Now that you have considered the various strategies to ensure the success of your venture, it is important for the reader of your plan to understand how you intend to meet these objectives. Your operations plan is another term for the ‘nuts and bolts’ of your business. It is the behind the scenes work that is needed to make your business successful.

CHOOSING YOUR CHANNELS OF DISTRIBUTION

In an ideal world all of your clients would come directly to you, eliminating all your distribution costs. Deciding which method of distribution to use would not even be an issue. However, whatever the size of your business, you can assume at some point you will have to address the issue of distribution. How you intend to distribute your product or service to your clients will depend on a number of factors, including your profit margin and selling price.

There are three methods of distribution for you to consider:

• indirect distribution
• direct distribution
• third party distribution.

Indirect distribution

If your product will be sold through the retail and wholesale sectors then this is considered to be indirect distribution as your clients will be purchasing your product from a business other than yours. Only products with a large profit margin and mass appeal tend to be sold in this way. With a large profit margin you will be able to attract good distributors with a generous discount whilst still keeping a percentage of the profits for yourself.

Direct distribution

Products which are sold straight from yourself to your clients are described as being distributed directly. This is usually achieved when you use the telephone for selling and then back it up with a mail order method of distribution, or when the client comes to your premises.

Third party distribution

Appointing an agent to sell your products on your behalf is another method of distribution. This method is favoured by businesses such as double glazing and insurance companies, but their heavy handed, hard sell techniques have brought door-to-door selling a bad name, and the introduction of new legislation to cut down on cowboy companies.

A softer approach has been made by party plan organisations which have proved to be very successful over the last few years. Kleeneze, Dorling Kindersley and Avon are examples of successful party plan companies. The Direct Selling Association (DSA) is the regulatory body for party plan and direct selling businesses and can be contacted at 29 Floral Street, London WC2E 9DP. Tel: (020) 7497 1234.

FINDING THE RIGHT PREMISES

The location of your business will partly depend on what you are selling, and who to. For example if you have a restaurant or a retail store then your clients will be coming to you. However, the manufacturing industry will generally discover its potential market and then go out and sell to it. In this case your channels of distribution will have an effect on where your business is located as will the possibility of obtaining a grant.

There are a number of grants available if you locate your business in a rural or underdeveloped area. The Development Commission will be able to provide you with further information and can be contacted at Countryside Agency, John Dower House, Crescent Place, Cheltenham GL50 3RA. Tel: (01242) 521381.

Positioning your business

Your market research data will show where the best position of your business is in relation to your intended market. In reality, this can be easier to discover than to put into practice. Retail stores generally prefer to be in the middle of a busy high street, whilst a manufacturing business might favour a purpose-built unit on an industrial site. A new business may find it difficult to meet the running costs of being in such a prime position.

Where you are positioned in relation to your competition will affect your success. Will you be attracting trade away from your competitors by competing close to them? Or will the fact that you are the only type of business in a particular area be one of your benefits? Only you will be able to discover the answers to these questions.

MEETING SAFETY AND QUALITY STANDARDS

If your business involves the manufacturing or assembly of products then you need to be aware that your products may have to meet one or more of the many standards of safety and quality set by the British Standards Institute. Tell the reader of your business plan about any standards your business has to comply with, and how you will obtain the relevant certification.

The British Standard EN ISO 9990 is the nationally recognised standard of quality which many companies are proud to own. Although this certification can put your business ahead of your competitors it can be very expensive to obtain and out of reach for many new businesses.

However, if you can follow the necessary procedures for obtaining certification then ultimately you will be in a position to achieve these internationally renowned standards of quality.

Further advice about applying for registration and certification can be obtained from the British Standards Institute at 389 Chiswick High Road, London W4 4AL. Tel: (020) 8996 9000.

OBTAINING STOCK AND MATERIALS

Having sufficient stock to sell is obviously crucial to the success of your business and your business plan should set out the methods you will use to obtain your products. Your reader will not expect you to go into great detail, just to summarise how your stock will finally be made ready for sale.

If you will be buying your stock as fully assembled products then tell the reader your sources of supply and how they compare with other businesses supplying similar products. Explain how your stock will get to you, how long it will take and what conditions of sale will be made such as sale or return and whether you will be granted any credit. However, if your products will be bought in as partially assembled products then you will need to explain your manufacturing process, stating how this stock will become assembled into your finished products.

Learning from competitors

It is worth investigating how and where your competitors obtain their materials. They have probably been established for a number of years and are fully aware of which suppliers are better than others. Constantly monitor the quality of your materials because you will only ever be as good as the materials you use.

• Keep it simple – Remember to make your business plan easy to read by eliminating any complicated jargon and substituting it with easy to understand terms.

CONTROLLING YOUR LEVEL OF QUALITY

Unless you are planning to buy an already established business your first objective will be to convince your potential clients of the quality of your product. Quality is of paramount importance and should never be overlooked. It not only relates to your finished product or service but it encompasses the whole concept of your business.

Every point of contact your clients have with your business will be measured in terms of the quality of your business. Whether it is on the telephone, with face to face contact or by postal correspondence, how you present yourself will constantly be assessed in terms of the level of service your clients will demand and expect of you.

Remember, just as a chain is only as strong as its weakest link, so is a business. You may have a product or service that is second to none in terms of quality and value for money but if your clients contact you by telephone and are greeted by a miserable unhelpful voice, then you will not get the chance to show how good your business really is.

Maintaining quality

Once you have established a level of quality it is important to maintain it. Don’t fall into the same trap as certain other companies by becoming complacent and allowing the standards you have set to become only adequate. We are living in a fast moving world; by tomorrow, today’s level of quality will be out of date. Constantly monitor your quality, and your previous, current and potential clients will be able to help you achieve this objective. Constant communication with your clients is the key to maintaining the level of quality and service they have come to expect. How will you be able to put a problem right if you are not even aware that a problem exists in the first place? Your clients should be the first to let you know when there is a problem, unless of course you can foresee any decline in quality and already have a strategy to overcome it.

EMPLOYING YOUR KEY PERSONNEL

Your personnel are the most important element of your business plan. Without them you will cease to have a business to run.

• In this section of your business plan you should highlight the job descriptions of each key member of staff.

Once you become fully operational your staff are in any case required by law to be given a written job description and a contract of employment stating the terms and conditions of the position offered. In the event of any dispute both parties then have a written document to refer to.

After you have defined your key personnel you will be in a better position to assess whether your present level of staffing is adequate and if not then how you will overcome this. Your level of staffing should be sufficient to cover holidays, sickness and days off without affecting the smooth running of your business. You may decide to alter the job descriptions of your present staff to compensate for any shortfall or perhaps employ further members of staff. Alternatively, you may consider introducing a number of training programmes to let your present personnel develop the skills and experience needed for your business.

The reader of your business plan will want to know about your employment methods. Will you advertise nationally or locally for staff? What wage and salary will you be offering? What, if any, incentives can your personnel expect to receive such as pensions, profit and performance related bonuses, holidays or other personal benefits?

Your reader will also want to know about any provisions you have made for the payment of PAYE (Pay As You Earn), National Insurance and pension plans. There is now a new employer’s helpline which has been set up by the Inland Revenue, Contributions Agency and Customs & Excise. If, as an employer you have any general questions regarding tax, National Insurance and basic VAT registration, then all three departments can be reached by contacting one number, 0845 60 70 143.

ORGANISING YOUR BOOK-KEEPING

In your business plan you will need to cover the question of book-keeping. Tell your reader what methods you intend to use and who will be responsible for ensuring that the books are up to date. Chapter 10 takes a more in depth look at what is involved with keeping accounts. In the meantime it is important to understand why your book-keeping is important and what effect inadequate accounts will have on your business.

When any new business is launched, a capital investment is made to get the business started. This investment will be used to acquire various items needed to get things going. In turn this will lead to a return on the capital investment by generating sales revenue to come into the business.

All movements of money coming into and going out of the business must be fully documented and recorded. This is done by keeping a set of organised books detailing all transactions. If you run a larger business then you may able to employ a book-keeper to control the books for you. However, if you run a smaller business, the responsibility of maintaining accurate and up to date books will remain with you personally.

INSURING YOURSELF AND YOUR BUSINESS

Regardless of the size and nature of your business you will need to make sure that you and your business have sufficient insurance should anything go wrong. There are many different types of insurance. Some are mandatory (required by law) such as motor insurance and employer’s liability insurance if you have any employees. Others will depend on the nature of your business, and are largely a matter of common sense – policies such as cover against fire, theft and accidental damage.

Your business plan need not go into great detail about your intended policies, such as who they are with or what they will cost. Your reader will only be interested to learn that you are planning to be adequately insured. A good business insurance broker who knows the job inside out will be worth their weight in gold in finding the best quotes for the specific cover you will need for your business.

Getting independent advice

The golden rule to remember when dealing with insurance is always to seek professional independent advice. Some insurance companies will sell you policies that you simply do not need. Make sure that your insurance broker is a member of The British Insurance and Investment Brokers Association; full details about their members can be obtained from 14 Bevis Marks, London EC3A 7NT. Tel: (020) 7623 9043.

CHECKLIST

• Do you know the channels of distribution you will use to get your product or service to your clients?
• Have you selected the right business premises for your potential market?
• Will any alterations be needed to the premises before you can start trading and has any necessary permission been sought from the local authorities?
• Does your business need to be registered with any authorities and has this been done?
• Do you know who your main suppliers will be, and what their terms and conditions of sale are?
• What steps have to be taken to ensure that your level of quality will be maintained?
• Have you considered who your key members of staff will be and have they been appointed?
• Have you made plans to keep your accounts from day one and decided who will be responsible to ensure that they are kept up to date?
• Do you and your business have an adequate level of insurance cover to provide for every eventuality?

CASE STUDIES

Joshua and Jake discover the Loan Guarantee Scheme

Down but not beaten, Joshua and Jake reassess their current situation. They feel that the business will be profitable and all projections indicate that this would continue but they still have to overcome the problem of loan security. To borrow any money from friends or family would still leave them with the same debts but from a different source.

At the local library Jake discovered a book about raising finance which mentioned the government’s Small Firms Loan Guarantee Scheme. Under the scheme, 85 per cent of the loan would be guaranteed by the government for a business such as Joshua and Jake’s in exchange for a small guarantee premium. This meant that should the business fail, then 85 per cent of the loan would be repaid by the government which would leave the bank with only 15 per cent of the loan unsecured.

Jasmine launches Calendar Creations

Calendar Creations is launched just in time for the Christmas rush. As the business begins to get established it becomes apparent that Jasmine’s original projections were a little too conservative. Although it was quite an effort Jasmine has managed to fulfil all her obligations and get the calendars out on time.

After Christmas the rush did not really die down as more and more people began to hear about her and her business through word of mouth recommendations. Orders started coming in for summer league fixture cards, school diaries for the new academic year, and from a broad selection of clubs and societies. Jasmine’s business was by far surpassing her original expectations – wonderful!

Luke prepares his business plan

Having found the avenue of additional capital investment, Luke’s next job is to compile his business plan in such a way as to satisfy both the government grant board and his potential investor that he was offering a viable opportunity. He will do this by generalising the facts and figures relating to the current business as a whole, and then highlighting the specific details which related to the grant board and to the private investor. This had the double benefit of not only illustrating to the government where the additional investment would be coming from but would also show the potential investor how the government would be assisting.

ACTION POINTS

• 1.List the various methods of distribution of goods and services to customers. What are the advantages and disadvantages of the method that you will choose?
• 2.Describe the proposed location of your business. What, if any, effect will this have on the level of your expected sales revenue?
• 3.Examine the different types of business insurance policies.