Management Team: Newsletter
Management Team
Imagine this scenario: You are a private investor searching for
that next exciting investment opportunity.
A business plan lands on your
desk, right next to the sixteen others you have received recently and are
in the process of reviewing.
Half of the plans present solid business
concepts.
Some of the plans seem to offer exceptional long-term growth
possibilities.
But in your opinion, only two of the plans present
management teams capable of turning ideas into reality.
As you consider
your investment options, you eventually eliminate all the business plans
except for those with the strong management teams.Why?
Products, marketing strategies, and operations are important, but it is
the experience, knowledge, and ability of the management team that makes a
business thrive.
Many lenders, venture capitalists, and private investors
stress that given the choice between a first-rate product with a second
rate management team, and a mediocre product with a top-notch management
team, they would prefer the latter.
To some investors, the management team
is THE critical investment factor.
Bottom line - investors invest in
people, not business plans, so make sure your management team is up to par
Naturally, each business is different and requires a
management team that matches the particular circumstance.
Your industry,
niche, and the loftiness of your goals lead investors to assumptions and
expectations about the quality of management that you require.
The
experience and depth of your managers must meet or exceed these investor
expectations, or must clearly explain how you intend to fill these
positions in the future.
Two basic themes that readers of your business plan
will look for throughout your entire management section include:
Team
Investors normally expect to see a minimum of three to six
experienced executives on your management team (start-ups have some
variations, see below.)
When investors and venture capitalists state the
importance of a top-notch management team, the word "team" should not be
underestimated.
They normally view one-person operations as limited in
terms of time, experience, and core business skills necessary to launch
and grow a serious business.
Balance
Although investors are looking for a group, they are not looking
for a group of clones.
They seek balance and a collection of skills that
meet the needs for your particular venture.
A diverse team increases the
chance that each business function (marketing, sales, operations, finance,
manufacturing, engineering, etc.) is tended to by an expert with
experience.
Avoid the tendency to staff your management team with people
just like yourself.
It might feel nice to work with friends, family, and
others that share your background, but investors see a management team
unprepared for the inevitable challenges that lie ahead.
But what if you are a startup company and you don't
have a team?
Early-stage management teams are often limited to a lead
entrepreneur or a small group of company founders.
If this is the reality
for your business, don't try to avoid it or claim that staff employees are
actually "management".
Instead, focus on the strengths of your current
management team and outline specific (and realistic) plans for adding
officers in the future.
OK, so let's assume that you have a balanced team, or
plans to build one as you grow.
In your business plan, only include those
individuals in the management section with the greatest effect on sales,
operations, net profit, and business development.
Every employee is
important, but this is not a section to outline the skills, hobbies, or
backgrounds of your entire staff.
Consider restricting your management
section to individuals that fall into the following categories: founders,
top decision makers, CEO, CFO, CIO, plant manager, lead engineer,
marketing or sales director, and R&D manager.
How should your management section be organized and
presented in your business plan?
Generally, BizPlanIt divides this section
into four parts: Specific Team Members, Board of Directors, Board of
Advisors, and Consultants.
Let's explore each of the four sections and
explain how to grab the attention of investors in your management section.
Specific Team Members
Don't just drop a resume under each officer's name and assume you
have completed your management section. Instead, construct a narrative
description for each team member, clarifying his or her backgrounds and
intended contributions.
Include a reference in your management section to
the completed resumes located in the appendix.
The length of each
narrative will differ, but try and keep each to a reasonable length
(normally under a half page).
Briefly address the following topics for
each manager with a focus on achievements, success, and results.
Position
Outline specific titles, duties, and responsibilities for each
individual.
Clarify what each manager does, what area of business
development they focus on, and how they fit into the organization as a
whole.
Experience
List past positions and responsibilities that directly relate to
the current position.
Outline the companies you worked for, the duties,
the successes, the experience gained, and how these skills transfer to
your current position.
Industry experience is looked at favorably by
investors as they size up your management team.
Some investors consider
industry experience an absolute must, but if you lack direct industry
experience, build on related and successful experiences from other fields.
Describe your abilities and experiences in previous management positions.
The number of years you were in management roles?
The number of people you
supervised?
For how long?
The goal here is to present a track record that
predicts future success.
Successes
Planning, managing, and organizing any business, even outside your
current industry, demonstrates the ability to achieve results.
If lenders
and investors are familiar with your prior record of success, they are
more likely to believe that you can repeat that success in your current
venture.
You may even wish to present past business failures, if you can
demonstrate what you learned from the experience and how you will conduct
yourself differently in the future.
Some investors may actually view past
business failures as "battle scars" and an indication of experience,
persistence, and an understanding that first time entrepreneurs may lack.
Education
Keep educational descriptions brief unless they directly relate to
your ability to succeed in a particular position (or if managers are
recent graduates with little or no business experience).
The older and
more experienced you are, the less value an investor is likely to place on
your educational credentials.
Key Strengths
What personal and business qualities do you possess that make you
well suited for this position?
What traits, abilities, personal
characteristics, or experiences have you developed that can lead to
success in this position?
This might include industry expertise, the
ability to motivate others, marketing competence, or interpersonal skills.
Experience outside the business arena may also be relevant, such as club
membership, civic involvement, or group leadership that can be directed
towards your current position.
Board of Directors
The board of directors can play an important role in the success of
your business.
In smaller companies and start-ups, the board of directors
may be limited to the individuals running the company.
In this case, they
perform little more than the legal requirements needed to maintain
corporate status.
However, as a company grows and the stakes rise, outside
members such as investors, advisors, and strategic partners are normally
added to the board to guide the company successfully into the future.
To protect their investment, investors will often
request a seat on your board.
This provides the investor some control over
management, influence on the direction of the company, and an ability to
protect their investment.
But it's not all about control, many times
outside board members contribute significant business and industry
expertise that should not be underestimated.
Experienced board members
provide a level of credibility that investor's desire in a start-up or
early-stage company.
The board of directors portion of your management
section is fairly simple to prepare after you identify the specific
members.
Briefly list the names, backgrounds, and contributions that will
be made by each board member.
Board of Advisors
While the board of directors is more legal in nature, the board of
advisors is more functional.
Your board of advisors should consist of
individuals with valuable industry expertise and insight.
Without the
legal constraints required of your board of directors, these advisors are
assembled to help and consult with you on your business.
Many small companies and start-ups assemble their
board of advisors as a mere formality - don't make that mistake.
A solid
and experienced board of advisors goes a long way toward establishing
credibility in the eyes of investors.
Include advisors with past success
in ventures similar to yours, or advisors with backgrounds you lack on
your current management team.
As with the board of directors, the board of advisors
is simple to present after you identify the individuals to include.
Briefly list the names, backgrounds and contributions to be made by each
person. Again, the members you attract to your board of advisors tell an
investor a lot about the quality of your business.
Professional Consultants
The last part of your management section should include a brief
mention of the outside consultants you will work with as your company
grows.
A typical list of consultants would include accountants, attorneys,
bankers, insurance agents, and experts such as technology advisors, web
developers, and payroll specialists, for example.
Outside consultants provide expertise that a company
lacks during its earlier years.
If carefully selected, consultants provide
your business an additional level of credibility and enhance your image in
the eyes of your reader.
Briefly describe the services each consultant provides
your company, and their qualifications as experts.
The earlier you start
to build relationships with consultants the more beneficial they become
your company as you grow.
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