Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment.
ProductionHow and where are your products/services produced?
Explain your methods of:
- Production techniques & costs
- Quality control
- Customer service
- Inventory control
- Product development
LocationWhat qualities do you need in a location? Describe the type of location you will have.
- Space; how much?
- Type of building
- Power and other utilities
Is it important that your location be convenient to transportation or to suppliers?
Do you need easy walk-in access?
What are your requirements for parking, and proximity to freeway, airports, railroads, shipping centres?
Include a drawing or layout of your proposed facility if it is important, as it might be for a manufacturer.
Construction? Most new companies should not sink capital into construction, but if you are planning to build, then costs and specifications will be a big part of your plan.
Cost: Estimate your occupation expenses, including rent, but also including: maintenance, utilities, insurance, and initial remodelling costs to make it suit your needs. These numbers will become part of your financial plan.
What will be your business hours?
Legal EnvironmentDescribe the following:
Licensing and bonding requirements
Health, workplace or environmental regulations
Special regulations covering your industry or profession
Zoning or building code requirements
Trademarks, copyrights, or patents (pending, existing, or purchased)
PersonnelNumber of employees
Type of labour (skilled, unskilled, professional)
Where and how will you find the right employees?
Quality of existing staff
Training methods and requirements
Who does which tasks?
Do you have schedules and written procedures prepared?
Have you drafted job descriptions for employees? If not, take time to write some. They really help internal communications with employees.
For certain functions, will you use contract workers in addition to employees?
InventoryWhat kind of inventory will be kept: raw materials, supplies, finished goods?
Average value in stock (i.e., what is your inventory investment)?
Rate of turnover and how this compares to industry averages?
Lead-time for ordering?
SuppliersIdentify key suppliers.
- Names & addresses
- Type & amount of inventory furnished
- Credit & delivery policies
- History & reliability
Should you have more than one supplier for critical items (as a backup)?
Do you expect shortages or short-term delivery problems?
Are supply costs steady or fluctuating? If fluctuating, how would you deal with changing costs?
Credit PoliciesDo you plan to sell on credit?
Do you really need to sell on credit? Is it customary in your industry and expected by your clientele?
If yes, what policies will you have about who gets credit and how much?
How will you check the credit worthiness of new applicants?
What terms will you offer your customers;i.e., how much credit and when is payment due?
Will you offer prompt payment discounts (hint: do this only if it is usual and customary in your industry).
Do you know what it will cost you to extend credit? Have you built the costs into your prices?
Managing your accounts receivable
If you do extend credit, you should do an aging at least monthly, to track how much of your money is tied up in credit given to customers, and to alert you to slow payment problems. When you do your financial forecasting it will be important to anticipate when customers will actually pay for their purchases, not simply when you will make the sale. It is possible to obtain information on the average % of accounts receivable in most industries.
You will need a policy for dealing with slow paying customers.
When do you make a phone call?
When do you send a letter?
When do you get your attorney to threaten?
Managing your accounts payable
You should also age your accounts payable, what you owe to your suppliers. This helps you plan who to pay and when. Paying too early depletes your cash, but paying late can cost you valuable discounts and damage your credit. (Hint: if you know you will be late making a payment, call the creditor before the due date. It tends to relax them.)
Are prompt payment discounts offered by your proposed vendors?