Facility and Business Location


The operating plan of your business plan should include a discussion on your planned facility and the business location. Topics of importance under the operating plan include the following items:

    1. The space required by your planned business venture;
    2. The proximity of your planned business venture;
    3. The method of acquiring your facility;
    4. The costs to maintain your facility; and
    5. The layout of your planned facility

Lets look at each of the above items separately, beginning with the "Space Required by Your Planned Business Venture".

1.  -  Space Required by Your Planned Business Venture:

Some businesses can be run from a home office while other businesses require 100,000 square feet of space. You will have to determine how many square feet your business requires to operate efficiently. If you plan to operate from your home, how much square footage will you need for office space, storage space, production facility, and so on? Sometimes entrepreneurs begin from their homes, only to expand as demand for their product increases.

If your business calls for a facility outside of the home, you will also need to calculate your square footage requirements for office, production, storage, displays, etc. Will you need 750 square feet or possibly 5,000 square feet of space? In the operating plan section of the business plan, be sure to discuss the amount of space you need  for your facility and why you need it. Then discuss how your selected business location meets those requirements. It is a good idea to discuss whether or not the facility can be expanded or renovated in the future.

2. Proximity of Your Planned Business Venture

After you have discussed your facility requirements, it is time to discuss in the operating plan the proximity of your planned business venture. Here you will discuss such factors as the actual address of the facility, the closeness of competitors, suppliers, and customers, the proximity to landmarks (for possible marketing considerations), banks, general supplies (if required) or other issues that may be of importance to your business. The idea is to show the investor or reader of the business plan that the location you have chosen has augmented benefits that will compliment your business.

Another benefit or selling point you may discuss in the operating plan is known as the accessibility benefit. It refers to the degree at which a company's location is accessible to the labour force, delivery vehicles and customers. Does your planned location have residents who you can hire on as staff? Labour force accessibility or availability is an extremely critical factor to consider when selecting a location. If a business can not acquire a competent, skilled and motivated staff, it may not accomplish the goals and objectives it sets out to achieve. If your planned business location can accommodate your staffing requirements, be sure to briefly indicate it under this section.

Is your planned location accessible to delivery vehicles? Accessibility to delivery of supplies, raw materials, and equipment is important and can play a crucial role in the success of a business venture. Image selecting a location where a company's required equipment can not pass through a door. Or image selecting a location where raw materials (products) must be carried eight blocks, down a back alley, though a hall, and up five flights of stairs to arrive at your place of business.

The third type of accessibility is known as customer's accessibility. How easily can customers access your selected location? Is the selected location easy to find? Does your business need high walk by traffic? Service and retail businesses generally require a close proximity to customers, while manufacturing and processing plants must generally be close to their suppliers and distribution networks. Does the nature of your business require you to be close to your customers, suppliers or distribution networks? If customer accessibility is important to your type of business, be sure to say so and indicate how your planned location caters to this need.

In closing, the proximity of your planned business venture should indicate the actual address of your facility, the closeness of competitors, suppliers, landmarks, banks, general supplies or other issues that may be of importance to your business. In addition, be sure to discuss how accessible your planned location is to buyers, your labour force requirements, transportation system and delivery vehicles.

3. The Method of Acquiring Your Facility

Will you purchase, build, or lease your planned facility? Why have you chosen this acquisition method? What are the benefits of leasing versus purchasing or building? How much will the facility cost to buy, built or rent. If you purchase or build the facility, how will it be financed. If you plan to lease, be sure to fully discuss your lease contract or lease agreement. For instance, is the lease paid on a monthly bases? What is the term of the lease? Can you get out of the lease at any time? Will it cost you money to break the lease? How much will the lease cost and when must it be paid? Does the lessee require a percentage of your sales in addition to the monthly rent? If so, what percentage? These issues as well as other issues directly relating to your business venture are some of the items you should discuss under this section of the facility component of the operating plan.

Whether you buy or lease your facility, chances are you will have to perform renovations. Typical renovations may include painting, replacing floor tile, laying carpets, rewiring, plumbing, installing air conditioning, building counters, building and installing shelving, replacing light fixtures and tearing down walls. Whether the renovations are as simple painting the walls or as complex as replacing the foundation, you should briefly explain exactly what must be made and who is scheduled to perform the work. In addition, you'll have to discuss the costs associated with each type of renovation. This involves the entrepreneurs contacting several contractors to acquire estimates or quotes on how much it would cost to perform the renovations you desire. The costs and contractors can be briefly discussed in the body of your opearting plan, while actual quotes and estimates can be placed in the appendices of the business plan.  Note: the costs, quotes, and estimates you indicate here as well as in every section of the business plan MUST coincide with the amounts shown in your forecasted financial statements.

4. The Costs to Maintain Your Facility

The reader (investor) is interested in how much your planned facility will cost to maintain. Here you will discuss such items as heat, rent, phone, lights, water, and general maintenance. In addition, your local government may levy taxes for special services such as parking, fire services, property, policing services, and other services depending upon your planned location. Be sure to discuss each item, as it relates to your particular business and their associated costs. Also, indicate how these costs are expected to increase or decrease over a three year forecasted period. Make sure, the costs you provide here are the same as the costs shown in your forecasted financial statements.

5. The Layout of Your Planned Facility

The facility section of the operating plan should include a discussion on your planned layout. This section of your operating plan will certainly depend upon the type of business you plan to open. Below looks at some of the more common areas that manufactures, retailers, and service providers generally consider when designing a facility layout or floor plan.


A manufacturer's layout is usually dictated by the available space and the machines used. Another factor affecting the layout of a facility is the type of production processes employed. Moreover, a manufacturer may use one of three types of production processes - an assembly line production process, a mass production process, or a customized production process. The production process in which a manufacturer selects will play a major role in determining the facility's layout. For example, an assembly line production process sees a manufacturer producing a product in various stages. Here, the manufacturer factory's layout would consist of a series of departments in which the product would flow until it reaches the final assembly stage.

A manufacturer's layout must also consider the following items;

    • storage for raw materials,
    • the flow or movement of raw materials,
    • storage for general suppliers,
    • storage of waste materials and defective products,
    • storage of semi-finished and finished products,
    • storage of finished products ready for packaging,
    • storage of finished products ready for shipping,
    • office space, lunch rooms, washrooms, etc...

Some manufacturers will have to consider health and safety standards when designing their manufacturing facility and layout.


The layout for a retailer is usually sophisticated and extremely important. For instance, a retailer must pay close attention to the actual placement of aisles, products, and promotional displays. Many retailers read many marketing and psychology books in an attempt to learn more about consumer behaviour. They use this new knowledge in designing a successful facility layout.

A retailer's layout objective is to design a combination of product arrangement and shelving that will first attract a customer to one shelf and secondly direct him or her to another shelve and so on. For instance, retailers usually place new and discounted products at the store's entrance or front display area. This attracts customers into the store, and with other subtle placement strategies, encourages the customer further into the store.

Another product placement strategy used by retailer is to situate "every day" products near the back of the store. By doing so, the customer is forced to walk by many other products before reaching the more commonly purchased ones. In essence, retailers are trying to increase their sales by tempting the customer into purchasing more. Yet another strategy used by retailers is to place complimentary products close together.

As you can see, a retailer's facility layout requires a lot of planning and knowledge of consumer behaviours. If you are planning on establishing a retail outlet, be sure to carefully plan the placement of aisles, shelving, sales promotional items and product displays. Visit a competitor and analysis their layout. Try to justify their layout as well as find flaws or clutter. In addition, read as much as you possibly can on consumer behaviour. This will help you to understand why consumers behave in the ways in which they do. Additionally, it will assist you in developing several powerful layout strategies.


The layout of a service provider is just as important as the layout for manufacturers or a retailer. Whether you are planning on opening a restaurant or renting a office for a bookkeeping service, you will have to design a layout.

Since service based business involve a wide range of industries, it is impossible for us to provide an in-depth discussion on areas to consider when deciding on your facility layout. The general rule of thumb, however, is simple - When you have customers coming in and out of your service business, layout tends to be more important. Moreover, you will want to provide an atmosphere (layout) that your target customers want and find appealing and which is efficient. If your service business does not rely on walk in customers, then you will want to create an atmosphere that is efficient and appeals to you and your staff.

A restaurant is a service based business that requires both types of atmospheres. That is, a facility for walk in customers (dining room, rest rooms, and entrance, for example) and a facility for non-customer (kitchen, storage rooms, and offices). The layout for each type is generally designed with the corresponding users in mind. For instance, the dinning room would be organized in a manner that is efficient and appealing to customers. The kitchen is generally organized in an efficient manner; allowing for easy access by staff to utilize equipment, prepared dishes, and so on.


In closing, your facility layout must be designed in a manner that provides for optimal performance as well as appeal. Under the facility section of the operating plan, you should provide the reader with details on the five issues outlined above. These issues are:

      1.   The space required by your planned business venture,

2.   The proximity of your planned business venture,

3.   The method of acquiring your facility,

4.   The costs to maintain your facility, and

5.   The layout of your planned facility

Also, be sure to discuss other facility issues that directly pertain to your particular business venture. Remember, you do not have to write a novel on each area, but you do have to thoroughly explain each. By doing so, the reader can gain a greater appreciation of your planned facility and how it will compliment your entire business operating plan.

For further information relating to the Components of the Operating Plan and how it appears in the business plan, please refer to section entitled Operating Plan.

Categories: Operations