What Equipment and Facilities to Include in Your Business Plan Investors will want a detailed list of the equipment your business requires and where you plan to operate. Here's a checklist to get you started.
This is part 10 / 10 of Write Your Business Plan: Section 5: Organizing Operations and Finances series.
A manufacturer will likely need all sorts of equipment, such as cars, trucks, computers, telecom systems, and machinery of every description for bending metal, milling wood, forming plastic, or otherwise making a product out of raw materials. A lot of this equipment is expensive and hard to move or sell once purchased.
Moreover, manufacturers often require a facility to house this equipment and operate the business.
Naturally, investors are very interested in your plans for purchasing equipment and facilities. But this part of your plan doesn't have to be long—just be sure it's complete.
Make a list of every sizable piece of equipment you anticipate needing. Include a description of its features, its functions, and, of course, its cost. In addition, list all facilities you plan on buying or leasing.
Be ready to defend the need to own the more expensive items. Bankers and other investors are loath to plunk down money for capital equipment that can be resold only for far less than its purchase price. Also, consider leasing what you need if you are starting out. Once you show that you are responsible for paying your bills and sales look good, you can apply for a small business loan or a line of credit with greater success.
Unless you're a globe-trotting consultant whose office is his suitcase, your plan will need to describe the facilities in which your business will be housed. Even home-based business owners now describe their home offices as the trend continues to snowball, thanks largely to mobile communications.
Land and buildings are often the largest capital items on any company's balance sheet. So it makes sense to go into detail about what you have and what you need. Decide first how much space you require in square feet. Don't forget to include room for expansion if you anticipate growth. Now consider the location. You may need to be close to a labor force and materials suppliers. Transportation needs, such as proximity to rail, interstate highways, or airports, can also be important. Next, ask whether there is any specific layout that you need.
Draw up a floor plan to see if your factory floor can fit into the space you have in mind. Manufacturers today do most of their ordering and communications online, so you need to ensure that your location has excellent connectivity.
To determine the cost of facilities, you'll first have to decide whether you will lease or buy space and what your rent or mortgage payments will be for the chosen option. Don't forget to include brokerage fees, moving costs, and the cost of any leasehold improvements you'll need. Finally, take a look at operating costs. Utilities, including phone, electric, gas, water, and trash pickup are concerns; also consider such costs as your computer connections, possibly satellite connections, maintenance, and general upkeep.
Use this checklist to analyze your facility's requirements.
- Space Requirements:
- Initial space
- Expansion space
- Total space
- Location Requirements:
- Technology requirements, including connectivity
- Proximity to the labor pool
- Proximity to suppliers
- Transportation availability
- Layout Requirements:
- Cost Requirements (Dollar Amounts of Estimated Expenses):
- Purchase/lease costs
- Brokerage costs
- Moving costs
- Improvement costs
- Operating costs
- Total Cost
These aren't the only operations concerns of manufacturers. You should also consider your need to acquire or protect such valuable operations assets as proprietary processes and patented technologies.
For many businesses— for example, Coca-Cola with its secret soft drink formula comes to mind—intellectual property is more valuable than their sizable accumulations of plants and equipment. Investors should be warned if they must pay to acquire intellectual property. If you already have it, they will be happy to learn they'll be purchasing an interest in a valuable and protected technology.