BUSINESS PLAN DEVELOPMENT Operations, Control Systems and Pricing

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BUSINESS PLAN DEVELOPMENTOperations, Control
Systems and Pricing

• Professor Alan L. Carsrud
• The FIU Center for Global Entrepreneurship
  Innovation
• FLORIDA INTERNATIONAL UNIVERSITY

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Purpose of an Operating Plan
Business operations are critical, however any
business will find it difficult to pass the cost
of inefficiencies on to consumers. Operations
are driven by costs and quality, with a frequent
tradeoff between controlling costs and improving
quality. An operating plan helps companies
explore ways to accomplish both at once, by, for
example, outsourcing or automating certain tasks.
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Operations Defined
Operations are the processes through which
resource inputs such as raw material, creative
talent, labor, selling skills, or a convenient
location are converted to useful outputs.
Operations determine how the company creates
value for its customers. Operating plans describe
the control procedures and flow of activities
required to provide the service or product and
associated activities.
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What is in an Operating Plan
Does the company have programs for controlling
cost and improving quality?
Has the company taken full advantage of new
technologies?
Are production costs in line with the rest of the
industry?
How quickly can the company boost production or
expand services to meet demand?
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More Questions About Operations
What value does the company create through
operations?
How is value created within the firm?
What resources are used in creating value?
Where is value created? The physical location of
business and the boundaries of its markets.
How does operations contribute to the companys
success? Or, what unique advantage does the
operating function provide?
What factors influence operations?
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Operations Overview
Identify the firms location and reason for such
location.
Develop operating procedures.
Describe operating facilities and layout.
Describe purchasing procedures.
Explain inventory management procedures.
Establish quality control and customer service
procedures.
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Operations and Controls Checklist
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Checklist For Operating Control Systems

• 1. Explain the process that will be used in
  receiving orders for the product / service.
• Diagram system using flow chart.

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Checklist For Operating Control Systems

• 2. Explain the administrative policies,
  procedures and controls
• Billing the customer
• Paying the suppliers
• Collecting the accounts receivables
• Reporting to management
• Providing for training, promotions, incentives,
  etc.
• Establishing inventory control
• Handling warranties and returns
• Monitoring budget control, travel, phone usage,
  suppliers, car allowances, etc.

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Checklist For Operating Control Systems

• 3. Diagram the flow of information and key tasks
  throughout the system.
• Identify all of the things that should happen in
  a transaction.
• 4. What documents /or data bases are needed for
  a transaction?
• Invoice, sales tickets, charge documents,
  e-commerce data bases, etc.

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Pricing Checklist
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Checklist For Pricing

• 1. Design a pricing sheet for customers.
• Show purchase price, quantity discounts, shipping
  procedures, billing procedures, warranties, and
  maintenance contracts
• 2. Compare the pricing strategy to that of the
  competition.
• Volume discounts, discount pricing, premium
  pricing.

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Checklist For Pricing

• 3. What are your policies on negotiating a price
  for large orders or on special price deals for
  penetrating the market?
• Quantity discounts, introductory offers, etc.

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Checklist For Pricing

• 4. Describe the pricing procedure for the
  industry.
• Do they differ from yours? If yes, explain why.
• What are traditional markup and discount
  structures?

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Checklist For Pricing

• 5. If the business is importing or exporting the
  product, what are the costs and procedures that
  must be added?
• Taxes, tariffs, foreign exchange of dollars,
  import / export broker, etc.

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Checklist For Pricing

• 6. Show the prices of all products minus their
  direct costs so that the reader can quickly grasp
  their profit potentials.
• Put this in chart form.

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Questions?