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 for 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 excellent for protecting shareholders in relations to liabilities. However, tax wise, these firms often times are double tax. A second benefit for detailed assessment of a company’s structure is to understand how each owner will contribute to the company. In other words, if there are more than one owner, what are the 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 important for 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 ownership 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 organizational structure is that the section introduces ownership. The ownership and management team not only should be introduced in this section but their experiences in the industry needs to be highlighted and thoroughly explained. In doing this, a sound foundation for management competence will be established.
A final reason the section is important 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 in an effective and efficient manner. Thus the need for the organizational section following immediately behind the company description.
How to write the Organizational Structure?
When I write my organizational structure for a business plan, I always start the first paragraph with 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 in ownership. Further, I also briefly introduce their experience in the industry.
By following the structure, the first paragraph is an excellent summation of the following section. This allows for the reader to understand the breath of the ownership structure without gaining significant details.
Organizational Structure: Ownership
In the ownership section, I always 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 CEOs history in the industry and the reason why they feel that they are best suited to start and run in 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 as to the qualifications of the ownership team and how their skills will complement each other.
Organizational Structure: Responsibilities
In the job responsibility section, I usually structure this portion is 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 is 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 ownership. By including resumes, supporting documentation is available for claims made related to experience. For example, if the CEO claim to have 20 years’ experience in the industry, then resume will show where this experience came from. This adds credibility to previous claims made.
Organizational Structure: Compensation
Compensation is important 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 will 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, reader should be well-versed in the experience and expertise for ownership and the management team. By adding achievements, this highlights their expertise in their chosen industry.
Author: Paul Borosky, MBA., Doctoral Candidate, Published Author