Management team members with proven track records is one big way investors can minimize their risk in a prospective business. The ideal situation from an investor’s point of view is to invest in a company whose key team members have worked together successfully in the past. Be sure to mention if members of your management team have worked together, and describe how their skills complement each other.
You may want to include resumes detailing the background and achievements of your management team. Highlight their training, experience, and accomplishments, and steer away from interesting but irrelevant facts like, “Our sales manager was crowned Miss B.C. Lions in 1975.” Accomplishments should be discussed in concrete terms such as profit and sales improvement, labor management, manufacturing or technical achievements, and their ability to meet budgets and schedules. You can include the salient points in your management section, but save the nitty gritty for the back of your business plan, or make them available upon request.
Be sure you connect your management team’s capabilities to those your business needs. For instance, a long arm of academic degrees does not necessarily mean a person can manage a team of salespeople.
Many small businesses can’t afford to fill every executive role in their company with a full-time person. It may also be smarter for you to hold off hiring people, rather than having jobs outgrow them in a year. If this is you, consider hiring part-time specialists or consultants to perform some functions. Be sure to include these people in your business plan, and provide a time-frame as to when they’ll be replaced by full-time staff members. One way you can do this is by creating a table of anticipated hiring.
Profit sharing can go a long way toward improving productivity, reducing labour turnover, and reducing disputes. Other ways of increasing employee involvement are developing a commission system on suggestions for improved company performance, setting profitability targets rewarded by wage increases, training and development opportunities, and employee share buying programs.
The clearest and easiest way of discussing your company’s organizational make-up is to use a chart. You may want to include both present and future charts.
It is important for you to think about the long-term role you want your board of directors to have in your business. For instance, do you want to hand over a wad of decision-making responsibilities to a person contributing relatively little money to your business.
Some small businesses have a hodgepodge of investment by many small and/or unsophisticated investors. These help get businesses off the ground, but they also raise the eyebrows of professional investors, and can create management problems if everybody has different ideas on how the business should evolve.
You may want to talk about the legal, accounting, advertising, and banking organizations you deal with. Capable, reputable, and well-known support services not only give you good advice, but also add to the credibility of your company. In addition, they can help you establish good contacts in your business community, identify potential investors, and help secure your financing.
A study by the University of Michigan indicates that hiring outside talent for management positions has a more positive impact on profits than promoting managers from within. Outsiders are quicker to make changes and exceed their profit goals by 10%, whereas managers who come up through the ranks miss their profit goals by an average of 15%.