Do Business Well

The quality of the people running the company is a critical link in making the strategy believable. Clearly, if there’s a history of company accomplishment and growth, that speaks for itself. For a company seeking to convince outsiders of its ability to succeed in the future, the quality of the management team becomes extremely important. Many investors and other outsiders are known to turn first to the descriptions of the management team when reading a business plan. They know that the people are key to determining success, and they are looking for clues to tell them that the people have what it takes to guide the company through growth stages.

The two most common management team problems are best described as follows:

1. The “one-man band” syndrome. I should point out that a company that expects to be a slow-growing lifestyle business should view the one-man band approach to business operations as merely a syndrome. It becomes a problem only if the company plans to expand significantly. In too many growth-oriented businesses, a single entrepreneur controls the company, makes the decisions, and is the guiding force for expansion. But beyond a certain point, usually about $1 million of sales, it becomes impossible for one person to control everything. A key concern of bankers and investors is who else will be involved in executive decision making.
2. Everyone comes from the same background. People tend to be friends with those with whom they have a lot in common. That’s fine for friendships, but it’s less fine for management teams. When everyone in a high-tech company is an engineer or everyone in an interior design firm is a designer, it means there aren’t any financial or marketing or sales experts. Successful management teams require diversity of training and expertise.

In describing the management team in the business plan, I offer the following suggestions:

• Emphasize real-life business accomplishments. To get clues about an individual’s likelihood for future success, you must know what that person has done in the past. In a start-up, ideally management team members will have helped run or begun a previous company that was at least moderately successful. Or they will have managed a division of a large company that showed impressive growth and accomplishment. Failing those accomplishments, outstanding job performance should be emphasized, especially if it demonstrates sound business judgment. Educational credentials are less important unless the business is technology oriented and some of the key officials are academics whose research accomplishments are essential to the company’s product development.

For an existing business, previous performance becomes thekey measurement criterion. The point is that an individual is more likely to manage a business successfully in the future if he or she has done so in the past.

• Identify evidence of special knowledge and creativity. Increasingly, business success is determined by top management’s leading-edge skills and the ability to apply those skills in unorthodox ways. For example, the management team at a computer software firm defied the conventional wisdom in its industry by launching a massive give-away campaign of a $50 personal finance program. The campaign attracted wide media attention. More significantly for the company, it added a million names to the company’s user list, enabling it to sell upgrades and other products to a friendly audience. The business plan should mention any evidence of unusual knowledge and application of that knowledge.

• Make the most of your resources. Be sure to mention and describe everyone in a position of authority and responsibility. It’s easy to overlook individuals who have managerial duties without having fancy titles. You may even want to change some titles to emphasize the individuals’ importance. (The sales director may become your vice-president of marketing.) The point is, if you’re seeking outside support, you want to portray a real team.

• Describe your board of directors. This assumes you have a board that includes outsiders as well as the inside executives. A board of experienced executives, industry experts, and other credible individuals demonstrates an additional strength.

• Keep it brief. A paragraph or two on each of the key people and their major business accomplishments is all that is necessary. Include résumés at the end of the business plan, in an appendix.

Possibly related posts: (automatically generated)
The Management Team

• Ask Yourself: Would You Invest?
• Targeting Your Plan continue...
• Company Strategy: What's Your Identity?
• Using Participative Management
• Making a Plan: how to construct a simple and workable business plan part 6
• How Your Business Situation Helps Shape Your Plan
• Personally Presenting the Plan
• Packaging Issues
• Working with subordinates
• Targeting Your Plan

5 Comments »