenditure during a specific time period in the future. In an organisation, budgets are used to forecast the revenues and expenses based on set business goals. Given that such goals may change, budgets are usually compiled and re-evaluated periodically, and they undergo adjustments as necessary.
Essentially, the budget serves as management’s quantitative expression of organisational plans for an upcoming time period. You will find that different levels of the organisation are involved in preparing budgets. However, it is the master budget that serves as the overall financial plan for a specific time period. Within the master budget, there are two budgets necessary in operational planning. These are:
If properly formulated, your budget can serve as a planning and control system of your organisation. This is because the budget documents both the goals and performance objectives of your organisation in financial terms. Through the implementation of your budget, your plans would then be utilised and monitored accordingly. For instance, the implementation of your annual budget would set your yearly plans and goals. To determine your relative success in achieving your set goals, your monthly reports would compare the budgeted results with the actual results you have come up with.
Budgeting is concerned with two major functions of management, namely planning and controlling. Your budget is a document that formalises your plan. However, as seen above, its use does not end once it has been formulated. Your budget is implemented periodically and is an effective means of controlling operations. Relating to the example in the previous paragraph, if a monthly report finds that the actual results during a month are not at par with budgeted results, management is likely to further investigate the situation and take the corrective actions necessary in controlling operations.
In developing an operational plan, two timeframes must be considered – current and projected (i.e. what will be needed in the future for a given period).
When you are writing an operational plan, it is important to consider several factors regarding your business. You might look at financial performance, market environment, inventory, the product mix that you are offering, and more. The products and services being offered are of particular importance to most plans. Businesses exist to sell products or services, so it is critical that you outline the way that an operational plan will impact how products or services are offered. A plan may involve new products being introduced, old products being discontinued or even the mix of products on offer being altered. If any of these are present in your plan, you need to examine the impact that they will have on the plan’s introduction.
You also need to convey information on each major issue that you foresee within the plan. The users of your plan want to know that you have carefully considered the implications of the plan and how they may impact on how the market perceives your products and services. It is, therefore, extremely important that you can demonstrate that you have considered these. Think about things such as personnel needs, resourcing requirements, changes to machinery, the need to employ contractors, and more. The more that you can detail to your end-user about the performance of your organisation and the way that the plan will impact on this performance, the more favourable the plan as a whole will seem.