PART 1   -   THE MANAGEMENT TEAM

Under part one, discussion on each member of the management team is required. Be sure to include information on each member's personal background & status, employment history, industry background & experience, small business experience, education & training, duties & responsibilities and each member's forecasted salary, wage, withdrawal, and/or commission.

Resumes cover a majority of these issues but for key managers it is better to provide a narrative explanation supported by a resume. The narrative provides a story while the resume details the dates, titles and organizations (resumes will be included in the appendices of the business plan).

An existing enterprise, preparing a business plan for loan purposes, would discuss the above items of only key members of the management team (president, vice president, financial controller, and so on). In addition, resumes of each key players act as supporting information and should be placed in the appendices of the business plan. Lower level managers must be addressed, however, fewer details are required.

Usually the key management team of a new or aspiring business ventures consists only of the entrepreneurs or owners. In this case, each owner would provide a narrative description, discussing the above items. In addition, each owner's resume would be placed in the appendices of the business plan. If other managers are needed, then details would be placed under Part 3 of the Management & Staffing section entitled "Staffing Requirements".

Below details each area that should be discussed under the "Management Team" section, beginning with personal background and status. Please note: for the most part, our discussion below assumes the management team consists of only of the entrepreneur or owner. You may adjust these components to reflect your particular situation.

Personal Background and Status:
Most investors want to know about an entrepreneur's personal background and status. If your background involves volunteer and community work, be sure to mention it in this section. If you are a member of any organizations such as the Chamber of Commerce, discuss your involvement. You want to leave the impression that you are respectable, reputable, and committed to the project.

Employment History:
An employment history gives an investor an idea of who will be controlling their money and whether the entrepreneur will be a good investment. If your employment history is discussed properly, it will illustrate to potential investors that you are capable of handling the task of successfully operating the business and that you will perform accordingly.

Holding positions of responsibilities will assist you in demonstrating your ability to own and operate the proposed ventured. If you've worked as a manager, you should definitely make reference to your duties while in this capacity. This will re-enforce your ability to perform in positions of responsibility.

Be sure to omit unfavorable aspects (such as taking a year off) from your working past. Wording can be adjusted to make a statement true or favorable. If an investor sees an unfavorable aspect, she may decide against investing; reasoning that you may just abandon the project like you did in your working past.

Industry Background and Experience:
Many backers require prior experience in the industry before investing into an entrepreneur or group of entrepreneurs. Even with the "best" business idea, many investors tend to feel that entrepreneurs need experience within the industry before they can efficiently operate in it. For example, if you have worked in the retail clothing industry for 10 years and now plan on establishing a retail clothing store, investors are less reluctant to provide the necessary capital. If, on the other hand, an entrepreneur plans to open a computer software company without any prior experience in the software industry, backers assume the risks are higher and tend to be more dubious in making an investment. In this case, the investor feels that the entrepreneur will be gaining the experience on his/her precious money. Therefore, if you or your partners do not have experience in the industry, you are advised to take the necessary steps in acquiring it.

Sometimes it is impossible to take the time needed to work in the industry to obtain such experience. In this case, be sure to conduct extensive research in all functional areas such as operations, marketing, customer service, etc. This will demonstrate that you have thought of every aspect of the business, you are aware of what you are getting into, and you are able to adapt to new settings. In other words, your business plan and the policies created therein MUST be meticulously created and MUST be extremely convincing. Additionally, if successful in showing that you fully understand the industry and how it operates, your lack of experience may be overlooked. Also you will want to focus the discussion on outside supporters and on staff members who will contribute their experience to the business venture.

Education & Training:
The education and training of the entrepreneur/management team is closely scrutinized by investors. Moreover, backers realize entrepreneurs will be making decisions that effect their investment. Having business training or a business degree is always considered a benefit; just as experience in the particular industry.

Having education directly linked to the proposed business is certainly advantageous. Such direct education will definitely enhance the appeal of your business plan and increase the likelihood of receiving the necessary capital. Assume for a moment, you propose to establish a local pub. Having education or training in managing or "tending" a bar certainly increases your credibility. In addition, the investor views such education as an element playing an instrumental role in determining the success of the business.

Education and training is usually acquired over a long-term period. Many entrepreneurs enroll in short courses or night school to acquire basic or specialized training. Tip: many business plan writers simply provide a brief statement about their education; they do not elaborate unless it directly relates to their proposed business.

Experience in Small Business:
If you or other partners have owned or operated a business in the past, then it should be addressed. Such experience will greatly add credibility to your proposed venture. Even if you have owned a business in the past and for some reason it failed, the actual ownership demonstrates that you have some experience in business operations. Most business failures, if worded correctly, can be justified in some way or another. Remember, a business failure is never a failure unless nothing is learned from the mistakes made.

An existing business owner, applying for a loan, for example, already has experience in small business. If you have a close relationship with your banker (and you should), then he will already know of your business experience. In this case, the existing owner should show how such experience reduces a backer's risk of investing.

Duties and Responsibilities:
The duties and responsibilities of each team member should be clearly outlined under this section. An investor will want to see that all functional areas are filled by qualified individuals. Moreover, each position should be fueled by individuals having the necessary experience, training, and skills (strengths) to perform the tasks at hand. Be sure to indicate who does what, who reports to who, and who has final authority.  Some inexperienced entrepreneurs suggest these details can be worked out as the business progresses. Business owners sharing such views will soon experience resentment among its team members. Some will feel they are doing too much work while others may feel they are doing too little. If the duties & responsibilities are openly discussed and are established in the beginning, less tension will surface; thus allowing the business to run more smoothly.

You may even decide to develop an organizational chart. An organizational chart is a tool used to graphically show an investor (as well as your management team and staff member) who is responsible for each department or functional area within the business. Below provides an example of an organizational chart.

President
(John Smith)
!
!
-------------------------------------------------------------------------------------
!                                   !                                   !
!                                   !                                   !
VP of Finance             VP of Production             VP of Marketing
(Tom Jones)                  (Monty Hall)                     (Betty Davis)
!
!
---------------------------------------------------------
!                                          !
!                                          !
Public Relations Manager       Sales Manager
(Pat Roy)                          (Rickey Lake)
!
!
-----------------
Sales Staff

And so on down the line......

Notice, the organizational chart does not detail each member's duty or responsibility, rather is depicts the name, position held, and the channel of command for each member of the organization. (For simplicity, we have focussed only on the Marketing level). As you can see, the Sales Staff report to the Sales Manager (Rickey Lake), the Sales Manager reports to the Vice President of Marketing (Betty Davis) and the Vice President of Marketing reports to the President of the company (John Smith).

A company using the organizational chart approach is still required to develop a complete description of each member's duties and responsibilities. Moreover, many business plan writers feel the chart simply adds substance to their presentation. If your business or proposed business consists of only one or two employees (including yourself), an organizational chart is not recommended. If however future plans involve expansion and additional staff members are expected to be hired, you may decide to include an organizational chart in your business plan.

Salaries of Management:
It is only natural for investors to be concerned with what entrepreneurs want to pay themselves and pay other managers within the enterprise; after all a large portion of the salaries are being funded by the investor. A backer will want to see that the owners and management are extracting the "going rate" from the business. Furthermore, an investor would, in most cases, certainly shun upon an entrepreneur paying himself an annual salary of $1,000,000 - unless off course the entrepreneur is Bill Gates. At any rate, be sure to establish the wages, salaries, withdrawals and or commissions for each owner and key manager.

Click Here to view J&B Incorporated's Management Team Section of the Business Plan.

MANAGEMENT TEAM SUMMARY:

Notice in the above example that J&B is a newly formed company. The company does not have any employees - other than its owners. Each key member is separately discussed in terms of duties, responsibilities, annual forecasted salaries, personal background, education, business experience, employment history, management experience. Also notice that readers are directed to the appendices section of the business plan to view each member's resume.

Neither member volunteered any information that an investor may view as risky. For example, ski-diving may be a cherished hobby of Barry Beck, however, it is wise not to mention it in his narrative description nor in his resume; unless off course the business evolves around these skills. Including such information may worry an investor and question whether or not this person will be "around" to repay any loans or other investments.

The Management Team is generally the most important topic of the Management & Staffing section of the business plan. Be sure to take the time to develop a well written narrative for each owner and team member. Remember: Your objective here is to sell the merits of your management team and to convince readers that your TEAM has the skills, motivation and determination to successfully operate and direct the company. With this in mind, however, never, never, never lie when developing your narrative description or resume. Investors always check references and other sources to determine if the owners are credit and thrust worthy.   This concludes our discussion on the Management Team.   The next topic to be addressed is Part 2 entitled "Outside Supporters".