Opening a new small business allows entrepreneurs to expand their creativity and carry out a long term vision. That freedom also comes with the responsibility to manage different roles, streamline the supply chain, research different technologies, and find the best talent.
Though juggling all of the elements of company operations can be a challenge, employing the proper strategies will help to mitigate risks and overcome difficulties.
To understand the various roles and requirements needed to run a business, it's important to make sure to know the components of business operations. Each element of operations usually requires cost, project management, risk, and strategy.
Recognizing how all of these elements need to work together to run a successful business is an essential part of ensuring a company's success.
Read ahead to learn about the important elements of business operations and how they function as part of a strategic operational plan.
Clear Cut Examples of Business Operations
Business operations are the goals and justifications that serve as a roadmap to fulfill a business plan. Operation plans are accessible to all involved stakeholders, business owners, department managers, and investors who handle all of the moving parts of an organization.
Business operations also include the technologies, systems, processes, equipment, and workflows essential to deliver value to customers.
Planning operations management allows decision-makers to supervise business activities and assign responsibilities to authorized individuals. It allows for the proper allocation of resources at the right time to the right people so workers can complete their jobs and help the business meet its financial objectives.
As the business changes and grows, the operations will most likely evolve as well. Revisiting and reworking operation strategies is an essential requirement of maintaining a competitive edge and increasing customer retention rates.
The important components of business operations include-
1. Key Operating Revenues
The important business activities that generate revenue include producing and selling a product/service. Sales activities may refer to the selling of manufactured products. For retailers, it may include the selling of other companies' manufactured products.
Service-based companies, such as a hair salon, may sell in-house products (shampoos, conditioners, gels, etc.) along with their services (haircuts, highlights, etc.) A service-based company can increase its revenue, optimize a brand, and improve customer satisfaction by selling in-house products as well as a service.
Any core business activity that generates wealth for an organization is considered a key operating revenue source. Interest and dividend income are not included as a core activity and are therefore not considered part of key operating revenue.
2. Key Operating Expenses
Any incurred costs generated from product development, advertising, or marketing a product/service are part of the key operating expenses.
Manufacturing expenses refer to the cost of raw materials needed to build a product, as well as the incurred costs of delivering those supplies to the warehouse.
Advertising and marketing costs include purchased ad slots, paid social media campaigns, print advertisement costs, or any other expenses related to advertising a product/service.
It can also include taking potential investors out to dinner, going to a trade show, or participating in a fundraiser to build brand awareness.
Businesses are required to understand the intricate process of hiring and maintaining a workforce, along with those incurred costs from doing so.
Roles will need to be defined, workers will need to be interviewed, hired, and trained, HR will have to perform payroll, and the organization will probably have to pay for some type of benefits. Questions to consider include-
- How many people does the organization need to hire to maintain operations and streamline workflows?
- How much will the organization pay each employee and why? Will there be opportunities for raises and advancements?
- Will the company be hiring non-exempt or exempt employees? How will it plan to track hourly employee time and adhere to FLSA standards?
- Will there be a human resource department to conduct payroll or will the organization hire a third-party accountant?
- What kind of policies will the organization have on sick days, paid time off, holidays, workplace harassment, etc.?
Hiring costs can be expensive, particularly for a larger organization. It's important to implement good hiring practices to prevent a high turnover rate, employee dissatisfaction, decreased revenue, and inefficiency.
Matching skills to roles are also an essential part of good management, as mismatched employees can also cause financial problems for the organization.
In today's world, it's essential to stay up-to-date with the latest workplace technologies and business intelligence solutions used to streamline business activities. Equipment such as computers, scanners, and software can be an expensive, yet necessary investment.
Troubleshooting, demos, and approving BI purchases are also incurred costs that need to be accounted for in advance. The organization should consider how each technology helps to streamline tasks and fulfill the objectives established in the business plan.
Many technologies, such as dashboards and time clocks can free up resources, save time, and allow employees to work on other tasks. They help ensure accuracy, which is essential in the age of FLSA laws and evolving regulations.
An effective BI tool also collects data that helps managers gain insight that improves decision-making across the organization. To maintain a competitive edge, businesses have to harness their data collection to make improvements, increase knowledge, and improve knowledge-sharing.
In conclusion, here are the key takeaways to remember the elements of business operations-
- Business operations serve as a roadmap for managers and employees to fulfill an organization's key objectives.
- Planning out operations ensures proper resource allocation, good hiring practices, streamlined workflows, and efficiency.
- Examples of business operations include key operating expenses, key operating revenues, personnel, and technology.