Formal Organizational Structure
Include the formal organizational structure of your business as part of the Operations Structure section of your business plan. In this section you will need to detail how your various departments are organized and how they work together for optimal production and efficiency.
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Plans are only good intentions unless they are implemented by highly qualified and effective leaders. Business owners are well advised to surround themselves with a team of people who bring value to the business and have a record of producing positive results.
Particularly during the start-up phase of a new business, having qualified people who can quickly and effectively implement the business plan is critical if the business is to succeed long-term. Why? Because in the beginning, funds tend to be limited. So, making the most out of the resources available is of the utmost importance.
The formal organizational structure of your business can be illustrated by an organizational chart, outlining the various departments and lines of leadership.
For corporate entities, clearly indicate the names and titles for all key personnel, such as CEO, President, CFO, Director of Operations, Directory of Marketing, etc.
"Knowing who is in charge of what is key to effective management."
Obviously, sole proprietorship's will mostly be easier to outline since the number of employees will be relatively smaller. However, if you outsource various elements of your team be sure to make this clear to the reader.
For instance, do you work with a virtual assistant? Do you contract with freelancers for your website, marketing or graphic design needs?
Although contract laborers do not have ownership in your business, they are responsible for critical aspects of the business so it’s important to show how and why you count on these third-party providers.
A wide variety of formal organizational structure flowcharts can be found online, such as these free organizational chart templates.
Formal Organizational Structure Tips
Individuals reading the formal organizational structure of your business plan want to
know who is in charge and why each person has been chosen to oversee a
particular area of the organization. They will judge the quality of the business and its
chances of success, in some measure, by the background and expertise of
the various people in charge.
The ownership of the business will also be of great interest to the reader. Be transparent about the makeup of the business owners.
Key ownership information to include in your business plan resource might include:
- names of each owner
- percentage of each owner’s stake in the company
- to what extent is each owner involved in the daily operations (passive vs. active owner?)
Make sure to include how each owner is compensated. Investors
understand that each dollar paid in salary expense takes away from the
bottom-line profits of the organization. Therefore, they will be looking to see
that owners aren’t putting the business as risk through by taking high salaries during the early stages of the business.
"Leadership is the art of accomplishing more than the science of management says is possible."
- Colin Powell
Success Lesson #8
Build A Network For Success
The late Andrew Carnegie suggested in a speech he once made that the
following statement would make for an appropriate epitaph for his own
“Here lies a man who knew how to get around him much cleverer men than himself.”
The great majority of men and women who succeed in business and in
life, do so by surrounding themselves with smart, eager and able
associates. No man should make the mistake of thinking he needs no
other person in order to succeed. We all need others to compliment or
make up for our own weaknesses. No one knows it all.
You cannot lead a great enterprise; stand at the head of a board room
table; or maximize your limited resources most effectively, unless you
have established a network of mentors and business partners to help
guide and support your efforts. You must use every resource available to you.
"A good plan, executed now, is vastly better than a perfect plan next week."
- George S. Patton
Each person has his talents. Just because a man can write a great
book on business does not ensure that he can successfully manage others.
Writing about management theory is not the same as practicing business in the real world. Humans are complex creatures that require
leadership along with clear and effective communication.
Not everyone is cut out to be the next Jack Welch, Michael Eisner or Warren Buffet. In fact, each of these highly successful business tycoons
would no doubt credit many within his circle of influence, as being critical to his success.
As you work through the business planning process, make
certain you have surrounded yourself with the most highly engaged,
talented people available.
Pay high performing people whatever you must in order to gain their
commitment. If they are as good as you think they are, then the upfront
costs will be well worth the investment over time.
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Part III: Formal Organizational Structure
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