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Business Structure Decisions Help Guide Business Planning

05 Mar Business Structure Decisions Help Guide Business Planning

Once you have completed your initial market analysis as part of the building blocks for business plan development, it is time to more clearly define the business organizational structure. Depending on how you plan to operate your new enterprise, this might also involve descriptions of your management team and board of directors. These elements are key in helping potential investors and others who review your business plan understand who is leading your business and how decisions are made.

Below are three critical components to consider as you create this segment of your business plan:

1. Define the legal structure. Being by including a description of the legal structure you will operate under, whether a sole proprietorship, partnership or corporation. If you have formed a partnership, provide information about the type of partnership and the role of each partner. If you have formed a corporation, note whether it is a  C or S corporation. If you are operating as a sole proprietorship, this also must be included in your description.

In addition to identifying the type of business structure, be sure to include names of all owners, the percentage each owns, the nature of that ownership and the extent of involvement each partner will have in the business. Include any additional relevant information, such as details about stock, if applicable.

2. Create an organizational chart. A detailed organizational chart that includes descriptions of manager responsibilities can be an excellent way to communicate necessary information about your business structure and management organization. For each manager, include name, position, and primary authority and responsibilities. Describe what education, experience and skills he or she bring to your business and how they mesh with your own capabilities. For each management level, include a compensation plan.

3. Consider adding an advisory board.  An unpaid advisory board can bring much-needed expertise to a small business that could not otherwise afford it.A list of advisory board members consisting of well-known, successful business owners or managers can really boost your company’s credibility and the perception of its management expertise. Describe how you will keep board members engaged in the business. Include each board member’s name, position on the board and expected involvement with the company. Also, describe his or her relevant experience and history with the company or its principals, if any.

This part of your business plan should also include a detailed description of each division of your business as well as its function. If you are a sole proprietor or have just a few employees, this exercise may seem like overkill. But remember, while you may know exactly how your business will operate, those reading your business plan will want to know qualified, knowledgeable people are calling the shots. Developed as part of an overall business plan, this process will help to build confidence in your capabilities to run a successful business.

Finally, don’t worry if some information you include might appear obvious. Your attention to detail says a lot about your dedication to making your business a success.

 

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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