Costs

Back to: How to Write a Show-Stopping Business Plan Step-by-Step

    1. Now you’ve considered the different aspects of the Operations Plan. Let’s get a bit more specific about the costs – because in the next lesson, “The Financial Plan”, you will need to have these figures ready. This activity is a little different. Use it as a cross-check to ensure you’ve thought about all the elements/costs involved with starting up and running your business. Not all areas will be relevant to your business type but it is fairly thorough in order to ensure that is covers a variety of different product or service businesses. The worksheet for this Lesson includes tables to break down the costs for each of the following areas, and we will briefly discuss each one below to supplement what we’ve discussed previously. You may or may not want to include all of these in your final business plan:
      1. Legislative
      2. Insurance
      3. Personnel
      4. Facilities
      5. Capital Items
      6. Production of Goods or Services
      2. We’ll look at each one below.

1. Legislative

    1. Are there any legislative (local and/or Provincial and/or Federal) or industry-related requirements your business must adhere to for your business, including all permits, licenses, and safety requirements.
Tip: Ensure you understand the lead times for application and approval so that they can be factored into your business launch plan (start-up dates); and all associated costs.

2. Insurance

    1. What are the details of all insurance you will need to run your business?
Tip: There is no need to include business premises insurance here, you can include that in the Facilities section.

3. Personnel

    1. Let’s break “personnel” down a little. For all areas consider the first 3 years of business at least. You can always change your plans as you learn more, but a financial evaluation of your plan will like you to forecast a full 3 years.
– Management
    1. Describe who will be managing the business including its day-to-day operation (include a short summary of their relevant experience).
Tip: Add a further 1-page resume as an Appendix to business plan if you feel it directly supports your business idea or it has been requested specifically.
– Staffing
    1. What is your approach to staffing, generally? What staff will you need for start-up? What additional staff are you planning to employ over the first few years of business? What are your recruitment, attraction, and retention strategies?
Tip: Remember to include any additional costs per staff member per month (not just salary), including WCB, essential training costs, health insurance, etc.
– Specialists
    1. Will your business require a very specific skill set? How you will go about recruiting for that role. It could be that you will be outsourcing or subcontracting a particular aspect of your services, or you may need an additional resource to provide product fulfillment services, or else, you may need to contract out the development of one-off software (like a phone app), etc.
– Further Supporting Staff
    1. Are there any further supporting or professional staff you will be using to help you with the business on an as-needed or semi-regular basis? EG accountant, book keeper, lawyer, marketing professional, technical assistance/services, etc.
Tip: Do not include regular facility specific services such as landscape services/snow clearance, or security services which will be itemized in the Facilities section below.

4. Facilities

    1. Do you know what facilities you will need to operate your business (include leased or rented space for operation or storage, office or showroom space, home office space, shop, garage, land, etc)? Why do you need the facility you do? What sort of facility will it be – size, location, etc? What must it be close to? Is this a long-term or short-term location?
– Start Up Renovations
    1. Do you need to renovate the space before you can start business? Often this is the case with store fronts, or other facilities that require safety upgrades, or the addition of plumbed facilities, etc.
Tip: Renovations that you plan for at a later date can be included as a maintenance or further operations charge and added into your Cash Flow Forecast tables in the Financial Plan as a line item for the approximate date you are planning them.
– Monthly Expenses
    1. Including lease or rental costs. These are the estimated monthly expenses 

in relation to the facility

    1. .
Tip: This table will apply whether you are starting your business at home or in another location.

5. Capital Items

    1. What capital items will you need to purchase or transfer to your business in order to operate? These will contribute toward your major start-up expenses. Think about machinery, vehicles, office equipment (eg. computers, printers), tools, land, buildings, and furniture (eg. desks, chairs), etc.

Do not include

    1.  fixtures or minor fittings or items that will be replaced regularly such as small office equipment (eg. staplers, hole-punches).
Tip 1: A capital item is an item which will be listed as an asset owned by your business, and will depreciate over time according to CRA guidelines. Tip 2: If transferring personal items, list their current value in the cost column, not the price at which you purchased them.

6. Production of Goods (for product based businesses)

    1. Use this section if your primary business deliverable is a single product or multiple products. This includes products you will be manufacturing from scratch and/or items you will be purchasing in bulk to sell to your customers.
Tip: If you are purchasing items to sell as part of a service include them in the Production of Service section below instead of here. Likewise, if you are primarily a service provider, and do not manufacture or resell any products, or only do so as an integral part of a service offering, also use the section below, instead of this one.
– Supplier Agreements
    1. Have you negotiated any Supplier agreements (include restrictions such as payment schedules, delivery hours, order lead times, special non-stock items, bulk offers you will be taking advantage of etc)?
– Product Inventory
    1. What are your key considerations with regard to the initial and ongoing production of your products?
Tip: Including costs and materials required for both initial and ongoing stock levels will help you to separate your startup costs from your ongoing operational costs later in the document.
– Deliveries of Supplies and Materials to Your Facility
    1. Are there any key logistical considerations pertaining to the delivery and management of materials or supplies to your location. Do you have any related costs to deliveries to your site?
Tip: Consider delivery times, access for delivery trucks, and/or other receiving requirements; stock management; storage; rental of PO Box; etc).
– Customer Deliveries
    1. Are there any key considerations with regard to the logistics related to the delivery of your products to your customers, if you are going to be offering a delivery service?
Tip: Consider delivery times and schedules, service areas, transportation method, supporting paperwork or pre or onsite processing you will need to undertake, etc.
– Other Operations Costs
    1. Any further operational considerations and costs that have not been discussed elsewhere in this or previous sections?

7. Production of Service (for service based businesses)

    1. Use this section if your primary business deliverable is a service or services. Consider the operational detail of providing your service  ie what process will use from evaluating client requests to delivering the service?
– Service Inventory
    1. Do you need to maintain an inventory of supplies to provide your service? What are the key considerations there are with regard to the initial and ongoing provision of your services.
Tip: Consider free the provision of samples, products that are included in the cost of service, or are offered in addition to your services, welcome gifts, etc; and/or administration related supplies and materials.
– Customer Service Delivery/Logistics
    1. Are there any key considerations with regard to the logistics related to the delivery of your services to your customers? Consider details of capacity for each service taking into account your start-up staffing, and ongoing staffing, seasonal variations etc.
Tip: Consider delivery times and schedules, service areas, transportation method, supporting paperwork or pre or onsite processing you will need to undertake, etc.
– Service Capacity
    1. Are there any key considerations with regard to the logistics related to the delivery of your services to your customers? Consider details of capacity for each service taking into account your start-up staffing, and ongoing staffing, seasonal variations etc.
– Other Operations Costs
    1. Any further operational considerations and costs that have not been included elsewhere in this or previous sections?

Activity

    Tables to collate the costs for each of these areas can be found on the worksheet for this Lesson available in the Overview.

 

 

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