How to Write a Business Plan: Organizational Structure
What is the Organizational Structure for a Business Plan?
The organization structure section should discuss whether your business will be a sole proprietor, limited liability corporation, or corporation, who will run your business, each person’s responsibility, and how your business will expand if needed. There are numerous benefits to a detailed assessment of the company’s structure. First, examining the structure of the business will help for tax purposes. For example, limited liability and corporations are considered excellent for protecting shareholders concerning liabilities. However, tax-wise, these firms often are double taxed. The second benefit of a detailed assessment of a company’s structure is to understand how each owner will contribute to the company. In other words, if there is more than one owner, what are their responsibilities, and how are these responsibilities to be carried out.
Why is the Organizational Structure important?
There are numerous reasons why the organizational structure is essential for a business plan. In this section, the business owner will lay out how the company will be structured. For example, this section will include job titles and responsibilities, resumes from owners and management, showing expertise in the industry, and supporting accolades for expertise. Through discussing job responsibilities and experiences for management, readers will better understand why this type of business structure, and this management team, will be successful in the proposed business.
A second important reason for the organizational structure is that the section introduces business owners. The owners and management team should not only be introduced in this section, but their experiences in the industry need to be highlighted and thoroughly explained. In doing this, a sound foundation for management competence will be established.
A final reason for its importance is the job responsibility segment. Ownership and management need to have a written document showing specific duties for each owner, if applicable, and specific job responsibilities for each position within the company. By having this document, readers will see how the business will function and better understand the breakup of management responsibilities.
When to write the Organizational Structure?
The organizational structure should be written after the company description. In the company description, readers will be introduced to the problem that the company is going to solve and how they propose to solve this problem. This is usually the product or service offered. The logical next step is to show a business structure that will allow the company to supply that product or service effectively and efficiently. Thus the need for the organizational section follows immediately behind the company description.
How to write the Organizational Structure?
When I write my organizational structure for a business plan, for the most part, I start the first paragraph by reminding the readers of the company name. From this, I then introduce how the company will be held in ownership. For example, will the company be a limited liability corporation? Sole proprietorship? Next, I briefly introduce the management team and owners. Further, I also briefly introduce their experience in the industry.
By following this structure, the first paragraph is an excellent summation of the section. This allows the reader to understand the breadth of the ownership structure without gaining significant details.
Organizational Structure: Ownership
In the ownership section, I usually start writing the section by introducing the CEO/founder/majority owner. In this portion, I usually write the segment, almost like a brief biography. I will discuss the CEO's history in the industry and the reason why they feel that they are best suited to start and run the operation.
Once this is complete, I then follow the same structure with the other management team members and minority stakeholders. When this is done, the reader should walk away with an excellent understanding of the qualifications of the ownership team and how their skills will complement each other.
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Organizational Structure: Responsibilities
In the job responsibility section, I usually structure this portion as a bullet-pointed list. At the top, I put the title such as CEO, project manager, or job title. Following this, I list the responsibilities and expectations for each position. Not only does this help show structure and foresight for the company. But also, this will help management divvy up duties for the business.
Organizational Structure: Resume
The resume section is for senior managers and owners. By including resumes, supporting documentation is available for claims made related to experience. For example, if the CEO claims to have 20 years of experience in the industry, then the resume will show where this experience came from. This adds credibility to previous claims made.
Organizational Structure: Compensation
Compensation is sometimes necessary to include in the organizational structure component. Investors expect management to be compensated and employees as well. However, excessive compensation is often an issue with startups and established businesses. By showing reasonable compensation for each position, not only will a solid understanding of the pay for each position be shown, but restraint for compensation by the management team and ownership may be highlighted as well.
Organizational Structure: Achievements
This final section is almost like a cherry on top of the cake. By this point, the reader should be well-versed in the experience and expertise of ownership and the management team. Adding achievements highlights their expertise in their chosen industry.
Organizational Structure Example
ABC Restaurant will be a limited liability corporation.
John Smith, Sr., MBA., is the founder and CEO of ABC Restaurant. He has started and managed numerous successful small restaurants over the last ten years. Restaurants started, and managed, including a breakfast cafe, food truck, and 24-hour diner. For each business, he was responsible for all aspects of the organization, from marketing to strategic planning.
- Create and execute marketing strategies for business growth.
- Align business strategies with the vision statement.
- Negotiating contracts with vendors.
- Ensure legal compliance for the business.
- Continually examine the firm’s external environment for new market opportunities.
- Control inventory to ensure optimal levels are attained.
- Manage day-to-day operations of the restaurant.
- Servers and cooks during high volume times.
- Interview and hire new employees.
- Assist in the onboarding process for new employees.
- Set up all workstations in the kitchen
- Prepare ingredients to use in cooked and non-cooked foods.
- Check food while cooking for appropriate temperatures.
- Ensure great presentation by dressing dishes as trained.
- Keep a sanitized and clean environment in the kitchen area.
- Stock dining area tables with needed items.
- Greet customers when they enter.
- Present dinner menus and help customers with food/beverages selections.
- Take and serve orders quickly and accurately.
Author: Paul Borosky, MBA., Doctoral Candidate, Published Author