Management
Team: BizPlanIt Newsletter
Management Team
Imagine this scenario: You are a private investor
searching for that next exciting investment opportunity. A
business plan lands on your desk, right next to the sixteen
others you have received recently and are in the process of
reviewing. Half of the plans present solid business concepts.
Some of the plans seem to offer exceptional long-term growth
possibilities. But in your opinion, only two of the plans
present management teams capable of turning ideas into reality.
As you consider your investment options, you eventually eliminate
all the business plans except for those with the strong management
teams.
Why? Products, marketing strategies, and
operations are important, but it is the experience, knowledge,
and ability of the management team that makes a business thrive.
Many lenders, venture capitalists, and private investors stress
that given the choice between a first-rate product with a
second rate management team, and a mediocre product with a
top-notch management team, they would prefer the latter. To
some investors, the management team is THE critical investment
factor. Bottom line - investors invest in people, not business
plans, so make sure your management team is up to par
Naturally, each business is different and
requires a management team that matches the particular circumstance.
Your industry, niche, and the loftiness of your goals lead
investors to assumptions and expectations about the quality
of management that you require. The experience and depth of
your managers must meet or exceed these investor expectations,
or must clearly explain how you intend to fill these positions
in the future.
Two basic themes that readers of your business
plan will look for throughout your entire management section
include:
Team
Investors normally expect to see a minimum of three
to six experienced executives on your management team (start-ups
have some variations, see below.) When investors and venture
capitalists state the importance of a top-notch management
team, the word "team" should not be underestimated.
They normally view one-person operations as limited in terms
of time, experience, and core business skills necessary to
launch and grow a serious business.
Balance
Although investors are looking for a group, they are
not looking for a group of clones. They seek balance and a
collection of skills that meet the needs for your particular
venture. A diverse team increases the chance that each business
function (marketing, sales, operations, finance, manufacturing,
engineering, etc.) is tended to by an expert with experience.
Avoid the tendency to staff your management team with people
just like yourself. It might feel nice to work with friends,
family, and others that share your background, but investors
see a management team unprepared for the inevitable challenges
that lie ahead.
But what if you are a startup company and
you don't have a team? Early-stage management teams are often
limited to a lead entrepreneur or a small group of company
founders. If this is the reality for your business, don't
try to avoid it or claim that staff employees are actually
"management". Instead, focus on the strengths of
your current management team and outline specific (and realistic)
plans for adding officers in the future.
OK, so let's assume that you have a balanced
team, or plans to build one as you grow. In your business
plan, only include those individuals in the management section
with the greatest effect on sales, operations, net profit,
and business development. Every employee is important, but
this is not a section to outline the skills, hobbies, or backgrounds
of your entire staff. Consider restricting your management
section to individuals that fall into the following categories:
founders, top decision makers, CEO, CFO, CIO, plant manager,
lead engineer, marketing or sales director, and R&D manager.
How should your management section be organized
and presented in your business plan? Generally, BizPlanIt
divides this section into four parts: Specific Team Members,
Board of Directors, Board of Advisors, and Consultants. Let's
explore each of the four sections and explain how to grab
the attention of investors in your management section.
Specific Team
Members
Don't just drop a resume under each officer's name
and assume you have completed your management section. Instead,
construct a narrative description for each team member, clarifying
his or her backgrounds and intended contributions. Include
a reference in your management section to the completed resumes
located in the appendix. The length of each narrative will
differ, but try and keep each to a reasonable length (normally
under a half page). Briefly address the following topics for
each manager with a focus on achievements, success, and results.
Position
Outline specific titles, duties, and responsibilities
for each individual. Clarify what each manager does, what
area of business development they focus on, and how they fit
into the organization as a whole.
Experience
List past positions and responsibilities that directly
relate to the current position. Outline the companies you
worked for, the duties, the successes, the experience gained,
and how these skills transfer to your current position. Industry
experience is looked at favorably by investors as they size
up your management team. Some investors consider industry
experience an absolute must, but if you lack direct industry
experience, build on related and successful experiences from
other fields. Describe your abilities and experiences in previous
management positions. The number of years you were in management
roles? The number of people you supervised? For how long?
The goal here is to present a track record that predicts future
success.
Successes
Planning, managing, and organizing any business, even
outside your current industry, demonstrates the ability to
achieve results. If lenders and investors are familiar with
your prior record of success, they are more likely to believe
that you can repeat that success in your current venture.
You may even wish to present past business failures, if you
can demonstrate what you learned from the experience and how
you will conduct yourself differently in the future. Some
investors may actually view past business failures as "battle
scars" and an indication of experience, persistence,
and an understanding that first time entrepreneurs may lack.
Education
Keep educational descriptions brief unless they directly
relate to your ability to succeed in a particular position
(or if managers are recent graduates with little or no business
experience). The older and more experienced you are, the less
value an investor is likely to place on your educational credentials.
Key Strengths
What personal and business qualities do you possess
that make you well suited for this position? What traits,
abilities, personal characteristics, or experiences have you
developed that can lead to success in this position? This
might include industry expertise, the ability to motivate
others, marketing competence, or interpersonal skills. Experience
outside the business arena may also be relevant, such as club
membership, civic involvement, or group leadership that can
be directed towards your current position.
Board of Directors
The board of directors can play an important role
in the success of your business. In smaller companies and
start-ups, the board of directors may be limited to the individuals
running the company. In this case, they perform little more
than the legal requirements needed to maintain corporate status.
However, as a company grows and the stakes rise, outside members
such as investors, advisors, and strategic partners are normally
added to the board to guide the company successfully into
the future.
o protect their investment, investors will
often request a seat on your board. This provides the investor
some control over management, influence on the direction of
the company, and an ability to protect their investment. But
it's not all about control, many times outside board members
contribute significant business and industry expertise that
should not be underestimated. Experienced board members provide
a level of credibility that investor's desire in a start-up
or early-stage company.
The board of directors portion of your management
section is fairly simple to prepare after you identify the
specific members. Briefly list the names, backgrounds, and
contributions that will be made by each board member.
Board of Advisors
While the board of directors is more legal in nature,
the board of advisors is more functional. Your board of advisors
should consist of individuals with valuable industry expertise
and insight. Without the legal constraints required of your
board of directors, these advisors are assembled to help and
consult with you on your business.
Many small companies and start-ups assemble
their board of advisors as a mere formality - don't make that
mistake. A solid and experienced board of advisors goes a
long way toward establishing credibility in the eyes of investors.
Include advisors with past success in ventures similar to
yours, or advisors with backgrounds you lack on your current
management team.
As with the board of directors, the board
of advisors is simple to present after you identify the individuals
to include. Briefly list the names, backgrounds and contributions
to be made by each person. Again, the members you attract
to your board of advisors tell an investor a lot about the
quality of your business.
Professional
Consultants
The last part of your management section should include
a brief mention of the outside consultants you will work with
as your company grows. A typical list of consultants would
include accountants, attorneys, bankers, insurance agents,
and experts such as technology advisors, web developers, and
payroll specialists, for example.
Outside consultants provide expertise that
a company lacks during its earlier years. If carefully selected,
consultants provide your business an additional level of credibility
and enhance your image in the eyes of your reader.
Briefly describe the services each consultant
provides your company, and their qualifications as experts.
The earlier you start to build relationships with consultants
the more beneficial they become your company as you grow.
For more advice on writing the management team section
of your business plan:
Email
us at BizPlanIt if you have comments or suggestions about
our Virtual Business Plan.
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