Page 113 - Business Plans that Work A Guide for Small Business

104 • Business Plans that Work

Figure 7.1 Operations Plan

• Operations strategy
• Scope of operations
• Ongoing operations

Lazybones has the interesting opportunity to generate negative work-
ing capital. That is, Lazybones may collect payments before it has to pay
the cost of delivering the service. Depending on revenue ramp-up this
could be a significant competitive advantage because Lazybones can use
the deposits to partially fund the growth of a store (e.g., adding new
washing machines and dryers as demand increases). In any case, entre-
preneurs have to understand the implications of operating strategy on
cash management.
Another factor that has cash implications is whether your operations
strategy is to “buy” or to “build” the production process. Lazybones is
using a combination of buy and build. For the company-owned stores,
Lazybones builds the stores, meaning that it finances and operates each
of the company-owned stores. On the other hand, Lazybones franchise
strategy is equivalent to a buy strategy in that each franchise pays a
royalty to carry the Lazybones brand and use its proprietary operations
system. How do you make the decision of whether to buy or build?
First, what is the nature of your competitive advantage? Reflect again on
your competitive advantages and concentrate your efforts on what you
do best. Outsource other requirements. Apple has a sophisticated mix
of buy and build. Their distribution channel is particularly complex, us-
ing a rapidly growing branded store system and a series of distributors,
especially campus bookstores. You might also build if your advantage
lies in some proprietary technology that you need to keep close control
of (although you may only need to make the component where your
technology is embedded). Lazybones is building company-owned stores
to demonstrate to potential franchises how the system works and to
provide proof that its system will generate profits for the franchisees. If
building isn’t central to your competitive advantage, consider buying,
which means outsourcing the operations, because the second key factor
to keep in mind for this decision is the cost. Building often means huge
fixed expenditures up front, which means raising more capital, diluting
your own equity, and lengthening the time to breakeven. Basically it
means increased risk.