Preparing Effective Business Plans: An

Entrepreneurial Approach
Second Edition

Chapter 8
Management Team and
Company Structure
Chapter Learning Objectives
8.1 Discuss Importance of the Management Team
8.2 Identify Composition of the Board of Directors
8.3 Determine Importance of the Board of Advisors
8.4 Explain Role of Other Professionals
8.5 Outline Company Structure

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Introduction
• Unless Firm Has Strong Management Team Little Else
Matters
• Investors Prefer:
– Untested Business Idea - Have More Potential
– Tested v s Untested Management Team
ersu

• Sensitive Issues:
1. Demonstrate Openness to Advice
2. Describe How Team Will Evolve

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Section 1: Management Team
• Founder(s) and Key Management Personnel
• Discuss Employment Status Today, and Plans for Future
Employees

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Management Team Personnel
• Profile Current Members of Management Team:
– Job Title and Duties
– Previous Industry Experience and Successes
– Education
– Why Each Will Uniquely Contribute to Firm’s Success

• Discuss Gaps in Management Team and Plans

for Filling Them
– (Figure 8-1)
– Part-Time or Temp
– Consultant or Advisor

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Management Team Ownership and
Compensation
• Show in Table Format for Management Team:
– See Figure 8-1

Name Position Pay % Investment

Ownership in Firm
J. Ryan President $68,500 20.0% $100,000

• Options Pool - Inventory of Company Stock Set Aside for

Future Employees
• Discuss How Funding of Firm Has Been Raised to Date

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Common Mistakes to Avoid
• Place Unqualified Friends in Key Positions
• Assume Previous Success in Other
Industries Translates to This Industry
• Present a “One-Man Team” Philosophy
• Hire Top Managers Without Sharing
Ownership
• Not Disclosing Skill or Competency Gaps
• Vague or Unclear Plans for Filling the Skill or
Competency Gaps

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Section 2: Board of Directors
• Panel Elected by Corporation’s Shareholders to Oversee
Management of Firm
• Responsibilities:
1. Appoint Officers of Firm
2. Declare Dividends
3. Oversee Affairs of Corporation

• Board Composition:
– Three to Five Members
– Insiders and Outsiders

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Other Advantages of Board of Directors
• Provide Guidance
– Help Management Team Avoid
Missteps
– Ask Tough and Probing Questions
– Fill Competency Gaps
• Lend Legitimacy by “Signaling”
– Appoint High Profile Individual to
Board
– High Profile Person Can Open
Doors to Suppliers, Customers, and
Financing
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Section 3: Board of Advisors
• Board of Advisors
– Panel of Experts
– No Legal Responsibility
– Provide Guidance and/or Lend Legitimacy
– See Figure 8-3

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Section 4: Other Professionals
• Attorneys, Bankers, Investors, College
Professors, Accountants
• Include Short Bio and Types of
Assistance Provided
• Consultants:
– Fee Paid
– Free Through Government Agency
▪ Small Business Development
Center (website)
▪ SCORE (website)

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Section 5: Company Structure
• Organizational Chart
– Graphic Representation of
How Authority and
Responsibility are Distributed
• Organize By:
– Function
– Product
– Geography

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Did You Learn?
1. Discuss Importance of the Management Team
2. Identify Composition of the Board of Directors
3. Determine Importance of the Board of Advisors
4. Explain Role of Other Professionals
5. Outline Company Structure

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End of lecture

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