The Management Plan Section of the Business Plan
Writing The Business Plan: Section 6
When writing the business plan, the Management Plan section describes your management team and staff and how your business ownership is structured. People reading your business plan will be looking to see not only who's on your management team but how the skills of your management and staff will contribute to the bottom line.
How to Write the Management Plan
A convenient way to organize the Management Plan section is to break it into sections detailing your new business's:
- Ownership Structure
- Internal Management Team
- External Management Resources
- Human Resources Needs
The Ownership Structure
The Ownership Structure section describes the legal structure of your business. It may be a single sentence if your business is a sole proprietorship. If your business is a partnership or a corporation, it may be longer; you want to be sure you explain who holds what percentage of ownership in the company.
The Internal Management Team
This section of the Management Plan will describe the main business management categories relevant to your business, identify who's going to have responsibility for each category, and profile that person's skills.
The basic business categories of Sales, Marketing, Administration, and Production work for many small businesses. If your business has employees you will need Human Resources as well. You may also find that your company needs additional management categories such as Research and Development.
It is not necessary to have a different person in charge of each business management category you decide to use in your company; some key management people may fill more than one role. Identify the key management people in your business and explain what functions each team member will fill.
This is your management team outline. You may wish to present this as an organizational chart in your business plan, although list format is fine.
Along with this outline, the management plan will include complete resumés of each member of your management team (including you) and an explanation of how each person's skills will contribute to your new business's success.
Follow this with an explanation of how your management team will be compensated. What salary and benefits will management team members have? Describe any profit-sharing plans that may apply.
If there are any contracts that relate directly to your management team members, such as work contracts or non-competition agreements, you should include them in an Appendix to your business plan.
External Management Resources
While External Management Resources are often overlooked when writing a business plan, (and running a business), using these resources effectively can make the difference between management success and failure.
Think of External Management Resources as your internal management team's backup. They give your business management plan credibility and an additional pool of expertise. There are two main sources of External Management Resources you should utilize and describe in this section of the business plan: Professional Services and an Advisory Board.
In the Professional Services section of your business plan's Management Plan, list and describe all those external professional advisors that your business will use, such as accountants, bankers, lawyers, IT consultants, business consultants, and/or business coaches. These professionals provide a "web" of advice and support outside your internal management team that can be invaluable in making management decisions and making your new business a success.
The Advisory Board
Additionally, it's a smart move to set up an Advisory Board for your business as soon as possible. An Advisory Board is like a management think tank; the members of your board will provide you with additional advice to run your business profitably and well. If you choose your board members carefully, they can also provide expertise that your internal management team lacks.
When selecting people to serve on your Advisory Board, you obviously want people who have a genuine interest in seeing your business do well and have the experience and expertise to provide good advice. Recently retired executives or managers, other successful entrepreneurs, and/or vendors would be good choices.
You will not want to include anyone on your Advisory Board who may have a conflict of interest, such as lawyers, accountants, customers (or a direct competitor). An Advisory Board of just two or three people can be a powerful management tool for a small business.
When you're writing your business plan, you'll want to describe who is on your Advisory Board, listing their names, titles, experience, and expertise and explaining how each member will contribute to helping you run a profitable business.
If you're writing a business plan in preparation for starting a business and don't yet have an Advisory Board, be sure to include this section anyhow, describing your plans for setting one up and describing the types of people you will approach to serve on your Board.
Having an Advisory Board, or planning to have one, shows those reading your business plan that you have the foresight to seek advice and make your management team as strong as possible, an important consideration when most businesses fail because of mismanagement of one type or another.
The last issue you need to address in the management plan section of your business plan is your business's human resources needs.
Human Resources Needs in the Business Plan
The trick to writing about your business's human resources needs in the management plan section of your business plan is to be able to describe your human resources needs specifically.
To write something such as, "We'll need more people once we get up and running" will impress no one.
Begin with the bottom line. How many employees will your business need and what will it cost you? This is what will be of most interest to the people reading your business plan.
Then consider how your business's human resources needs can best be met. Will it be best to have employees or should you operate with contract workers or freelancers? Do you need full-time or part-time staff or a mix of both?
Outline your staffing requirements in this section of your business plan, including a description of the specific skills that the people working for you will have to have.
Now you're ready to calculate your labor costs. You can calculate the number of employees you will need by figuring out how many customers each employee can serve. As an example, if it takes one employee to serve 150 customers, and you forecast 1500 customers in your first year, your business will need 10 employees.
Add to this the cost of Workers' Compensation Insurance (mandatory for most businesses) and the cost of any other employee benefits, such as company-sponsored medical and dental plans to calculate your total labor cost.
You also need to describe how you're going to find the staff your business needs, and how you're going to train them.
Your description of staff recruitment should explain whether or not sufficient local labor is available and how you're going to recruit staff if you need to go further afield.
When you're writing about staff training in your business plan, you'll want to include as many specifics as possible. What specific training will your staff undergo? What ongoing training opportunities will you provide your employees?
Even if your plan for your business is to start as a solo act, you need to include this section on Human Resources Needs in your business plan to demonstrate that you've thought about the staffing your business may require as it grows and that your business has (or will have) human resources policies in place. Business plans are about the future, and how your business is going to succeed.
Next in this series: Writing the Operating Plan Section of the Business Plan