labor requirements business plan

Labor requirements for business

The following laws are in place to protect workers and potential hires, and require that you treat your workers fairly, provide them with benefits and a safe workplace, and contribute to California’s unemployment insurance.

Understand whether they should be employees or independent contractors

Understanding the labor laws for different types of workers–employees, independent contractors, and volunteers–can be confusing. Sometimes employers improperly classify employees as independent contractors, which have different rules on payroll taxes, minimum wage, overtime, and other labor laws.

If you aren't sure how to classify a potential hire as an employee or independent contractor, you can use this "test" to help you figure it out:  https://www.dir.ca.gov/dlse/faq_independentcontractor.htm

Some questions are off limits

During the hiring process, it is unlawful to ask about a job applicant’s age, sexual orientation, marital status, religious affiliation or race. Additionally, questions related to a physical, emotional or mental handicap can only be asked if an applicant will need special accommodations for performing a specific job. The  US Department of Labor  and the  Equal Employment Opportunity Commission  explains these rules in more detail.

Give potential hires a fair chance

Businesses located or doing business in the City, that have 5 or more employees (regardless of the employees’ locations), cannot discriminate against potential hires who may have a criminal record. Learn more about the  Fair Chance Ordinance  from the SF Office of Labor Standards Enforcement.

Set up employee benefits

If your business has established employee benefit programs like health insurance or a 401(k) plan, you’ll need a sign-up procedure so employees can enroll, name their dependents, and select options.

Follow San Francisco labor laws

Minimum wage.

The San Francisco minimum wage is higher than most cities to reflect the cost of living in the city. The current minimum wage is  updated every year .

• Paid sick leave

All employers must provide paid sick leave to each employee (including temporary and part-time employees) who performs work in San Francisco. Learn more about the  Paid Sick Leave Ordinance  from the SF Office of Labor Standards Enforcement and the  Healthy Workplace Healthy Family Act  from the CA Department of Industrial Regulations.  

Flexible work arrangements

Employees with families in San Francisco have the right to request a flexible work arrangement (though employers also have the right to refuse for legitimate business reasons). Learn more about the  Family Friendly Workplace Ordinance  from the SF Office of Labor Standards Enforcement.

Healthcare security spending

In San Francisco, you must pay toward health care coverage for all your employees. The size of this payment depends on the size of your business, where a small business has 19 employees or less, a medium business has 20-99 employees, and a large business has over one hundred employees. Learn more about the  Health Care Security Ordinance  from the SF Office of Labor Standards Enforcement.

Commuter benefits

Businesses located or doing business in the City that have 20 or more employees must provide commuter benefits to encourage their employees to take public transit, bike, or rideshare to work. Learn more about the  Commuter Benefits Ordinance  from the SF Department of the Environment.

Retail employees

Beginning July 3, 2015, all  Formula Retail Establishments  with at least 20 retail stores, must follow the  San Francisco Retail Worker Bill of Rights . These employers must provide schedules in advance, give prior notice for schedule changes, and offer  predictability pay  among other requirements. Sign up for  updates and reminders about Formula Retail Labor Protections  through the SF Office of Labor Standards and Enforcement.

Provide workers’ compensation insurance

In California, if you have one employee or more, you must have workers’ compensation insurance to protect workers who might suffer on-the-job injuries. If your employees get hurt or sick because of work, you are required to pay for workers' compensation benefits. Workers’ comp insurance provides six basic benefits: medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits or vocational rehabilitation and death benefits. 

You may obtain workers’ compensation insurance in California in the following ways:

• Through a broker
• Directly with an insurance carrier 

If you currently do not have a broker or insurance carrier and would like to search for a list of carriers, you can learn more from the  CA Department of Industrial Relations . 

NOTE: If you are a roofer and don’t have any employees, you are still required to carry  workers’ comp insurance . 

Deduct temporary disability insurance

Employers are required by law to withhold and remit State Disability Insurance (SDI) contributions and to inform their employees of SDI benefits. To inform employees, you must provide them with the publications listed below. You can find these publications through the  CA Employment Development Department . 

• Notice to Employees: Unemployment Insurance/Disability Insurance Benefits  (DE 1857A)  – Advises employees of their right to claim Unemployment Insurance (UI), DI, and PFL benefits.
• State Disability Insurance Provisions  (DE 2515)  – For new hires and again when the employee notifies the employer they need to take time off from work due to their non-industrial medical condition.
• Paid Family Leave Benefits  (DE 2511)  – For new hires and again when the employee notifies the employer they need to take time off from work to care for a seriously ill family member or to bond with a new child.

Register with the state

Once you bring on employees, you must pay California unemployment insurance taxes. First, register with the  CA Department of Industrial Relations . Later, at tax time, your payments will go to the state’s unemployment compensation fund, which provides short-term relief to workers who lose their jobs. 

Unemployment Insurance (UI) is paid by every employer in California. Tax-rated employers pay a percentage on the first $7,000 in wages paid to each employee in a calendar year. The  UI rate schedule  and amount of taxable wages are determined annually. 

Adopt workplace safety measures

Almost every employer must comply with the requirements of the  Occupational Safety and Health Act  (OSHA) by, among other things, providing a workplace free of hazards, training employees to do their jobs safely, notifying government administrators about serious workplace accidents, and keeping detailed safety records.

Post required notices

Employers are required to display certain posters in the workplace that inform employees of both their rights and employer responsibilities under labor laws. California employers must post all state and federal required posters, but San Francisco has some additional notices that must be displayed. 

City-Required Posters

• Minimum Wage Ordinance Official Poster.  Find poster and read more . 
• Fair Chance Ordinance Notice.  Find poster and read more .
• Paid Sick Leave Ordinance Official Poster.  Find poster and read more .
• Health Care Security Ordinance (HCSO) Notice.  Find poster and read more . 
• Family Friendly Workplace Ordinance Notice.  Find poster and read more .

State and Federal Required Posters

The CA Department of Industrial Relations maintains an  updated list  of the following posters, which are required for all employers. The list also includes notices that only apply to specific business types and sizes.

• Payday notice
• Safety and health protection on the job
• Emergency phone numbers
• Notice to employees – injuries caused by work
• Notice to employees – workers’ compensation carrier and coverage
• Whistleblower protections
• No smoking signage
• Discrimination and harassment in employment
• Notice to employees – unemployment insurance benefits
• Notice to employees – time off to vote
• Equal employment opportunity
• Notice to employees – Employee Polygraph Protection Act

Posters required by the US Department of Labor (DOL) and other federal agencies can also be found using the  DOL FirstStep Poster Advisor  search tool.

Featured resources

Hire your first employee.

The US Small Business Administration (SBA) explains how to start the hiring process and ensure you are compliant with key federal and state regulations.

Nolo, formerly known as Nolo Press, is a Bay Area publisher that produces do-it-yourself legal books and software that reduce the need for people to hire lawyers for simple legal matters.

Hiring Your First Employee: 13 Things You Must Do

A to-do list for new employers produced by Nolo, a Berkeley-based legal advice publisher.

Recruitment assistance to find local talent

The Office of Economic and Workforce Development  (OEWD) knows that finding good talent in a market like San Francisco can be a challenge—but the Employer Engagement Team is here to help. Services range from presenting qualified and screened candidates that match your job requirements to assisting you in scheduling interviews in our recruitment facilities. OEWD can also help connect you to local hiring events. 

Tax credits and incentives

Certain employers can be eligible for thousands of dollars in Local, State, and Federal tax credits and incentives based on hiring and other business expenses. 

CityBuild Employment Networking Services

The Office of Workforce and Economic Development' s CityBuild Employment Networking Services connect contractors with qualified San Francisco resident trades workers. CityBuild maintains a database of over 4,000 local workers and can assist contractors in meeting workforce hiring requirements.

Layoff response assistance

The Office of Economic and Workforce Development can provide services through the Rapid Response Program that will assist you in easing the transition of your workforce when a downsizing event cannot be averted. Staff will conduct on-site or virtual orientations and inform your employees about resources and services that can assist them with applying for unemployment, access to career coaching, and healthcare options.

The following requirements are in place for reporting and tax purposes. They ask that you obtain an EIN, verify your worker’s eligibility before hiring and registering them with the state, and that you withhold taxes.

Find out where to begin, what you need, and how to plan for success.

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Qualitative and quantitative labor requirements planning

With a regular, systematic labor requirements plan, you can ensure that your company is able to continue operations and secure its long-term success.

Qualitative and quantitative staff planning means you will have the right number of the right people with the necessary qualifications – at right time and place.

The experts at Ingenics offer decades of project experience in factory and production planning. With the right tools, Ingenics can also actively support your company when it comes to efficient and successful labor requirements planning. The resulting staff structure is made transparent for all the relevant areas.

Based on this requirements plan, your potential can be identified and quantified. Appro-priate measures are then established to achieve this potential over the long term. These include regular audits and inspections using key performance indicators (KPIs). Offering added value, Ingenics will also present you with the optimal organizational structure for your production and administrative departments.

Methods of qualitative and quantitative labor requirements planning

First, basic information is collected and analyzed so that a requirements plan can be developed. This basic data should include relevant information such as the number of units to be produced, the shift pattern, and the number of working days per week and year.

The qualitative perspective takes into account responsibilities concerning work tasks as well as the mental and physical demands on employees. One tool that is used here is a qualification matrix to identify skills and qualification levels.

Furthermore, quantitative staffing needs play an especially important role in labor re-quirements planning – the determination of gross and net staffing needs, among other things. With respect to net staffing needs, a further distinction is made between direct and indirect employees.

The results of the qualitative and quantitative labor requirements plan are documented in the form of job charts, organizational structures, and organizational charts. At the same time, the required staffing needs are monitored over defined periods in a process known as “calendarization”. This breakdown of capacity planning makes it possible to determine in advance which (and how many) employees have to be available in the immediate future, and in what areas of the company.

Appropriate measures are derived from the labor requirements plan so that the company remains sufficiently staffed at all times now and in the future, while also avoiding expensive overstaffing situations. Ingenics actively supports your company with the creation of a structured, clear, and transparent labor requirements plan. This also serves as an early warning system so that you can estimate future developments, identify risks, and introduce new measures where appropriate.

Johann Kablutschkin

Associate Partner Phone: +49 731 93680 225

Dennis Schunigl

Associate Partner Phone: +52 222 549 32 19

The New Ingenics Magazine Is Available Now!

The newly released ingenics magazine no. 11 / 2024 is now available for download..

Manpower Requirements and Operations in a Business Proposal

Writing a winning business proposal can be a critical part of expanding your business. An informal meeting with a potential new client sets the stage, but a thoughtful, personalized business proposal can help you seal the deal. As you craft your business proposal, two important areas to consider are the manpower requirements of the project and the operational requirements of the project. These areas will help inform the project deliverables, milestones and overall budget.

Writing a Business Proposal

The purpose of a business proposal is to win new business, so it should be written with sales in mind. Some industries have a specific template that's commonly used, so if you're uncertain of the correct format, connect with peers in your network to find out proposal specifics. In particular, federal and state governments bids may have specific requirements that you need to meet.

In general, business proposals have five to six sections. These include an introduction, an executive summary, details about the project, deliverables and project milestones, a breakdown of the budget for the project and the conclusion. In the introduction, you can provide a brief overview of your business and why it's well-suited for this particular project. In the executive summary, you can provide an overview of the project itself. Next, give more details about the project, including your operational and manpower planning.

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Your deliverables and project milestones can be spelled out in the simple table. Your budget breakdown can also be delivered in a table and should include your manpower proposal for the project. Overall, business proposals tend to be relatively short and easy-to-read.

Manpower Proposal Considerations

Before you write your business proposal, consider the manpower you'll need for this project. Your manpower requirements definition may include managers, front-line employees and employees with special skill sets required for this project. Define the roles of each member of your proposed team and how they will interact with each other. Estimate how long it will take for each team member to complete their portion of the project. Use that estimate to determine your manpower costs, keeping in mind their salary, their employee benefits, payroll taxes and other costs associated with their employment.

When you address manpower requirements in your business proposal, you may not need to include this level of detail. This level of planning can help you develop an accurate budget, though. Be sure to include a cushion for unexpected costs such as overtime.

Operations Proposal Considerations

Your operational plan will influence several areas of your business proposal. For example, it will play a large role in the section where you spell out the details of your project. You may want to include a brief description of how your product is made, as well as your supply chain. You should also describe the quality control measures you have in place to ensure a high-quality product or service.

As you develop your project budget, keep in mind operational requirements such as the type of physical space you'll need, any special equipment you will need to purchase, any special materials you'll need to obtain, storage costs and delivery costs. You may not need to go into this level of detail in your proposed budget, but using a high level of detail for planning ensures a higher level of accuracy, which can help prevent cost overruns.

• Fundera: How to Write a Business Proposal in 6 Steps to Win Clients
• Inc.: Business Proposals
• The Balance Small Business: Including Management and Human Resources in Your Business Plan
• The Balance Small Business: The Operations Plan Section of the Business Plan

Melinda Hill Sineriz has been writing professionally for over 10 years. She worked as an editorial assistant for Forward Movement Publications in Cincinnati, Ohio. She wrote for several years for allmusic.com and edited and wrote a chapter for a book with Wooster Press. She graduated from Miami University in Ohio with a Bachelor of Arts in English. She has a master's degree in teaching.

Workforce Planning: Definition & Best Practices

Updated: Feb 11, 2024, 3:58pm

Table of Contents

What is workforce planning, why workforce planning is important, benefits of workforce planning, 6 steps to effective workforce planning, 7 workforce planning best practices, frequently asked questions (faqs).

In today’s ever-changing workplace environment, it is more important than ever that businesses use workforce planning to ensure that their workforce aligns with their business strategy. Workforce planning is the process of analyzing workforce supply and demand, and then making adjustments as necessary to meet business needs and goals. This article explains the definition of workforce planning, the process of engaging in workforce planning, and best practices.

Workforce planning is the process of leveraging data to ensure that a business’s workforce supports business needs, goals and strategic plans. By utilizing workforce planning, businesses can set themselves up for success and empower their HR department to make more informed decisions about their talent needs. After assessing business needs and strategic plans, workforce planning looks at possible solutions, including staffing and technology solutions.

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Workforce planning is essential to keeping your business appropriately staffed. Without workforce planning, businesses can easily become overstaffed with excessive payroll expenses or understaffed and unable to meet customer or client needs. Workforce planning can help keep the business on track to meet customer and client needs, to achieve business goals and strategic plans, and avoid excessive overhead costs.

When trying to juggle all of the responsibilities of running a business, it might seem as though taking the time to sit down and plan your personnel strategy is a poor use of time. But taking the care to practice effective workforce planning can pay off greatly in the long run.

When done correctly, benefits of workforce planning include:

• Creating a road map for achieving business goals. Rather than just words on paper, the strategic plan comes to life through workforce planning. Because workforce planning aligns the workforce supply and demand with the business’s strategic plan, it provides a path to making the strategic plan a reality.
• Preparing for the future. Rather than focusing on immediate staffing needs, workforce planning takes a longer view to prepare for future needs by looking to labor market trends, technological alternatives, sustainable ways to streamline job responsibilities and other workforce options.
• Discovering staffing gaps or opportunities for increased efficiency. Workforce planning requires an evaluation process, through which staffing gaps and inefficiencies can be discovered and corrected.
• Providing data to support HR decisions. Rather than making impulsive decisions, workforce planning relies on data and stats to make informed decisions. Accordingly, HR leaders and company management can be confident in their decisions and have the data to support their decisions to various stakeholders.
• Facilitating succession planning. Because workforce planning looks beyond the horizon to future needs, the process can assist with succession planning. If there are gaps in succession planning, the business can take steps to train and develop future leaders so they aren’t scrambling when leaders retire.
• Improving retention rates. Because there is a clear road map, transparent standards and appropriate staffing levels, businesses often realize improved retention rates when they practice effective workforce planning. Employees are not overworked or underutilized. Instead, talent is developed and given opportunities for growth. And because the workforce planning program aligns with strategic planning, the workforce can feel united in a common goal.

Workforce planning essentially consists of six steps:

• Determine your business strategy. A business plan details your goals, budget and other needs to get your business up and running. A strategic plan can be developed at any point during a business’s life cycle and outlines the company’s strategy for the next three to five years.
• Assess workforce supply. Look at your talent pool, including current employees and potential candidates.
• Assess workforce demand. Determine the number of employees needed to meet current business needs and achieve strategic plans.
• Develop a workforce plan. Analyze your workforce supply and demand in the context of your strategic plans. If there are gaps between supply and demand, consider ways to close those gaps. If there is a misalignment between workforce supply and demand, consider ways to create alignment.
• Implement your workforce plan. The workforce plan might include hiring additional staff, using temporary employees, working with contractors or rolling out technological solutions to meet business needs. Conversely, it might also mean consolidating departments or teams.
• Monitor progress. After the workforce adjustments are implemented, continue to monitor the impact of these solutions to ensure that they have the desired outcomes.

The specific workforce planning process varies depending on the size of your business, industry and the labor market. In an unpredictable labor market or for a startup company, the workforce planning process may look out a year or two in the future. In contrast, a well-established company in a steady labor market might take a longer view. Below are some best practices to consider regardless of the specific duration of your workforce planning program:

1. Take the time to create a strategic plan

Effective workforce planning relies on having a concrete and actionable strategic plan. Not only does a well-formed strategic plan serve as a “north star” to guide you through the workforce planning process, but it can also help monitor progress and evaluate the impact of your proposed solutions.

2. Make workforce planning a collaborative process

Workforce planning works best when there is input from a wide range of stakeholders and there is buy-in across all facets of the business. Consult with different business teams and seek feedback from employees. When communicating the workforce plan, share information regarding the “why” and “how” so that employees throughout the organization understand the goal of any workforce changes.

3. Engage senior leadership in the process

Although workforce planning impacts HR, the process shouldn’t be delegated solely to the HR department. To be effective and sustainable, the workforce planning program should involve senior leadership, who should consider factors such as organization structure, succession planning, budgets, risk reduction and strategic plans.

4. Define your KPIs

To track progress and assess the impact of workforce planning solutions, it is crucial to have appropriate KPIs in place. Some common KPIs to include in your workforce planning program include employee head count, attrition rate, retention rate, promotion rate, tenure, quality of hire, voluntary vs. involuntary turnover rate, eNPS and diversity metrics.

5. Leverage data

Data is your workforce planning friend. By relying on data, you can make informed decisions and justify staffing decisions. Look at current staffing, employee retention rates, employee promotion rates, time-to-hire period and other vital measurements.

6. Pay attention to labor market insights

Understanding labor market trends, especially in your industry, will help you assess potential staffing needs. If multiple competitors are on a hiring spree, it could give you some key insights into where your industry is going and what your organization needs to do to prepare for it.

7. Consider alternative solutions

Workforce planning extends beyond hiring and terminating employees. Workforce planning should consider several options, including technological solutions, temporary employees and contractors. Workforce planning might also include adjustments to operations to remove bottlenecks, enhance efficiency, scale operations and employee transfers. The most effective workforce planning programs use a combination of talent strategies to meet their needs, including hiring talent, developing talent, redesigning workflow, redeploying talent and contracting with talent.

Bottom Line

Workforce planning isn’t a quick fix; it takes time, effort and careful deliberation. But workforce planning is well worth the time and effort it takes. When done well, workforce planning can boost retention rates, minimize inefficiencies and help the business achieve its goals.

How is workforce planning different from workforce management?

Workforce management is a set of techniques to manage your current workforce by allocating resources, improving efficiency and managing schedules. On the other hand, workforce planning takes a more big-picture view and predicts future workforce needs according to the company’s strategic plan.

Why is workforce planning important?

For many businesses, human capital is their most valuable asset. Workforce planning can ensure that your talent strategy aligns with your overall business strategy.

What are the key steps to effective workforce planning?

When it comes time to create a workforce plan, employ the following steps:

• Determine your business strategy
• Assess workforce supply
• Assess workforce demand
• Develop a workforce plan
• Implement your workforce plan
• Monitor progress

Are there technologies to assist with workforce planning?

Several technological solutions can assist with workforce planning and other strategic human resource management needs, including Vena, Planful and Workday Adaptive Planning.

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Christine is a non-practicing attorney, freelance writer, and author. She has written legal and marketing content and communications for a wide range of law firms for more than 15 years. She has also written extensively on parenting and current events for the website Scary Mommy. She earned her J.D. and B.A. from University of Wisconsin–Madison, and she lives in the Chicago area with her family.

Business Plan Example and Template

Learn how to create a business plan

What is a Business Plan?

A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing .

A business plan should follow a standard format and contain all the important business plan elements. Typically, it should present whatever information an investor or financial institution expects to see before providing financing to a business.

Contents of a Business Plan

A business plan should be structured in a way that it contains all the important information that investors are looking for. Here are the main sections of a business plan:

1. Title Page

The title page captures the legal information of the business, which includes the registered business name, physical address, phone number, email address, date, and the company logo.

2. Executive Summary

The executive summary is the most important section because it is the first section that investors and bankers see when they open the business plan. It provides a summary of the entire business plan. It should be written last to ensure that you don’t leave any details out. It must be short and to the point, and it should capture the reader’s attention. The executive summary should not exceed two pages.

3. Industry Overview

The industry overview section provides information about the specific industry that the business operates in. Some of the information provided in this section includes major competitors, industry trends, and estimated revenues. It also shows the company’s position in the industry and how it will compete in the market against other major players.

4. Market Analysis and Competition

The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model.

Market analysis includes information about the target market’s demographics , geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.

A business can choose to consolidate the market analysis and competition analysis into one section or present them as two separate sections.

5. Sales and Marketing Plan

The sales and marketing plan details how the company plans to sell its products to the target market. It attempts to present the business’s unique selling proposition and the channels it will use to sell its goods and services. It details the company’s advertising and promotion activities, pricing strategy, sales and distribution methods, and after-sales support.

6. Management Plan

The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees.

Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.

7. Operating Plan

The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory . For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.

8. Financial Plan

The financial plan is an important section that will often determine whether the business will obtain required financing from financial institutions, investors, or venture capitalists. It should demonstrate that the proposed business is viable and will return enough revenues to be able to meet its financial obligations. Some of the information contained in the financial plan includes a projected income statement , balance sheet, and cash flow.

9. Appendices and Exhibits

The appendices and exhibits part is the last section of a business plan. It includes any additional information that banks and investors may be interested in or that adds credibility to the business. Some of the information that may be included in the appendices section includes office/building plans, detailed market research , products/services offering information, marketing brochures, and credit histories of the promoters.

Business Plan Template

Here is a basic template that any business can use when developing its business plan:

Section 1: Executive Summary

• Present the company’s mission.
• Describe the company’s product and/or service offerings.
• Give a summary of the target market and its demographics.
• Summarize the industry competition and how the company will capture a share of the available market.
• Give a summary of the operational plan, such as inventory, office and labor, and equipment requirements.

Section 2: Industry Overview

• Describe the company’s position in the industry.
• Describe the existing competition and the major players in the industry.
• Provide information about the industry that the business will operate in, estimated revenues, industry trends, government influences, as well as the demographics of the target market.

Section 3: Market Analysis and Competition

• Define your target market, their needs, and their geographical location.
• Describe the size of the market, the units of the company’s products that potential customers may buy, and the market changes that may occur due to overall economic changes.
• Give an overview of the estimated sales volume vis-à-vis what competitors sell.
• Give a plan on how the company plans to combat the existing competition to gain and retain market share.

Section 4: Sales and Marketing Plan

• Describe the products that the company will offer for sale and its unique selling proposition.
• List the different advertising platforms that the business will use to get its message to customers.
• Describe how the business plans to price its products in a way that allows it to make a profit.
• Give details on how the company’s products will be distributed to the target market and the shipping method.

Section 5: Management Plan

• Describe the organizational structure of the company.
• List the owners of the company and their ownership percentages.
• List the key executives, their roles, and remuneration.
• List any internal and external professionals that the company plans to hire, and how they will be compensated.
• Include a list of the members of the advisory board, if available.

Section 6: Operating Plan

• Describe the location of the business, including office and warehouse requirements.
• Describe the labor requirement of the company. Outline the number of staff that the company needs, their roles, skills training needed, and employee tenures (full-time or part-time).
• Describe the manufacturing process, and the time it will take to produce one unit of a product.
• Describe the equipment and machinery requirements, and if the company will lease or purchase equipment and machinery, and the related costs that the company estimates it will incur.
• Provide a list of raw material requirements, how they will be sourced, and the main suppliers that will supply the required inputs.

Section 7: Financial Plan

• Describe the financial projections of the company, by including the projected income statement, projected cash flow statement, and the balance sheet projection.

Section 8: Appendices and Exhibits

• Quotes of building and machinery leases
• Proposed office and warehouse plan
• Market research and a summary of the target market
• Credit information of the owners
• List of product and/or services

Related Readings

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• Corporate Structure
• Three Financial Statements
• Business Model Canvas Examples
• See all management & strategy resources
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Elements of a Business Plan There are seven major sections of a business plan, and each one is a complex document. Read this selection from our business plan tutorial to fully understand these components.

Now that you understand why you need a business plan and you've spent some time doing your homework gathering the information you need to create one, it's time to roll up your sleeves and get everything down on paper. The following pages will describe in detail the seven essential sections of a business plan: what you should include, what you shouldn't include, how to work the numbers and additional resources you can turn to for help. With that in mind, jump right in.

Executive Summary

Within the overall outline of the business plan, the executive summary will follow the title page. The summary should tell the reader what you want. This is very important. All too often, what the business owner desires is buried on page eight. Clearly state what you're asking for in the summary.

The statement should be kept short and businesslike, probably no more than half a page. It could be longer, depending on how complicated the use of funds may be, but the summary of a business plan, like the summary of a loan application, is generally no longer than one page. Within that space, you'll need to provide a synopsis of your entire business plan. Key elements that should be included are:

• Business concept. Describes the business, its product and the market it will serve. It should point out just exactly what will be sold, to whom and why the business will hold a competitive advantage.
• Financial features. Highlights the important financial points of the business including sales, profits, cash flows and return on investment.
• Financial requirements. Clearly states the capital needed to start the business and to expand. It should detail how the capital will be used, and the equity, if any, that will be provided for funding. If the loan for initial capital will be based on security instead of equity, you should also specify the source of collateral.
• Current business position. Furnishes relevant information about the company, its legal form of operation, when it was formed, the principal owners and key personnel.
• Major achievements. Details any developments within the company that are essential to the success of the business. Major achievements include items like patents, prototypes, location of a facility, any crucial contracts that need to be in place for product development, or results from any test marketing that has been conducted.

When writing your statement of purpose, don't waste words. If the statement of purpose is eight pages, nobody's going to read it because it'll be very clear that the business, no matter what its merits, won't be a good investment because the principals are indecisive and don't really know what they want. Make it easy for the reader to realize at first glance both your needs and capabilities.

Business Description

Tell them all about it.

The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business. Base all of your observations on reliable data and be sure to footnote sources of information as appropriate. This is important if you're seeking funding; the investor will want to know just how dependable your information is, and won't risk money on assumptions or conjecture.

When describing your business, the first thing you need to concentrate on is its structure. By structure we mean the type of operation, i.e. wholesale, retail, food service, manufacturing or service-oriented. Also state whether the business is new or already established.

In addition to structure, legal form should be reiterated once again. Detail whether the business is a sole proprietorship, partnership or corporation, who its principals are, and what they will bring to the business.

You should also mention who you will sell to, how the product will be distributed, and the business's support systems. Support may come in the form of advertising, promotions and customer service.

Once you've described the business, you need to describe the products or services you intend to market. The product description statement should be complete enough to give the reader a clear idea of your intentions. You may want to emphasize any unique features or variations from concepts that can typically be found in the industry.

Be specific in showing how you will give your business a competitive edge. For example, your business will be better because you will supply a full line of products; competitor A doesn't have a full line. You're going to provide service after the sale; competitor B doesn't support anything he sells. Your merchandise will be of higher quality. You'll give a money-back guarantee. Competitor C has the reputation for selling the best French fries in town; you're going to sell the best Thousand Island dressing.

How Will I Profit?

Now you must be a classic capitalist and ask yourself, "How can I turn a buck? And why do I think I can make a profit that way?" Answer that question for yourself, and then convey that answer to others in the business concept section. You don't have to write 25 pages on why your business will be profitable. Just explain the factors you think will make it successful, like the following: it's a well-organized business, it will have state-of-the-art equipment, its location is exceptional, the market is ready for it, and it's a dynamite product at a fair price.

If you're using your business plan as a document for financial purposes, explain why the added equity or debt money is going to make your business more profitable.

Show how you will expand your business or be able to create something by using that money.

Show why your business is going to be profitable. A potential lender is going to want to know how successful you're going to be in this particular business. Factors that support your claims for success can be mentioned briefly; they will be detailed later. Give the reader an idea of the experience of the other key people in the business. They'll want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.

The business description can be a few paragraphs in length to a few pages, depending on the complexity of your plan. If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in three or four paragraphs that will end the statement.

While you may need to have a lengthy business description in some cases, it's our opinion that a short statement conveys the required information in a much more effective manner. It doesn't attempt to hold the reader's attention for an extended period of time, and this is important if you're presenting to a potential investor who will have other plans he or she will need to read as well. If the business description is long and drawn-out, you'll lose the reader's attention, and possibly any chance of receiving the necessary funding for the project.

Market Strategies

Define your market.

Market strategies are the result of a meticulous market analysis. A market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to garner its share of sales. A market analysis also enables the entrepreneur to establish pricing, distribution and promotional strategies that will allow the company to become profitable within a competitive environment. In addition, it provides an indication of the growth potential within the industry, and this will allow you to develop your own estimates for the future of your business.

Begin your market analysis by defining the market in terms of size, structure, growth prospects, trends and sales potential.

The total aggregate sales of your competitors will provide you with a fairly accurate estimate of the total potential market. Once the size of the market has been determined, the next step is to define the target market. The target market narrows down the total market by concentrating on segmentation factors that will determine the total addressable market--the total number of users within the sphere of the business's influence. The segmentation factors can be geographic, customer attributes or product-oriented.

For instance, if the distribution of your product is confined to a specific geographic area, then you want to further define the target market to reflect the number of users or sales of that product within that geographic segment.

Once the target market has been detailed, it needs to be further defined to determine the total feasible market. This can be done in several ways, but most professional planners will delineate the feasible market by concentrating on product segmentation factors that may produce gaps within the market. In the case of a microbrewery that plans to brew a premium lager beer, the total feasible market could be defined by determining how many drinkers of premium pilsner beers there are in the target market.

It's important to understand that the total feasible market is the portion of the market that can be captured provided every condition within the environment is perfect and there is very little competition. In most industries this is simply not the case. There are other factors that will affect the share of the feasible market a business can reasonably obtain. These factors are usually tied to the structure of the industry, the impact of competition, strategies for market penetration and continued growth, and the amount of capital the business is willing to spend in order to increase its market share.

Projecting Market Share

Arriving at a projection of the market share for a business plan is very much a subjective estimate. It's based on not only an analysis of the market but on highly targeted and competitive distribution, pricing and promotional strategies. For instance, even though there may be a sizable number of premium pilsner drinkers to form the total feasible market, you need to be able to reach them through your distribution network at a price point that's competitive, and then you have to let them know it's available and where they can buy it. How effectively you can achieve your distribution, pricing and promotional goals determines the extent to which you will be able to garner market share.

For a business plan, you must be able to estimate market share for the time period the plan will cover. In order to project market share over the time frame of the business plan, you'll need to consider two factors:

• Industry growth which will increase the total number of users. Most projections utilize a minimum of two growth models by defining different industry sales scenarios. The industry sales scenarios should be based on leading indicators of industry sales, which will most likely include industry sales, industry segment sales, demographic data and historical precedence.
• Conversion of users from the total feasible market. This is based on a sales cycle similar to a product life cycle where you have five distinct stages: early pioneer users, early users, early majority users, late majority users and late users. Using conversion rates, market growth will continue to increase your market share during the period from early pioneers to early majority users, level off through late majority users, and decline with late users.

Defining the market is but one step in your analysis. With the information you've gained through market research, you need to develop strategies that will allow you to fulfill your objectives.

Positioning Your Business

When discussing market strategy, it's inevitable that positioning will be brought up. A company's positioning strategy is affected by a number of variables that are closely tied to the motivations and requirements of target customers within as well as the actions of primary competitors.

Before a product can be positioned, you need to answer several strategic questions such as:

• How are your competitors positioning themselves?
• What specific attributes does your product have that your competitors' don't?
• What customer needs does your product fulfill?

Once you've answered your strategic questions based on research of the market, you can then begin to develop your positioning strategy and illustrate that in your business plan. A positioning statement for a business plan doesn't have to be long or elaborate. It should merely point out exactly how you want your product perceived by both customers and the competition.

How you price your product is important because it will have a direct effect on the success of your business. Though pricing strategy and computations can be complex, the basic rules of pricing are straightforward:

• All prices must cover costs.
• The best and most effective way of lowering your sales prices is to lower costs.
• Your prices must reflect the dynamics of cost, demand, changes in the market and response to your competition.
• Prices must be established to assure sales. Don't price against a competitive operation alone. Rather, price to sell.
• Product utility, longevity, maintenance and end use must be judged continually, and target prices adjusted accordingly.
• Prices must be set to preserve order in the marketplace.

There are many methods of establishing prices available to you:

• Cost-plus pricing. Used mainly by manufacturers, cost-plus pricing assures that all costs, both fixed and variable, are covered and the desired profit percentage is attained.
• Demand pricing. Used by companies that sell their product through a variety of sources at differing prices based on demand.
• Competitive pricing. Used by companies that are entering a market where there is already an established price and it is difficult to differentiate one product from another.
• Markup pricing. Used mainly by retailers, markup pricing is calculated by adding your desired profit to the cost of the product. Each method listed above has its strengths and weaknesses.
• Distribution

Distribution includes the entire process of moving the product from the factory to the end user. The type of distribution network you choose will depend upon the industry and the size of the market. A good way to make your decision is to analyze your competitors to determine the channels they are using, then decide whether to use the same type of channel or an alternative that may provide you with a strategic advantage.

Some of the more common distribution channels include:

• Direct sales. The most effective distribution channel is to sell directly to the end-user.
• OEM (original equipment manufacturer) sales. When your product is sold to the OEM, it is incorporated into their finished product and it is distributed to the end user.
• Manufacturer's representatives. One of the best ways to distribute a product, manufacturer's reps, as they are known, are salespeople who operate out of agencies that handle an assortment of complementary products and divide their selling time among them.
• Wholesale distributors. Using this channel, a manufacturer sells to a wholesaler, who in turn sells it to a retailer or other agent for further distribution through the channel until it reaches the end user.
• Brokers. Third-party distributors who often buy directly from the distributor or wholesaler and sell to retailers or end users.
• Retail distributors. Distributing a product through this channel is important if the end user of your product is the general consuming public.
• Direct Mail. Selling to the end user using a direct mail campaign.

As we've mentioned already, the distribution strategy you choose for your product will be based on several factors that include the channels being used by your competition, your pricing strategy and your own internal resources.

Promotion Plan

With a distribution strategy formed, you must develop a promotion plan. The promotion strategy in its most basic form is the controlled distribution of communication designed to sell your product or service. In order to accomplish this, the promotion strategy encompasses every marketing tool utilized in the communication effort. This includes:

• Advertising. Includes the advertising budget, creative message(s), and at least the first quarter's media schedule.
• Packaging. Provides a description of the packaging strategy. If available, mockups of any labels, trademarks or service marks should be included.
• Public relations. A complete account of the publicity strategy including a list of media that will be approached as well as a schedule of planned events.
• Sales promotions. Establishes the strategies used to support the sales message. This includes a description of collateral marketing material as well as a schedule of planned promotional activities such as special sales, coupons, contests and premium awards.
• Personal sales. An outline of the sales strategy including pricing procedures, returns and adjustment rules, sales presentation methods, lead generation, customer service policies, salesperson compensation, and salesperson market responsibilities.

Sales Potential

Once the market has been researched and analyzed, conclusions need to be developed that will supply a quantitative outlook concerning the potential of the business. The first financial projection within the business plan must be formed utilizing the information drawn from defining the market, positioning the product, pricing, distribution, and strategies for sales. The sales or revenue model charts the potential for the product, as well as the business, over a set period of time. Most business plans will project revenue for up to three years, although five-year projections are becoming increasingly popular among lenders.

When developing the revenue model for the business plan, the equation used to project sales is fairly simple. It consists of the total number of customers and the average revenue from each customer. In the equation, "T" represents the total number of people, "A" represents the average revenue per customer, and "S" represents the sales projection. The equation for projecting sales is: (T)(A) = S

Using this equation, the annual sales for each year projected within the business plan can be developed. Of course, there are other factors that you'll need to evaluate from the revenue model. Since the revenue model is a table illustrating the source for all income, every segment of the target market that is treated differently must be accounted for. In order to determine any differences, the various strategies utilized in order to sell the product have to be considered. As we've already mentioned, those strategies include distribution, pricing and promotion.

Competitive Analysis

Identify and analyze your competition.

The competitive analysis is a statement of the business strategy and how it relates to the competition. The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle.

The first step in a competitor analysis is to identify the current and potential competition. There are essentially two ways you can identify competitors. The first is to look at the market from the customer's viewpoint and group all your competitors by the degree to which they contend for the buyer's dollar. The second method is to group competitors according to their various competitive strategies so you understand what motivates them.

Once you've grouped your competitors, you can start to analyze their strategies and identify the areas where they're most vulnerable. This can be done through an examination of your competitors' weaknesses and strengths. A competitor's strengths and weaknesses are usually based on the presence and absence of key assets and skills needed to compete in the market.

To determine just what constitutes a key asset or skill within an industry, David A. Aaker in his book, Developing Business Strategies , suggests concentrating your efforts in four areas:

• The reasons behind successful as well as unsuccessful firms
• Prime customer motivators
• Major component costs
• Industry mobility barriers

According to theory, the performance of a company within a market is directly related to the possession of key assets and skills. Therefore, an analysis of strong performers should reveal the causes behind such a successful track record. This analysis, in conjunction with an examination of unsuccessful companies and the reasons behind their failure, should provide a good idea of just what key assets and skills are needed to be successful within a given industry and market segment.

Through your competitor analysis, you will also have to create a marketing strategy that will generate an asset or skill competitors don't have, which will provide you with a distinct and enduring competitive advantage. Since competitive advantages are developed from key assets and skills, you should sit down and put together a competitive strength grid. This is a scale that lists all your major competitors or strategic groups based upon their applicable assets and skills and how your own company fits on this scale.

Create a Competitive Strength Grid

To put together a competitive strength grid, list all the key assets and skills down the left margin of a piece of paper. Along the top, write down two column headers: "weakness" and "strength." In each asset or skill category, place all the competitors that have weaknesses in that particular category under the weakness column, and all those that have strengths in that specific category in the strength column. After you've finished, you'll be able to determine just where you stand in relation to the other firms competing in your industry.

Once you've established the key assets and skills necessary to succeed in this business and have defined your distinct competitive advantage, you need to communicate them in a strategic form that will attract market share as well as defend it. Competitive strategies usually fall into these five areas:

• Advertising

Many of the factors leading to the formation of a strategy should already have been highlighted in previous sections, specifically in marketing strategies. Strategies primarily revolve around establishing the point of entry in the product life cycle and an endurable competitive advantage. As we've already discussed, this involves defining the elements that will set your product or service apart from your competitors or strategic groups. You need to establish this competitive advantage clearly so the reader understands not only how you will accomplish your goals, but also why your strategy will work.

Design and Development Plan

What you'll cover in this section.

The purpose of the design and development plan section is to provide investors with a description of the product's design, chart its development within the context of production, marketing and the company itself, and create a development budget that will enable the company to reach its goals.

There are generally three areas you'll cover in the development plan section:

• Product development
• Market development
• Organizational development

Each of these elements needs to be examined from the funding of the plan to the point where the business begins to experience a continuous income. Although these elements will differ in nature concerning their content, each will be based on structure and goals.

The first step in the development process is setting goals for the overall development plan. From your analysis of the market and competition, most of the product, market and organizational development goals will be readily apparent. Each goal you define should have certain characteristics. Your goals should be quantifiable in order to set up time lines, directed so they relate to the success of the business, consequential so they have impact upon the company, and feasible so that they aren't beyond the bounds of actual completion.

Goals For Product Development

Goals for product development should center on the technical as well as the marketing aspects of the product so that you have a focused outline from which the development team can work. For example, a goal for product development of a microbrewed beer might be "Produce recipe for premium lager beer" or "Create packaging for premium lager beer." In terms of market development, a goal might be, "Develop collateral marketing material." Organizational goals would center on the acquisition of expertise in order to attain your product and market-development goals. This expertise usually needs to be present in areas of key assets that provide a competitive advantage. Without the necessary expertise, the chances of bringing a product successfully to market diminish.

With your goals set and expertise in place, you need to form a set of procedural tasks or work assignments for each area of the development plan. Procedures will have to be developed for product development, market development, and organization development. In some cases, product and organization can be combined if the list of procedures is short enough.

Procedures should include how resources will be allocated, who is in charge of accomplishing each goal, and how everything will interact. For example, to produce a recipe for a premium lager beer, you would need to do the following:

• Gather ingredients.
• Determine optimum malting process.
• Gauge mashing temperature.
• Boil wort and evaluate which hops provide the best flavor.
• Determine yeast amounts and fermentation period.
• Determine aging period.
• Carbonate the beer.
• Decide whether or not to pasteurize the beer.

The development of procedures provides a list of work assignments that need to be accomplished, but one thing it doesn't provide are the stages of development that coordinate the work assignments within the overall development plan. To do this, you first need to amend the work assignments created in the procedures section so that all the individual work elements are accounted for in the development plan. The next stage involves setting deliverable dates for components as well as the finished product for testing purposes. There are primarily three steps you need to go through before the product is ready for final delivery:

• Preliminary product review . All the product's features and specifications are checked.
• Critical product review . All the key elements of the product are checked and gauged against the development schedule to make sure everything is going according to plan.
• Final product review . All elements of the product are checked against goals to assure the integrity of the prototype.

Scheduling and Costs

This is one of the most important elements in the development plan. Scheduling includes all of the key work elements as well as the stages the product must pass through before customer delivery. It should also be tied to the development budget so that expenses can be tracked. But its main purpose is to establish time frames for completion of all work assignments and juxtapose them within the stages through which the product must pass. When producing the schedule, provide a column for each procedural task, how long it takes, start date and stop date. If you want to provide a number for each task, include a column in the schedule for the task number.

Development Budget

That leads us into a discussion of the development budget. When forming your development budget, you need to take into account all the expenses required to design the product and to take it from prototype to production.

Costs that should be included in the development budget include:

• Material . All raw materials used in the development of the product.
• Direct labor . All labor costs associated with the development of the product.
• Overhead . All overhead expenses required to operate the business during the development phase such as taxes, rent, phone, utilities, office supplies, etc.
• G&A costs . The salaries of executive and administrative personnel along with any other office support functions.
• Marketing & sales . The salaries of marketing personnel required to develop pre-promotional materials and plan the marketing campaign that should begin prior to delivery of the product.
• Professional services . Those costs associated with the consultation of outside experts such as accountants, lawyers, and business consultants.
• Miscellaneous Costs . Costs that are related to product development.
• Capital equipment . To determine the capital requirements for the development budget, you first have to establish what type of equipment you will need, whether you will acquire the equipment or use outside contractors, and finally, if you decide to acquire the equipment, whether you will lease or purchase it.

As we mentioned already, the company has to have the proper expertise in key areas to succeed; however, not every company will start a business with the expertise required in every key area. Therefore, the proper personnel have to be recruited, integrated into the development process, and managed so that everyone forms a team focused on the achievement of the development goals.

Before you begin recruiting, however, you should determine which areas within the development process will require the addition of personnel. This can be done by reviewing the goals of your development plan to establish key areas that need attention. After you have an idea of the positions that need to be filled, you should produce a job description and job specification.

Once you've hired the proper personnel, you need to integrate them into the development process by assigning tasks from the work assignments you've developed. Finally, the whole team needs to know what their role is within the company and how each interrelates with every position within the development team. In order to do this, you should develop an organizational chart for your development team.

Assessing Risks

Finally, the risks involved in developing the product should be assessed and a plan developed to address each one. The risks during the development stage will usually center on technical development of the product, marketing, personnel requirements, and financial problems. By identifying and addressing each of the perceived risks during the development period, you will allay some of your major fears concerning the project and those of investors as well.

Operations & Management

The operations and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business. In fact, within the operations plan you'll develop the next set of financial tables that will supply the foundation for the "Financial Components" section.

The financial tables that you'll develop within the operations plan include:

• The operating expense table
• The capital requirements table
• The cost of goods table

There are two areas that need to be accounted for when planning the operations of your company. The first area is the organizational structure of the company, and the second is the expense and capital requirements associated with its operation.

Organizational Structure

The organizational structure of the company is an essential element within a business plan because it provides a basis from which to project operating expenses. This is critical to the formation of financial statements, which are heavily scrutinized by investors; therefore, the organizational structure has to be well-defined and based within a realistic framework given the parameters of the business.

Although every company will differ in its organizational structure, most can be divided into several broad areas that include:

• Marketing and sales (includes customer relations and service)
• Production (including quality assurance)
• Research and development
• Administration

These are very broad classifications and it's important to keep in mind that not every business can be divided in this manner. In fact, every business is different, and each one must be structured according to its own requirements and goals.

The four stages for organizing a business are:

Calculate Your Personnel Numbers

Once you've structured your business, however, you need to consider your overall goals and the number of personnel required to reach those goals. In order to determine the number of employees you'll need to meet the goals you've set for your business, you'll need to apply the following equation to each department listed in your organizational structure: C / S = P

In this equation, C represents the total number of customers, S represents the total number of customers that can be served by each employee, and P represents the personnel requirements. For instance, if the number of customers for first year sales is projected at 10,110 and one marketing employee is required for every 200 customers, you would need 51 employees within the marketing department: 10,110 / 200 = 51

Once you calculate the number of employees that you'll need for your organization, you'll need to determine the labor expense. The factors that need to be considered when calculating labor expense (LE) are the personnel requirements (P) for each department multiplied by the employee salary level (SL). Therefore, the equation would be: P * SL = LE

Using the marketing example from above, the labor expense for that department would be: 51 * $40,000 = $2,040,000

Calculate Overhead Expenses

Once the organization's operations have been planned, the expenses associated with the operation of the business can be developed. These are usually referred to as overhead expenses. Overhead expenses refer to all non-labor expenses required to operate the business. Expenses can be divided into fixed (those that must be paid, usually at the same rate, regardless of the volume of business) and variable or semivariable (those which change according to the amount of business).

Overhead expenses usually include the following:

• Maintenance and repair
• Equipment leases
• Advertising & promotion
• Packaging & shipping
• Payroll taxes and benefits
• Uncollectible receivables
• Professional services
• Loan payments
• Depreciation

In order to develop the overhead expenses for the expense table used in this portion of the business plan, you need to multiply the number of employees by the expenses associated with each employee. Therefore, if NE represents the number of employees and EE is the expense per employee, the following equation can be used to calculate the sum of each overhead (OH) expense: OH = NE * EE

Develop a Capital Requirements Table

In addition to the expense table, you'll also need to develop a capital requirements table that depicts the amount of money necessary to purchase the equipment you'll use to establish and continue operations. It also illustrates the amount of depreciation your company will incur based on all equipment elements purchased with a lifetime of more than one year.

In order to generate the capital requirements table, you first have to establish the various elements within the business that will require capital investment. For service businesses, capital is usually tied to the various pieces of equipment used to service customers.

Capital for manufacturing companies, on the other hand, is based on the equipment required in order to produce the product. Manufacturing equipment usually falls into three categories: testing equipment, assembly equipment and packaging equipment.

With these capital elements in mind, you need to determine the number of units or customers, in terms of sales, that each equipment item can adequately handle. This is important because capital requirements are a product of income, which is produced through unit sales. In order to meet sales projections, a business usually has to invest money to increase production or supply better service. In the business plan, capital requirements are tied to projected sales as illustrated in the revenue model shown earlier in this chapter.

For instance, if the capital equipment required is capable of handling the needs of 10,000 customers at an average sale of $10 each, that would be $100,000 in sales, at which point additional capital will be required in order to purchase more equipment should the company grow beyond this point. This leads us to another factor within the capital requirements equation, and that is equipment cost.

If you multiply the cost of equipment by the number of customers it can support in terms of sales, it would result in the capital requirements for that particular equipment element. Therefore, you can use an equation in which capital requirements (CR) equals sales (S) divided by number of customers (NC) supported by each equipment element, multiplied by the average sale (AS), which is then multiplied by the capital cost (CC) of the equipment element. Given these parameters, your equation would look like the following: CR = [(S / NC) * AS] * CC

The capital requirements table is formed by adding all your equipment elements to generate the total new capital for that year. During the first year, total new capital is also the total capital required. For each successive year thereafter, total capital (TC) required is the sum of total new capital (NC) plus total capital (PC) from the previous year, less depreciation (D), once again, from the previous year. Therefore, your equation to arrive at total capital for each year portrayed in the capital requirements model would be: TC = NC + PC - D

Keep in mind that depreciation is an expense that shows the decrease in value of the equipment throughout its effective lifetime. For many businesses, depreciation is based upon schedules that are tied to the lifetime of the equipment. Be careful when choosing the schedule that best fits your business. Depreciation is also the basis for a tax deduction as well as the flow of money for new capital. You may need to seek consultation from an expert in this area.

Create a Cost of Goods Table

The last table that needs to be generated in the operations and management section of your business plan is the cost of goods table. This table is used only for businesses where the product is placed into inventory. For a retail or wholesale business, cost of goods sold --or cost of sales --refers to the purchase of products for resale, i.e. the inventory. The products that are sold are logged into cost of goods as an expense of the sale, while those that aren't sold remain in inventory.

For a manufacturing firm, cost of goods is the cost incurred by the company to manufacture its product. This usually consists of three elements:

As in retail, the merchandise that is sold is expensed as a cost of goods , while merchandise that isn't sold is placed in inventory. Cost of goods has to be accounted for in the operations of a business. It is an important yardstick for measuring the firm's profitability for the cash-flow statement and income statement.

In the income statement, the last stage of the manufacturing process is the item expensed as cost of goods, but it is important to document the inventory still in various stages of the manufacturing process because it represents assets to the company. This is important to determining cash flow and to generating the balance sheet.

That is what the cost of goods table does. It's one of the most complicated tables you'll have to develop for your business plan, but it's an integral part of portraying the flow of inventory through your operations, the placement of assets within the company, and the rate at which your inventory turns.

In order to generate the cost of goods table, you need a little more information in addition to what your labor and material cost is per unit. You also need to know the total number of units sold for the year, the percentage of units which will be fully assembled, the percentage which will be partially assembled, and the percentage which will be in unassembled inventory. Much of these figures will depend on the capacity of your equipment as well as on the inventory control system you develop. Along with these factors, you also need to know at what stage the majority of the labor is performed.

Financial Components

Financial statements to include.

Financial data is always at the back of the business plan, but that doesn't mean it's any less important than up-front material such as the business concept and the management team. Astute investors look carefully at the charts, tables, formulas and spreadsheets in the financial section, because they know that this information is like the pulse, respiration rate and blood pressure in a human--it shows whether the patient is alive and what the odds are for continued survival.

Financial statements, like bad news, come in threes. The news in financial statements isn't always bad, of course, but taken together it provides an accurate picture of a company's current value, plus its ability to pay its bills today and earn a profit going forward.

The three common statements are a cash flow statement, an income statement and a balance sheet. Most entrepreneurs should provide them and leave it at that. But not all do. But this is a case of the more, the less merry. As a rule, stick with the big three: income, balance sheet and cash flow statements.

These three statements are interlinked, with changes in one necessarily altering the others, but they measure quite different aspects of a company's financial health. It's hard to say that one of these is more important than another. But of the three, the income statement may be the best place to start.

Income Statement

The income statement is a simple and straightforward report on the proposed business's cash-generating ability. It's a score card on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result--which is either a profit or a loss.

For a business plan, the income statement should be generated on a monthly basis during the first year, quarterly for the second, and annually for each year thereafter. It's formed by listing your financial projections in the following manner:

• Income . Includes all the income generated by the business and its sources.
• Cost of goods . Includes all the costs related to the sale of products in inventory.
• Gross profit margin . The difference between revenue and cost of goods. Gross profit margin can be expressed in dollars, as a percentage, or both. As a percentage, the GP margin is always stated as a percentage of revenue.
• Operating expenses . Includes all overhead and labor expenses associated with the operations of the business.
• Total expenses . The sum of all overhead and labor expenses required to operate the business.
• Net profit . The difference between gross profit margin and total expenses, the net income depicts the business's debt and capital capabilities.
• Depreciation . Reflects the decrease in value of capital assets used to generate income. Also used as the basis for a tax deduction and an indicator of the flow of money into new capital.
• Net profit before interest . The difference between net profit and depreciation.
• Interest . Includes all interest derived from debts, both short-term and long-term. Interest is determined by the amount of investment within the company.
• Net profit before taxes . The difference between net profit before interest and interest.
• Taxes . Includes all taxes on the business.
• Profit after taxes . The difference between net profit before taxes and the taxes accrued. Profit after taxes is the bottom line for any company.

Following the income statement is a short note analyzing the statement. The analysis statement should be very short, emphasizing key points within the income statement.

Cash Flow Statement

The cash-flow statement is one of the most critical information tools for your business, showing how much cash will be needed to meet obligations, when it is going to be required, and from where it will come. It shows a schedule of the money coming into the business and expenses that need to be paid. The result is the profit or loss at the end of the month or year. In a cash-flow statement, both profits and losses are carried over to the next column to show the cumulative amount. Keep in mind that if you run a loss on your cash-flow statement, it is a strong indicator that you will need additional cash in order to meet expenses.

Like the income statement, the cash-flow statement takes advantage of previous financial tables developed during the course of the business plan. The cash-flow statement begins with cash on hand and the revenue sources. The next item it lists is expenses, including those accumulated during the manufacture of a product. The capital requirements are then logged as a negative after expenses. The cash-flow statement ends with the net cash flow.

The cash-flow statement should be prepared on a monthly basis during the first year, on a quarterly basis during the second year, and on an annual basis thereafter. Items that you'll need to include in the cash-flow statement and the order in which they should appear are as follows:

• Cash sales . Income derived from sales paid for by cash.
• Receivables . Income derived from the collection of receivables.
• Other income . Income derived from investments, interest on loans that have been extended, and the liquidation of any assets.
• Total income . The sum of total cash, cash sales, receivables, and other income.
• Material/merchandise . The raw material used in the manufacture of a product (for manufacturing operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies used in the performance of a service.
• Production labor . The labor required to manufacture a product (for manufacturing operations only) or to perform a service.
• Overhead . All fixed and variable expenses required for the production of the product and the operations of the business.
• Marketing/sales . All salaries, commissions, and other direct costs associated with the marketing and sales departments.
• R&D . All the labor expenses required to support the research and development operations of the business.
• G&A . All the labor expenses required to support the administrative functions of the business.
• Taxes . All taxes, except payroll, paid to the appropriate government institutions.
• Capital . The capital required to obtain any equipment elements that are needed for the generation of income.
• Loan payment . The total of all payments made to reduce any long-term debts.
• Total expenses . The sum of material, direct labor, overhead expenses, marketing, sales, G&A, taxes, capital and loan payments.
• Cash flow . The difference between total income and total expenses. This amount is carried over to the next period as beginning cash.
• Cumulative cash flow . The difference between current cash flow and cash flow from the previous period.

As with the income statement, you will need to analyze the cash-flow statement in a short summary in the business plan. Once again, the analysis statement doesn't have to be long and should cover only key points derived from the cash-flow statement.

The Balance Sheet

The last financial statement you'll need to develop is the balance sheet. Like the income and cash-flow statements, the balance sheet uses information from all of the financial models developed in earlier sections of the business plan; however, unlike the previous statements, the balance sheet is generated solely on an annual basis for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas:

To obtain financing for a new business, you may need to provide a projection of the balance sheet over the period of time the business plan covers. More importantly, you'll need to include a personal financial statement or balance sheet instead of one that describes the business. A personal balance sheet is generated in the same manner as one for a business.

As mentioned, the balance sheet is divided into three sections. The top portion of the balance sheet lists your company's assets. Assets are classified as current assets and long-term or fixed assets. Current assets are assets that will be converted to cash or will be used by the business in a year or less. Current assets include:

• Cash . The cash on hand at the time books are closed at the end of the fiscal year.
• Accounts receivable . The income derived from credit accounts. For the balance sheet, it's the total amount of income to be received that is logged into the books at the close of the fiscal year.
• Inventory . This is derived from the cost of goods table. It's the inventory of material used to manufacture a product not yet sold.
• Total current assets . The sum of cash, accounts receivable, inventory, and supplies.

Other assets that appear in the balance sheet are called long-term or fixed assets. They are called long-term because they are durable and will last more than one year. Examples of this type of asset include:

• Capital and plant . The book value of all capital equipment and property (if you own the land and building), less depreciation.
• Investment . All investments by the company that cannot be converted to cash in less than one year. For the most part, companies just starting out have not accumulated long-term investments.
• Miscellaneous assets . All other long-term assets that are not "capital and plant" or "investments."
• Total long-term assets . The sum of capital and plant, investments, and miscellaneous assets.
• Total assets . The sum of total current assets and total long-term assets.

After the assets are listed, you need to account for the liabilities of your business. Like assets, liabilities are classified as current or long-term. If the debts are due in one year or less, they are classified as a current liabilities. If they are due in more than one year, they are long-term liabilities. Examples of current liabilities are as follows:

• Accounts payable . All expenses derived from purchasing items from regular creditors on an open account, which are due and payable.
• Accrued liabilities . All expenses incurred by the business which are required for operation but have not been paid at the time the books are closed. These expenses are usually the company's overhead and salaries.
• Taxes . These are taxes that are still due and payable at the time the books are closed.
• Total current liabilities . The sum of accounts payable, accrued liabilities, and taxes.

Long-term liabilities include:

• Bonds payable . The total of all bonds at the end of the year that are due and payable over a period exceeding one year.
• Mortgage payable . Loans taken out for the purchase of real property that are repaid over a long-term period. The mortgage payable is that amount still due at the close of books for the year.
• Notes payable . The amount still owed on any long-term debts that will not be repaid during the current fiscal year.
• Total long-term liabilities . The sum of bonds payable, mortgage payable, and notes payable.
• Total liabilities . The sum of total current and long-term liabilities.

Once the liabilities have been listed, the final portion of the balance sheet-owner's equity-needs to be calculated. The amount attributed to owner's equity is the difference between total assets and total liabilities. The amount of equity the owner has in the business is an important yardstick used by investors when evaluating the company. Many times it determines the amount of capital they feel they can safely invest in the business.

In the business plan, you'll need to create an analysis statement for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points about the company.

Source: The Small Business Encyclopedia , Business Plans Made Easy, Start Your Own Business and Entrepreneur magazine.

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What is workforce planning, and why is it important?

Workforce planning is a strategic alignment of business goals with people strategy. It involves reducing labor costs, responding to changing customer needs, identifying strategies for people development, targeting inefficiencies, improving employee retention, productivity, and work-life balance, and delivering strategic value through talent.

Suzanne, the Evil HR Lady, shares expertise, guidance, and insights based on 10+ years of experience in corporate human resources....

Table of contents:

What is workforce planning?

What is involved in workforce planning, how to create a workforce plan.

Workforce planning is the people side of planning, but some businesses skip it, thinking that people will just appear when needed. Workforce planning aligns core business goals with people strategy . It makes no sense to plan on a new product launch next year without thinking about R&D, supply chain, and sales staff.

Workforce planning is the tool you use to ensure that alignment.

The Chartered Institute of Personnel and Development (CIPD) identifies the critical points of workforce planning as follows.

• Reduce labor costs in favor of workforce deployment and flexibility
• Identify and respond to changing customer needs
• Identify relevant strategies for focused people development
• Target inefficiencies
• Improve employee retention
• Improve productivity and quality outputs
• Improve employees’ work-life balance
• Make recommendations to deliver strategic value through talent

This article will break down these points and how they apply to your business.

1. Reduce labor costs in favor of workforce deployment and flexibility

Labor is often the highest cost for businesses outside of manufacturing. Some estimates put labor costs at 60% and even 70% of expenses . With these costs, planning to reduce costs while increasing flexibility is critical to continued success.

This isn’t advocating for low-balling employees or providing rotten benefits for employees. It’s about getting the right people in the correct positions. An engaged, competent, happy employee will cost less than an unhappy, unqualified employee. Remember, turnover is expensive as well .

2. Identify and respond to changing customer needs

The classic case study of a company that didn’t respond to customer needs is Kodak. As the king of film, Kodak had digital technology early but decided to focus on film, thinking digital was a fad. It wasn’t, and the company struggled for survival, dropping from a peak of 145,000 employees to 5,000 as of August 2020 .

Human resources departments need to be a bit of a fortune-teller to accurately predict workforce needs. Because SHRM doesn’t issue crystal balls, HR needs to work closely with each department to help predict needs and create plans for meeting these. Open communication between HR and each department is critical.

3. Identify relevant strategies for focused people development

The very premise of workforce planning is that business changes, and because business changes, people need to change. Figuring out talent gaps and plans to fill those gaps is a core function of workforce planning.

People development needs to happen before the need exists. Remember, you can go out and search for the “unicorn” candidate to fill a need immediately, but it’s often more manageable if you plan and develop an employee to take care of that specialty skill gap – if you do it right . This can mean training classes, graduate programs, or stretch assignments.

4. Target inefficiencies

If you’ve ever heard “we’ve always done it that way” as an explanation, then you know that the business has inefficiencies that can be rooted out. Good HR will ask; “What should we stop doing?” as well as “What should we do?”. You can find inefficiencies in all areas of the business.

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5. Improve employee retention

Turnover is expensive – not only does it take time and money to find, interview, and onboard a new employee, training them can take months. Good HR focuses on retaining employees who have potential. (You shouldn’t retain just to retain – if someone is a toxic employee , giving them more technical skills won’t eliminate their toxicity.) Creating career paths within the company can be an excellent workforce planning tool to aid employee retention .

6. Improve productivity and quality outputs

While managers need to figure out how to improve productivity and quality, HR can provide support. For instance, are there policies and procedures that can increase productivity and quality? What support do employees get for reaching their goals? When HR takes a look at the workforce, they can spot problems that decrease productivity. For instance, an employee who bullies their coworkers can destroy productivity in a department.

HR needs to plan to find, coach, or remove such employees, as well as helping managers find better ways to do things.

7. Improve employees’ work-life balance

Employees are at the center of workforce planning – without employees, all plans are worthless. You can increase your productivity by requiring everyone to work 80-hour weeks, but your turnover will shoot through the roof, and your quality will collapse.

Through making sure that employees have sufficient downtime and are supported at work, your workforce will be a lot more stable.

8. Make recommendations to deliver strategic value through talent

Sometimes managers can undervalue employees – they think if they can get someone cheaper, they should. But, good workforce planning demonstrates that you pay for top skills. While we use the word talent often in HR, you really should think about it in terms of skills. What skills do these employees have that can make a difference in your business?

Remember that treating employees right is a lot easier than trying to squeeze value out of people who are exhausted and burnt out .

This is more than just figuring out who you need to hire. There are many ways to approach this, but here are four critical elements that will make your workforce planning a success.

1. Understand the company’s mission and goals

Workforce planning doesn’t exist in a vacuum – it needs to support the company’s goals. Are you looking to expand across North America? Well, that’s quite different from a company that is content operating out of a single location.

The company’s mission matters as well. What’s the most important thing to the CEO, shareholders, employees, and customers? Make sure you have that answered before you move to step two.

2. Conduct a present gap analysis

This is a systematic method of understanding the gaps in the organization. What is missing? While workforce planning focuses on the people side of the business, keep in mind that a gap analysis looks at all business areas, not just skills and talent .

People aren’t at their best unless they have the equipment, training, and support they need. This is looking at the situation now. Remember all the points above – you need to look for improvement in all these areas.

3. Project for the future

This involves speaking with company leadership and involving every unit in the business. You’re looking for where the growth will be and where the workforce will shrink. You want to determine what skills the company will need in the coming years, not just now.

4. Conduct a future gap analysis

Knowing what you do about the current employment situation and the business’s goals and projected path, put together what the workforce will need and look at your gaps:

• What do you need to reach these goals?
• Do you need more employees?
• What type of training will your current staff need?
• Can you conduct this training in-house, or do you need people to receive formal training or even degrees?
• Do you have a formal employee training and development company policy in place?

Make sure you look at external trends as well. In 2019, no one would have guessed the massive shift toward remote work, but now, you’d be remiss not to consider where the workforce will be in the future. Will employees continue to work remotely or will they expect to? If so, is your company prepared to support people in other states? Or do you want to limit hiring to your local area, regardless of where they work?

Of course, there are many more things that you can do to plan for your workforce’s future, but these will get you a solid foundation. And, one last note: remember to be flexible. Plans change, and your workforce planning documents need to flex as the world changes as well.

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12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

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• Start a Company > Business Plan > Business Plan Financials

Forecasting Revenues, Costs and Labor Requirements

Business Planning Advice

Written by Andrew Goldman for Gaebler Ventures

The creation of a long-term plan and strategy is not enough to adequately prepare the small business for the ups and downs in their markets. By outlining different forecast scenarios, the small business can be better prepared for any volatility in their market.

Before entering any battle, generals make sure that their military strategy has been defined and that detailed planning has been completed.

Before any big sporting event, coaches and managers prepare their strategies and plans in order to achieve victory.

You can pick the metaphor, but when there's victory, success or championships on the line, you can be certain thorough planning and due diligence was part of the formula.

If you want your small business to succeed, make sure proper planning is a part of your business formula.

Planning for Small Business Success

Planning encompasses both long-term and short-term horizons. While most small businesses are required to produce some form of long-term plan, less focus and attention is placed on detailed and thorough short-term planning.

In order to acquire loans or outside capital, the small business developer is typically responsible for producing data and long-term planning to support outside investment. This process gives both the investor and the small business owner a detailed map of where and how the company is going to reach sustainable profitability. Once the loan has been approved however, the small business owner often puts detailed planning on the backburner and does not use the same thoroughness in creating appropriate short-term business plans.

Short-term planning should deal with managing demand over weekly, monthly and quarterly periods.

The short-term plans should outline expected demand based on relevant information, expected purchases, expected labor and all relevant costs associated with delivering the final product or service. Your short-term plans should not be based solely on expected sales, you should outline several scenarios including best-case, worst-case and most likely.

By analyzing different scenarios on paper, the small business can get a better sense of where problem areas might arise and where costs appear to be ballooning.

Forecasting Demand

A solid short-term plan will start with the forecast of demand. How consistent your demand is and how much historical data your company has will greatly determine the accuracy of your forecast. If your demand is seasonal or fluctuates, extra careful attention needs to be paid towards your forecasting techniques. There is plenty of literature on the topic of forecasting, but the key element is making sure that your forecasting numbers are being created with the most up-to-date information possible. Check your forecast numbers versus the actual numbers constantly and outline different forecast scenarios (best-case versus worst-case) to help cover your bases.

Cost Projections

After your different forecasted demand scenarios are put on paper, you want to analyze and plan for what your expected costs will be for the various levels of demand. Leave no stone unturned when you undergo this process, it is far better to anticipate what your costs will be rather than get blindsided when cash is thin and margins are tight. By analyzing and planning for costs ahead of time, you can get a much better sense for which projects are worth selling and which ones may not be so appealing. If there are to be periods of cash flow constraints, you'll want to know when and why. Detailed short-term planning can address these problems, which are not as easily identified with long-term planning.

Staffing Plans

While planning your costs and demand, you can properly allocate your expected labor. This is crucial, especially if you're anticipating hiring or releasing any employees.

Knowing what your expected workload is and the subsequent labor staffing plan is a key element of successful small businesses.

During periods of low demand and high demand, proper staffing may very well be the difference between profitability and losing money. By anticipating demand and balancing your labor force ahead of time, you avoid many problems that are difficult to manage when they spring up without notice. Letting an employee know that there will be less work in 4 weeks is much better than having an employee show up for work only to find out there's nothing to do.

On the flipside, if it looks like demand is ramping up and your short-term plan indicates a need for an additional employee, you'll be in better shape that being seriously understaffed.

Plan to Succeed

Short-term planning and the analysis of demand, forecasting, costs and labor is a crucial element for any small business looking to succeed. The creation of a long-term plan and strategy is not enough to adequately prepare the small business for the ups and downs in their markets. By outlining different forecast scenarios, the small business can be better prepared for any volatility in their market.

Andrew Goldman is an Isenberg School of Management MBA student at the University of Massachusetts Amherst. He has extensive experience working with small businesses on a consulting basis.

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Simple Business Plan Template for Entrepreneurs

Follow This Business Plan Outline to Write Your Own

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Pros and Cons of Using a Business Plan Template

Do i need a simple or detailed business plan, how to use this business plan template, table of contents, section 1: executive summary, section 2: business/industry overview.

• Section 3: Market Analysis and Competition

Section 4: Sales and Marketing Plan

Section 5: ownership and management plan, section 6: operating plan, section 7: financial plan.

• Section 8: Appendices and Exhibits

Ariel Skelley / Getty Images

Think you have a great idea for a business? The best way to find out whether your idea is feasible is to create a business plan .

A solid, well-researched business plan provides a practical overview of your vision. It can be used to ground your ideas into workable actions and to help pitch your idea to financial institutions or potential investors when looking for funding.

The standard business plan consists of a single document divided into several sections for distinct elements, such as a description of the organization, market research, competitive analysis, sales strategies, capital and labor requirements, and financial data. Your plan may include more or fewer sections to best represent your business.

The template presented here will get you well on your way toward your simple business plan.

Ready-made layouts

Free downloads

Generic, not customized

No financial guidance

Additional skills needed

• Ready-made layouts : Templates offer general guidance about what information is needed and how to organize it, so you’re not stuck looking at a blank page when getting started. Especially detailed templates may offer instructions or helpful text prompts along the way.
• Variations : If you know what type of business plan you need—traditional, lean, industry-specific—chances are you can find a specialized template.
• Free downloads : There are many free business plan templates available online, which can be useful for comparing formats and features, or refining your own.
• Generic, not customized : Templates typically contain just the basics, and there will still be a lot of work involved to tailor the template to your business. For instance, you'll have to reformat, refine copy, and populate tables.
• No financial guidance : You’ll need enough industry knowledge to apply financial models to your specific business, and the math skills to generate formulas and calculate figures.
• Additional skills needed : Some degree of tech savvy is required to integrate charts and graphs, merge data from spreadsheets, and keep it all up-to-date.

A corporate business plan for a large organization can be hundreds of pages long. However, for a small business, it's best to keep the plan short and concise, especially if you're submitting it to bankers or investors . Around 35 to 50 pages should be sufficient, and more allowed for extras, such as photos of products, equipment, logos, or business premises or site plans.  Your audience will likely prefer solid research and analysis over long, wordy descriptions.

An entrepreneur who creates a business plan is nearly twice as likely to secure financing and grow their business compared with those who do not have a plan.

The business plan template below is divided into sections as described in the table of contents. Each section can be copied into a document of your own; you may need to add or delete sections or make adjustments to fit your specific needs.

Once complete, be sure to format it attractively and get it professionally printed and bound. You want your business plan to convey the best possible impression. Make it engaging, something people will to want to pick up and peruse.

Enter your business information, including the legal name and address. If you already have a business logo, you can add it at the top or bottom of the title page.

• Business Plan for "Business Name"
• Business address
• Website URL

If you're addressing it to a company or individual, include:

• Presented to "Name"
• At "Company"
• Executive Summary................................................Page #
• Business/Industry Overview.................................Page #
• Market Analysis and Competition.........................Page #
• Sales and Marketing Plan.......................................Page #
• Ownership and Management Plan.......................Page #
• Operating Plan..........................................................Page #
• Financial Plan............................................................Page #
• Appendices and Exhibits........................................Page #

The  executive summary introduces the plan, but it is written last. It provides a concise and optimistic overview of your business and should capture the reader's attention and create a desire to learn more. The executive summary should be no more than two pages long, with highlights or brief summaries of other sections of the plan.

• Describe your  mission —what is the need for your new business? Sell your vision.
• Introduce your company briefly, sticking to vital details such as size, location, management, and ownership.
• Describe your main product(s) and/or service(s).
• Identify the customer base you plan to target and how your business will serve those customers.
• Summarize the competition and how you will get market share. What is your competitive advantage?
• Outline your financial projections for the first few years of operation.
• State your startup financing requirements.

This section provides an overview of the industry and explains in detail what makes your business stand out.

• Describe the overall nature of the industry, including sales and other statistics. Note trends and demographics, as well as economic, cultural, and governmental influences.
• Explain your business and how it fits into the industry.
• Mention the existing competition, which you'll expand upon in the following section.
• Identify what area(s) of the market you will target and what unique, improved, or lower-cost products and/or services you will offer.

Many business plans cover their products/services in a standalone section to add more detail or emphasize unique aspects.

Section 3: Market Analysis and Competition

This section focuses on the competitive factor of your business and justifies it with financial models and statistics. You need to demonstrate that you have thoroughly analyzed the target market, assessed the competition, and concluded that there is enough demand for your products/services to make your business viable.

• Define the target market(s) for your products/services in your geographic locale.
• Explain the need for your products/services.
• Estimate the overall size of the market and the units of your products/services that the target market might buy. Include forecasts of potential repeat-purchase volume and how the market might be affected by economic or demographic changes.
• Estimate the volume and value of your sales in comparison with any existing competitors. Highlight any key strengths over the competition in easily digestible charts and tables.
• Describe any helpful barriers to entry that may protect your business from competition, such as access to capital, technology, regulations, employee skill sets, or location.  

You may opt to split the target market description and competitive analysis into two separate sections, if either (or both) portray your business especially favorably.

Here's where you dive into profits, giving detailed strategic view of how you intend to entice customers to buy your products and/or services, including advertising or promotion, pricing, sales, distribution, and post-sales support.

Product or Service Offerings

If your products and/or services don't take up a standalone section earlier in the plan, here is where you can answer the question: What is your unique selling proposition? Describe your products and/or services, how they benefit the customer and what sets them apart from competitor offerings.

Pricing Strategy

How will you price your products/services? Pricing must be low enough to attract customers, yet high enough to cover costs and generate a profit. You can base pricing decisions on a number of financial models, such as markup from cost or value to the buyer, or in comparison with similar products and/or services in the marketplace.  

Sales and Distribution

For products, describe how you plan to distribute to the customer. Will you be selling wholesale or retail? What type of packaging will be required? How will products be shipped? If you offer a service, how will it be delivered to the customer? What methods will be used for payment?

Advertising and Promotion

List the various forms of media you will use to get your message to customers (e.g., website, email, social media, or newspapers). Will you use sales promotional methods such as free samples and product demonstrations? What about product launches and trade shows? Don't forget more everyday marketing materials such as business cards, flyers, or brochures. Include an approximate budget.

This section describes the legal structure, ownership, and (if applicable) management and staffing requirements of your business.

• Ownership structure : Describe the legal structure of your company (e.g., corporation, partnership, LLC, or  sole proprietorship ). List ownership percentages, if applicable. If the business is a sole proprietorship, this is the only section required.
• Management team : Describe managers and their roles, key employee positions, and how each will be compensated. Include brief résumés.
• External resources and services : List any external professional resources required, such as accountants, lawyers, or consultants.
• Human resources : List the type and number of employees or contractors you will need, and estimate the salary and benefit costs of each.
• Advisory board : Include an advisory board as a supplemental management resource, if applicable.

The operating plan outlines the physical requirements of your business, such as office, warehouse, or retail space; equipment; supplies; or labor. This section will vary greatly by industry; a large manufacturer, for instance, should provide full details about supply chain or specialty equipment, while a therapist's office can get by with a much shorter list.

If your business is a small operation (like a one-person, home-based consulting firm), you might choose to eliminate the operating plan section altogether and include the operating essentials in the business overview.

• Development : Explain what you have done to date to identify possible locations, sources of equipment, supply chains, and other relevant relationships. Describe your production workflow.
• Production : For manufacturing, explain how long it takes to produce a unit and when you'll be ready to start production. Include factors that may affect the time frame of production and how you'll deal with potential problems, such as rush orders.
• Facilities : Describe the physical location of the business. Include geographical or building requirements; square footage estimates (with room for expansion if expected); mortgage or leasing costs; and estimates of maintenance, utilities, and related  overhead costs . Include zoning approvals and other permissions that are necessary in order to operate.
• Staffing : Outline expected staffing needs and the main duties of staff members, especially the key employees. Describe how the employees will be sourced and the employment relationship (i.e., contract, full-time, part-time) as well as any training needs and how these will be provided.
• Equipment : Include a list of any specialized equipment needed, along with cost, whether it will be leased or purchased, and sources.
• Supplies : If your business is, for example, manufacturing, retail, or food services, include a description of the materials needed, reliable sources, major suppliers, and how you will manage inventory.

The financial plan is the most important section for lenders or investors. The goal is to demonstrate that your business will grow and be profitable. To do this, you will need to create realistic predictions or forecasts.

To avoid inflated expectations, a prudent financial plan underestimates revenues and overestimates expenses.

• Income statements : The income statement displays projected revenues, expenses, and profit. Do this on a monthly basis for at least the first year for a startup business.
• Cash-flow projections : The cash-flow projection shows your monthly anticipated cash revenues and disbursements for expenses. To be considered a good credit risk, it is important to demonstrate that you can manage your cash flow.
• Balance sheet : The  balance sheet  is a snapshot summary of the assets, liabilities, and equity of your business at a particular point in time. For a startup, this would be on the day the business opens.
• Breakeven analysis : Including a breakeven analysis will demonstrate to lenders or investors what level of sales you need to achieve to make a profit.

Section 8: Appendices and Exhibits

The appendices and exhibits section contains any detailed information needed to support other sections of the plan.  

Possible Appendix or Exhibit items include:

• Credit histories for the business owners
• Detailed market research and analysis of competitors
• Résumés of the owners and key employees
• Diagrams and/or research about your products and/or services
• Site, building, or office plans
• Copies of mortgage documents or equipment leases (or quotes)
• Marketing brochures and other materials
• References from business colleagues
• Links to your business website
• Any other material that may impress potential lenders or investors

SCORE. " Business Plan Template for a Startup Business ." Accessed April 28, 2021.

U.S. Small Business Administration. " Write your business plan ." Accessed April 28, 2021.

U.S. Small Business Administration. " SBA Recommended Business Plans and Length ." Accessed April 28, 2021.

Bplans. " Why Plan Your Business? Look at This Data ." Accessed April 28, 2021.

Marketing MO. " Pricing Strategy ." Accessed April 28, 2021.

Incorporate.com. " Write a Business Plan, a Step-by-Step Guide ." Accessed April 29, 2021.

Startup Nation. " The Five Costs You're Most Likely to Underestimate in Your Business Plan ." Accessed April 28, 2021.

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Labor Requirements

Subsection of:  Creating an Effective Business Plan

Adapted from content excerpted from the  American Express® OPEN Small Business Network

Your management team is outlined in the management section. This section provides details of other labor you will need to start up and run your business. Address how many people you require and what skills they need to possess. Be sure to cover the following issues:

• Is there sufficient local labor? If not, how will you recruit.
• Is labor trained? If not, how will you train them.
• Cost of labor, current and future.
• Plans for ongoing training.

See sample  labor description .

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Navigating warehouse automation strategy for the distributor market

Advises clients in consumer, retail, pharma, and private equity in setting and implementing the digital supply chain strategy to transform operational performance and capabilities

September 27, 2024 The technology is mature, the promised benefits are significant, yet only about 20 percent of warehouses in North America have adopted any form of automation. This raises several questions: Why aren't more warehouses automated? Why is implementation so challenging? Does anyone achieve success with it, and if so, how? These questions underscore the confusion surrounding warehouse automation, despite its apparent advantages.

Automation has become a key topic for companies and leaders. A recent survey of 65 top logistics and supply chain executives revealed that 70 percent plan to invest approximately $100 million in automation over the next five years, prioritizing speed, process stability, and reduced labor dependency. 1 “Hiring more people is always an option, but eventually, we were going to hit a point where that wouldn’t solve the issue,” says one executive, vice president of distribution strategy for a large pharmaceutical company. “Automation in the DCs [distribution centers] allows orders to ship complete with next-day delivery and also replenish branches that provide same-day availability to customers,” added the president of global supply chain for a large industrial distributor. The vice president of supply chain practice at a large IT company predicts that “By 2027, over 75 percent of companies will have adopted some form of cyber-physical automation within their warehouse operations.”

These bold aspirations have yet to translate into actions, however. The number of automated warehouses in North America is projected to grow at a compounded annual growth rate of 8.3 percent over the next few years. At that pace, only a quarter of warehouses will employ some level of automation by 2027. 2

Why aren’t distributors automating their warehouses?

In the distribution sector, several factors contribute to the low rate of automation adoption:

• Perceived adequacy of current processes. Some distributors believe their current processes are sufficient and can scale to accommodate growth.
• Lack of clarity regarding business needs. Misalignment among stakeholders regarding business needs can lead to incorrect investments. Without a clear understanding of objectives and requirements based on the evolution of product portfolio, expected growth, et cetera, the wrong expectations may be set, and incorrect technology can be selected, resulting in a poor return on investment and/or an inadequate solution.
• Poor understanding of automation technology. A lack of comprehensive understanding of available automation technologies and their nuances can result in poor decision making and the selection of technologies that don't meet operational needs.
• High initial costs creating an untenable ROI. For many companies, the expected return on investment from automation projects is too low. Payback periods for projects are often longer than the lease on the building being automated.
• Too many options. The plethora of available solutions makes it daunting for companies to choose the right one. At MODEX 2024, a premier supply chain trade show in the United States, for example, more than 50 autonomous mobile robot (AMR) vendors were present.

Why is implementation so challenging?

If an organization determines that warehouse automation can help the business and meets the investment threshold, the next set of challenges lie in implementation. Even with the best of intentions, implementations can go off track for a multitude of reasons, but two major challenges stand out:

• Lack of in-house expertise. Many distributors lack the internal IT and operational expertise to manage the implementation of complex automation solutions successfully. Evaluating the potential engagement of a systems integrator (SI) can help streamline the operations, but usually adds an additional layer of complexity.
• Focus limited to the technology and not process. If processes are not redesigned around the solution, and if frontline workers and other stakeholders do not fully embrace the technology, efficiencies may never materialize or scale.

What makes automation work?

Despite the challenges, many companies have successfully implemented warehouse automation solutions by adhering to a set of key actions:

• They determine where automation best suits the organization and focus on the capabilities that will drive value.
• They assess current business operations, systems, and needs prior to selecting and implementing a solution.
• They explore various automation options and plan a scaled deployment, starting with pilot programs to minimize disruptions.
• They secure employee buy-in and provide training prior to go-live to ensure staff are fully prepared to leverage automation.
• They collaborate with upstream and downstream stakeholders and redesign processes as required to maximize benefits of the selected solution.

A notable example of successful automation is a regional grocery chain. Faced with outdated warehouse operations, the company implemented an automation retrofit design and strategy. Its comprehensive approach included an analysis of network optimization scenarios alongside DC automation options. It assessed DC performance, layout, and capacity, and modeled future growth projections to ensure fit with material handling equipment (MHE) and target automation solutions. Finally, it developed a full business case for its automation investments, looking at several potential implementation scenarios. The results were impressive: 20 percent run-rate savings, a fourfold increase in productivity, 15 to 20 percent faster response times, and a 20 percent decrease in space usage.

Elsewhere, a global logistics company integrated AMRs into its pick process. Initially piloting 1,000 units in North American warehouses, the company later expanded the deployment to other regions. The phased approach allowed for performance monitoring, adjustments as required, and a smooth transition. The AMRs were integrated into existing warehouse management systems without major overhauls and limited to key warehouses that offered the greatest impact from automation. The benefits included a 200 percent increase in picking productivity, a 50 percent reduction in cycle time, and faster, more accurate picking, contributing to a “zero-defect environment.”

Where should we start?

To plan and execute a successful warehouse automation project, companies should focus on five key areas:

• Assess process maturity, performance management, and governance within the organization . Ensure sufficient process maturity through robust training programs and current, clearly defined standard operating procedures (SOPs).This should be accompanied by a rigorous governance mechanism with metrics to support coaching and engagement of frontline workers. Additionally, base technologies and master data management are required to streamline integration with automation solutions.
• Understand current handling profiles and areas that can most benefit from automation. Not all SKUs benefit equally from automation. Medium- and low-volume SKUs can benefit significantly by reducing operator travel and improving storage density, while high-volume and long-tail SKUs may not benefit as much. Functions involving the most labor hours, task repetitions, and risk of injury are ideal candidates for automation. A clear understanding of where and how automation can benefit the operations is critical to selecting the right solution and ensuring a sound business case is in place.
• Involve IT early in the conversation. Many implementations fail due to lack of early engagement of the IT and digital departments when defining the functional and business requirements. Engaging the right experts who can translate requests from the business into clear technical requirements accounting for all end-to-end interdependencies, is paramount.
• Narrow the list of solutions to those that can meet the needs of the organization. With many solutions entering or already in the market, selection can be complex (exhibit). Evaluate automation technologies based on a predefined criteria including product profile (small, medium versus bulky), order profile (volume, type of orders—big or small unit orders), maturity of the organization, and future strategic vision (growth, diversification beyond current profiles). This requires in-depth market knowledge about the latest technologies, and understanding the return on investment, setup timeline, integration and implementation requirements, and the provider’s support and maintenance track record.
• Evaluate the technical capabilities within the organization in preparation for the future. Assess the organization’s technical capability and maturity to support implementation and ongoing maintenance. Evaluate the current system’s maturity and ability to integrate with automation technologies, as well as maintenance and technical system support within the organization. Based on these inputs, determine whether it is better for the organization to engage with an SI or directly purchase from an OEM. Ultimately, the success of implementation depends on user buy-in, effective change management, and scalability within and across sites.

1 McKinsey Global Industrial Robotics Survey, 65 senior leaders and executives in automotive; food and beverage; life sciences, healthcare, and pharmaceuticals; logistics and fulfillment; and retail and consumer goods sectors, August 2022. 2 Automated Material Handling Equipment Market, Global Forecast to 2028, MarketsandMarkets, 2023.

• New California Law Imposes Transparency Requirements About Employers’ Child Labor Practices

At a Glance

• The public disclosure of the social compliance audit report may have unintended consequences and deter employers from voluntarily engaging in these audits.
• California employers will need to determine whether AB 3234 will apply to their operations or practices, which in many cases will involve a fact-intensive analysis. Employers will need to put a process in place to meet the compliance requirements.
• Multinational companies also should consider how AB 3234 will impact their corporate social responsibility disclosure requirements.

On September 22, 2024, California Gov. Gavin Newsom signed Assembly Bill (AB) 3234 into law, which imposes transparency requirements for employers who audit their child labor practices. The bill will take effect on January 1, 2025.

Under AB 3234, any employer who has voluntarily subjected itself to a “social compliance audit,” in whole or in part, to determine if child labor is involved in the employer’s operations or practices, must post a clear and conspicuous link on its website to a report detailing the findings of its audit. “Child labor” means any work performed by a person under 18 years old in violation of state of federal law. AB 3234 defines “social compliance audit” as a voluntary, nongovernmental inspection or assessment of an employer’s operations or practices to evaluate whether the operations or practices are in compliance with state or federal labor laws, including wage-and-hour and health and safety regulations, including those regarding child labor.

The report must contain at minimum:

• The year, month, day and time the audit was conducted, and whether the audit was conducted during a day shift or night shift
• Whether the employer did or did not engage in, or support the use of, child labor
• A copy of any written policies and procedures the employer has and had regarding child employees
• Whether the employer exposed children to any workplace situations that were hazardous or unsafe to their physical and mental health and development
• Whether children work within or outside regular school hours, or during night hours, for the employer
• A statement that the auditing company is not a government agency and is not authorized to verify compliance with state and federal labor laws or other health and safety regulations

Four Takeaways for Employers

• AB 3234 does not impose a substantive requirement to conduct social compliance audits relating to child labor or otherwise. However, if an employer voluntarily subjects itself to a partial or complete audit of child labor compliance, the law will require specific disclosures about the audit.
• The public disclosure of the social compliance audit report may deter employers from voluntarily engaging in these audits. The U.S. Department of Labor’s Wage and Hour Division (the Department) has enhanced its response to child labor violations following a 69% increase in findings of child labor violations between 2018 and 2022. As previously reported , the Department has strengthened federal efforts to protect minors from illegal employment situations, changing the penalty structure for violations, and enforcing the “hot goods” provision that would prohibit the shipping of goods that were produced in an establishment where oppressive child labor occurred. State agencies have also enhanced their response and increased enforcement activities to address potential child labor violations.
• There are open questions about AB 3234 that will be crucial for compliance. AB 3234 does not specify a deadline for posting findings following a social compliance audit, how long the report must be posted, and penalties for noncompliance. Further guidance will be required from the Division of Labor Standards Enforcement (DLSE) before enforcement activities ensue.
• California employers will need to determine whether AB 3234 will apply to their operations or practices, which in many cases will involve a fact-intensive analysis. Employers will need to put a process in place to meet the compliance requirements of AB 3234. Companies also should consider how AB 3234 will impact their corporate social responsibility reporting and compliance with global forced labor laws. Multiple countries have recently implemented laws to combat forced labor in supply chains and require disclosure of potential exposure and measures taken to remediate forced labor or child labor. California employers should promptly work with legal counsel to assess whether their companies are subject to the AB 3234 disclosure requirements.

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Autoworkers, Boeing machinists, cannabis drivers: Labor unions are mobilizing in new and old industries alike

Professor of U.S. History and Labor Studies, UMass Lowell

Disclosure statement

Robert Forrant does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

University of Massachusetts provides funding as a member of The Conversation US.

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What do violinists , grocery store clerks , college dorm counselors , nurses , teachers , hotel housekeepers , dockworkers , TV writers , autoworkers , Amazon warehouse workers and Boeing workers have in common?

In the past year or so, they’ve all gone on strike , tried to get co-workers to join a union, or threatened to walk off the job over an array of issues that include retirement plans, technology replacing workers and lagging wages as inflation increased.

The array of Americans who are organizing unions extends to the tech, digital media and cannabis industries . Even climbing gym employees have formed a union.

This is happening as U.S. workers in general are finding themselves in an increasingly precarious position . As a labor historian , I believe mobilization is the result of economic disruption caused by the relocation of jobs, the impact of new technologies on work and the erosion of income stability. It’s become very unlikely that today’s workers will have the same employer for decades , as my father and many men and women of his generation did.

Greatest generation of jobs

My father, a butcher, worked for the same company for 40 years and raised a family of seven on his union-secured wages and benefits. While back in the 1950s and 1960s many working-class Americans took that kind of job security for granted, it’s no longer the case. Some career coaches consider keeping a job for many years as a character flaw .

The upsurge in labor organizing is in part a way for workers to gain some sort of say about what happens to their jobs. It’s also helping employees plan for the future.

Union members are increasingly using strikes to demand higher wages, better benefits and increased job security. Why should it be, some low-income earners are asking, that in my family we must hold down two or three jobs to make ends meet, while CEO pay goes through the stratosphere ?

There were 33 major strikes involving nearly a half-million workers in 2023, the most since 2000 . Many labor scholars attribute much of this uptick in organizing to several long-term trends. They include stagnating wages , high out-of-pocket health spending costs – even for those with insurance coverage – and growing concerns over job insecurity caused by the expanded use of labor-saving technology.

Precarious work

In many industries, large numbers of the reliable jobs that paid enough for workers to be in the middle class have dwindled. That’s largely due to technological advances that replaced labor with automation and manufacturers moving to lower-income places, including Mexico, China and other foreign countries, as well as southern states such as Alabama and Tennessee. These trends have left behind a Rust Belt strewn with decaying buildings that once housed bustling factories and increasing numbers of what are sometimes called “ precarious ” jobs, which are poorly paid and lack sick leave, vacation time and other basic protections.

This isn’t new.

I’ve researched how New England’s textile industry fled cities such as Lowell, Massachusetts , as early as the 1920s for nonunion locations in South Carolina, while precision metalworking plants in Springfield, Massachusetts , sent work to Mississippi and South Carolina starting in the 1950s.

But faced with mounting economic uncertainty, public support for unions is increasing. A 2024 Gallup Poll found that 70% of Americans approve of them – close to the 71% level seen in 2022, which was the highest approval rating that unions had gotten in half a century.

Support is even rising among Americans who identify as Republicans, a political party that has historically frowned on organized labor: Gallup found it stood at 49% in 2024, down from 56% two years earlier but up from a low point of 26% in 2011.

Hotel workers strike

On Labor Day weekend in 2024, more than 10,000 hotel workers represented by the UNITE HERE union and employed by 24 hotels from Boston to the West Coast to Hawaii went on strike. Their labor actions disrupted travel plans during a busy time .

Most hotel work stoppages lasted for three days and intended to pressure the companies that own hotels as part of a larger labor contract negotiation strategy. Later in September, workers kept walking off the job at other hotels to pressure management to improve pay, expand health insurance coverage, boost retirement benefits and agree to resolve important job security issues .

Although the hotel industry has been booming since 2023, UNITE HERE contends that employment has decreased by nearly 40%, while wages have stagnated. On the picket line, workers have described living paycheck to paycheck and working one or two additional jobs to cover recent rent hikes.

Hotel workers have more bargaining power today because, according to an industry study, 79% of the 450 hotels surveyed looking to hire people said they could not fill open jobs .

That strike shows no sign of ending. Thousands more hotel workers were joining in by late September.

Boeing strike

Unlike the hotel workers’ brief rolling work stoppages, the Boeing strike hasn’t let up since it began on Sept. 13, 2024 . About 32,000 workers, mainly in Seattle, Washington, and Portland, Oregon, have walked off the job.

Boeing workers declared the strike even though the International Association of Machinists District 751 leadership in Seattle wanted to accept a deal from Boeing’s management . But on Sept. 12, 94.6% of all rank-and-file workers rejected the tentative contract their leadership recommended the union accept.

The Boeing strike started the next day; it could last a long time. On Sept. 25, the workers rejected what the company had called its “ best and final offer ” to settle the strike.

This is the eighth time these workers have gone on strike since their union formed in the 1930s. Its two most recent strikes, in 2008 and 2005, lasted 57 days and 28 days, respectively. Boeing’s management, already reeling from the company’s numerous operational and safety problems , has announced several cost-cutting measures, including furloughs for some nonunion employees .

Boeing’s nonunion backup plan

Boeing has assured its shareholders and the public that the strike would not hinder production of the 787 Dreamliner jets at the company’s nonunion factory in South Carolina.

International Association of Machinists union members have never forgiven Boeing for deciding to build that assembly plant. Operational since 2011, it now employs roughly 6,000 workers. Most of them would have been union members had Boeing built that plant or expanded production in Washington or Oregon, because the existing labor agreement would have covered the new workers.

However, the agreement did not extend to South Carolina .

At the time of the decision, a Boeing spokesperson said , its contract with the machinists’ union “acknowledges our right to locate work elsewhere, and that’s what we chose to do in this case because we just couldn’t get the terms from them that we needed.”

Dockworkers could be next

The timing of the hotel and Boeing strikes makes them perhaps more visible than they might have been because union members’ votes are coveted by both major parties in the 2024 presidential election.

Meanwhile, 25,000 dockworkers who belong to the International Longshoremen’s Association are planning a possible shutdown of ports from Boston to Houston on Oct. 1, over the union’s concern for job loss due to automation.

How job security issues are addressed following this wave of strikes could set the tone for what other hospitality, manufacturing and transportation unions seek when their contracts are up for negotiation again.

• Economic inequality
• Organized Labor
• Labor unions
• Labor rights
• Precarious employment
• hospitality industry

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Lecturer / senior lecturer in construction and project management.

Unique ERISA Barriers of 11th Cir. Won't Go Before Full Court

By Jacklyn Wille

An appeal asking the Eleventh Circuit to reconsider the unique barriers it places on benefit plan participants claiming fiduciary breach won’t be heard by the court’s full slate of judges.

The Thursday announcement is a setback for Inland Fresh Seafood Corp. of America Inc. workers, who asked the US Court of Appeals for the Eleventh Circuit for an initial en banc hearing in a lawsuit over their employee stock ownership plan. The workers want the court to disavow its outlier approach of requiring benefit plan participants to exhaust their plan’s internal appeals process before filing fiduciary breach claims in federal ...

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