1. Product (or Service) Development Plan
Chapter Nine
Operations Plan
and
Product (or Service) Development Plan
Operations Plan and Product (or Service) Development Plan By
Bruce R. Barringer, PhD
Department of Management
University of Central Florida
Orlando, FL 32816
Dr. Bruce Barringer
University of Central Florida
9-1

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Introduction
Operations section
How to produce your product or service and run your business
The status of the development of a product or service
The first part of the chapter describes the operations section of a business plan, which focuses on how you will produce your product or service and run your business.
The section half of the chapter focuses on a topic that is signaled out in some business plans and is not in others—the status of the development of a product or service.
If you are developing a non-existent product, you’ll need to include a chapter that describes the design and development of the product.
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Operations Plan
How your business will be run and how your product or service will be produced
Operating model and procedures
Business location
Facilities and equipment
Operations strategy and plans
The operations plan section of the business plan outlines how your business will be run and how your product or service will be produced.
The topics that are generally included, and will be discussed below, include: operating model and procedures, business location, facilities and equipment, and operations strategy and plans. Other topics may be included depending on the nature of the business.
The degree of importance that the reader of your plan will place on the operations plan varies dramatically by plan.
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4. Operations Model and Procedures
Objective
Fully understand operational details of launching and running your business
How inventory will be stored
Production cycle
Bottlenecks
Seasonal production loads
Quality control
The primary objective of this section is to show that you have a firm grasp on the operational details of launching and running your business.
Examples of issues that fall into this category include:
An explanation of how you inventory will be stored and how frequently it will be turned over.
A description of the length and nature of your product or service’s production cycle (when do you pay for inputs?, how long does it take to produce the product?, when does the customer buy the product?, when do you get paid?)
An explanation of where bottlenecks are likely to occur in your manufacturing process or service delivery and how these will be handled.
A explanation of how seasonal production loads will be handled without service disruption (normally accomplished by building up inventory and using part-time help during beak periods)
An explanation of how your quality control will be managed.
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Business Location
Geographic location of business
Proximity to labor force
Closeness to suppliers
Access to transportation
Access to international shipping alternatives
Proximity to customers
Access to favorable state and local tax rates
Access to economic incentives
Proximity to high-quality community
This section of your plan describes the geographic location of your business.
There are several specific instances in which a business’s location is a critical factor is in ability to operate efficiently and effectively. These instances include:
Proximity to a qualified labor force.
Closeness to suppliers.
Access to transportation, such as a major airport or an interstate highway.
Access to international shipping alternatives, such as a major airport, a rail hub, and/or a seaport.
Proximity to customers with a profile conductive to a firm’s business, such as a high income neighborhood for an upscale clothing boutique or a certain ethnic population for an ethic restaurant.
Access to favorable state and local tax rates.
Access to economic incentives for locating in a certain area, such as tax abatements and/or low priced land or labor.
Proximity to a high quality community in terms of public education, recreational opportunities, healthcare and the arts, to attract a high quality workforce.
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6. Facilities and Equipment
Identify facilities and equipment
Describe how acquired (purchase, lease)
Facilities of business partners
This section describes a firm’s facilities and equipment.
You should list your most important facilities and equipment, and briefly describe how they will be (or have been) acquired, in terms of whether they will be purchased, leased, or acquired through some other means.
If you will be producing a product and will contract or outsource your production, you should comment on the facilities of your business partners
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7. Operations Strategy and Plans
Strategy issues
Working with partners
Approach to quality control
Production control
Inventory control
This section deals with strategic and longer-term issues pertaining to your operations strategy.
An important issue that is normally covered is the portion of your production process (or service delivery process) that you’ll perform in-house opposed to the activities that will be done by others.
The model that many firms use in constructing their operations flow (or supply chain) is to perform the activities in-house that they are particularly good at and find partners to do the rest.
Other issues that are discussed in this section include a firm’s overall approach to quality control, production control, inventory control, and similar issues, depending on the nature of the business.
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8. Product or Service Development Plan
Development status and tasks
Challenges and risk
Costs
Intellectual property
This section of your business plan has four parts: development status and tasks, challenges and risks, costs, and intellectual property
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9. Development Status and Tasks
Describe the present state of the development of your product or service
Product conception
Prototyping
Initial production and full production
The purpose of this section is to describe the present state of the development of your product or service.
Most products follow a logical path of development which includes product conception, prototyping, initial production, and full production.
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Prototype
A prototype is the first physical depiction of a new product
If you are a very early stage firm and only have an idea, you should carefully explain how a prototype of your product will be made. A prototype is the first physical depiction of a new product.
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Prototype Testing
Prototype and usability testing measures the product’s ease of use and user’s perception of the experience
After a company has a working prototype of its product, usability testing often takes place.
Usability testing is a form of product/service feasibility analysis, which measures a product’s ease of use and the user’s perception of the experience. Usability tests are sometimes called user tests, beta tests, or field trials, depending on the circumstances involved.
Usability testing is particularly important for software and Web site design.
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Challenges and Risks
Detail any major design and development challenges and risks that will be involved in bringing your product or service to market
This section should disclose any major anticipated design and development challenges (and risks) that will be involved in bringing your product or service to market.
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Costs
Budget for remaining design and development work
Costs of labor
Material
Consulting fees
Prototyping
Usability testing
This section should provide a budget for the remaining design and development work that needs to be done to bring your product or service to market. The budget should include the costs of labor, material, consulting fees, prototyping, usability testing, and so on.
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14. Intellectual Property
Patents, trademarks, copyrights, or trade secrets secured relative to the products you are developing
This section should describe any patents, trademarks, copyrights, or trade secrets that you have secured or plan to secure relative to the products or services you are developing.
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15. Intellectual Property
Intellectual property is any product of human intellect that is intangible but has value in the marketplace
Intellectual property is any product of human intellect that is intangible but has value in the marketplace. It is called “intellectual” property because it is the product of human imagination, creativity, and inventiveness.
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Trade Secret
A trade secret is any formula, pattern, physical device, idea, process, or other information that provides the owners of the information with a competitive advantage in the marketplace
A trade secret is any formula, pattern, physical device, idea, process, or other information that provides the owners of the information with a competitive advantage in the marketplace.
Trade secrets include marketing plans, product formulas, financial forecasts, employee rosters, logs of sales calls, laboratory notebooks, operations manuals, and similar material.
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Patents
Patents are expensive ($5,000 to $50,000) and must be applied for within one year of when the product is first offered for sale, put into public use, or is described in any printed publication, such as a concept statement, or the right to file a patent application is forfeited
Patents are expensive to obtain, which poses a challenge for many startups.
The total cost of applying for a patent ranges from $5,000 to $50,000, depending on the nature of the patent.
In addition, a patent must be applied for within one year of when a product or process is first offered for sale, put into public use, or is described in any printed publication, such as a concept statement, or the right to file a patent application for the product or process is forfeited
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