Having a solid plan for how your business will run is a key component of its smooth and successful operation. Of course, you need to surround yourself with good people, but you have to set things up to enable them to work well with each other and on their own.
It’s important to define the positions in the company, which job is responsible for what, and to whom everyone will report. Over time, the structure may grow and change and you can certainly keep tweaking it as you go along, but you need to have an initial plan.
If you’re applying for funding to start a business or expand one, you may not even have employees to fit all the roles in the organization. However, you can still list them in your plan for how the company will ideally operate once you have the ability to do so.
Obviously, for small businesses, the organization will be far more streamlined and less complicated than it is for larger ones, but your business plan still needs to demonstrate an understanding of how you’ll handle the work flow. At the very least, you’ll need to touch on sales and marketing, administration, and the production and distribution of your product or the execution of your service.
For larger companies, an organizational plan with well-thought-out procedures is even more important. This is the best way to make sure you’re not wasting time duplicating efforts or dealing with internal confusion about responsibilities. A smooth-running operation runs far more efficiently and cost-effectively than one flying by the seat of its pants, and this section of your business plan will be another indication that you know what you’re doing.
A large company is also likely to need additional operational categories such as human resources and possibly research and development.
One way to explain your organizational structure in the business plan is graphically. A simple diagram or flowchart can easily demonstrate levels of management and the positions within them, clearly illustrating who reports to whom, and how different divisions of the company (such as sales and marketing) relate to each other.
Here is where you can also talk about the other levels of employees in your company. Your lower-level staff will carry out the day-to-day work, so it’s important to recognize the types of people you’ll need, how many, what their qualifications should be, where you’ll find them, and what they’ll cost.
If the business will use outside consultants, freelancers, or independent contractors, mention it here as well. And talk about positions you’d want to add in the future if you’re successful enough to expand.
Business Management
Now that we understand the structure of your business, we need to meet the people who’ll be running it. Who does what, and why are they on board? This section is important even for a single practitioner or sole proprietorship, as it will introduce you and your qualifications to the readers of your plan.
Ownership
Start at the top with the legal structure and ownership of the business. If you are incorporated, say so, and detail whether you are a C or S corporation. If you haven’t yet incorporated, make sure to discuss this with your attorney and tax advisor to figure out which way to go. Whether you’re in a partnership or are a sole owner, this is where to mention it.
List the names of the owners of the business, what percent of the company each of them owns, the form of ownership (common or preferred stock, general or limited partner), and what kind of involvement they’ll have with day-to-day operations; for example, if they’re an active or silent partner.
Management
Here’s where you’ll list the names and profiles of your management team, along with what their responsibilities are. Especially if you’re looking for funding, make sure to highlight the proven track record of these key employees. Lenders and investors will be keenly interested in their previous successes, particularly in how they relate to this current venture.
Include each person’s name and position, along with a short description of what the individual’s main duties will be. Detail his or her education, and any unique skills or experience, especially if they’re relevant to the job at hand. Mention previous employment and any industry awards or recognition related to it, along with involvement with charities or other non-profit organizations.
Think of this section as a resume-in-a-nutshell, recapping the highlights and achievements of the people you’ve chosen to surround yourself with. Actual detailed resumes for you and your management team should go in the plan’s appendix, and you can cross reference them here. You want your readers to feel like your top staff complements you and supplements your own particular skill set. You also want readers to understand why these people are so qualified to help make your business a success.
This section will spell out the compensation for management team members, such as salary, benefits and any profit-sharing you might be offering. If any of the team will be under contract or bound by non-compete agreements, you would mention that here, as well.
Board
If your company will have a Board of Directors, its members also need to be listed in the business plan. Introduce each person by name and the position they’ll hold on the board. Talk about how each might be involved with the business (in addition to board meetings.
Similarly to what you did for your management team, give each member’s background information, including education, experience, special skills, etc., along with any contributions they may already have had to the success of the business. Include the full resumes for your board members in the appendix.
Alternately, if you don’t have a Board of Directors, include information about an Advisory Board you’ve put together, or a panel of experts you’ve convened to help you along the way. Having either of these, by the way, is something your company might want to consider whether or not you’re putting together a business plan.
Characteristics of Organizational Analysis
Important aspects of organizational analysis include the assessment of external elements that can influence the performance of an organization. An organizational analysis also includes strategically evaluating an organization’s potential and resource base.
Internal weaknesses and strengths, together with external threats and opportunities, determine the success of an entity. For this reason, SWOT analysis is an important part of organizational analysis. It is used by businesses to assess their performance and establish goals or objectives.
- Strengths
The competitive edge that an organization enjoys over its competitors is an advantage that defines its success. Assessing the strengths of an organization involves evaluating management, workforce, resources, as well as current marketing goals. In general, an internal analysis looks at an entity’s core competencies and resources.
Defining the capability of an organization helps the management team to make sound decisions as they formulate long-term objectives. Other important aspects of an internal analysis include looking at financial objectives, strategic planning, and operational structure.
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Weaknesses
Weaknesses are obviously an aspect of an organization that can affect its performance. Recognizing weaknesses is important, as it enables the organization to locate problems and implement beneficial changes. In addition, the organization is able to develop appropriate choices in its strategic planning process, especially when results are not satisfactory.
Potential weaknesses include low morale, poor leadership, poor financials, obsolete technology, and inefficient functions. An example of a turnaround would be an organization, which previously experienced poor cost control, working hard to manage costs.
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Opportunities
Generally, an external analysis weighs the threats and opportunities that are present outside of an organization. An external assessment includes sizing up the competition, analyzing market trends, and evaluating the impact of technology on the performance of an organization. When looking at external opportunities, an organization needs to identify current trends in the market, as well as weaknesses and gaps in the market that it can come in and fill.
An entity also needs to consider technological changes as an opportunity. Innovation helps to create opportunities for business. Therefore, organizations that set themselves apart in terms of their efficient use of available technology are capable of becoming leaders in their respective industries.
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Threats
Not all threats are detrimental to the success of a business. For instance, labor can be a threat or an opportunity, depending on the prevailing economic conditions. Legislation and regulations set by the government also exert an effect on how well an organization performs in its industry.
To succeed in a competitive environment, an organization needs to learn to cope and embrace change as it happens.
Models of Organizational Analysis
Organizational analysis helps businesses succeed in a dynamic business environment. For that reason, an entity needs to understand its model. Business modeling is a key parameter in the process of organizational analysis. Models explain how a business functions and the changes they experience, so that they can reach their desired level of performance.
There are four different models that organizations commonly work with. The first model is the rational model. Its philosophy is that there is only one logical way to perform tasks. An alternative model is the natural model, which believes that a business not only wants to achieve its own goals, but also positively influence its external environment.
Socio-technical is the third model. According to the socio-technical model, businesses are evolving on a continuous basis. Change is made each time employee expectations are altered because of collaborating with fellow employees.
The last one is the cognitive model. This model places great emphasis on tasks done by the business team. A lot of attention goes toward the division and coordination of tasks among employees.
Benefits of Organizational Analysis
Organizational analysis offers many benefits to a business. For one, it helps businesses improve on their weaknesses. Understanding how a business functions helps to shed light on areas of weakness that may only require simple changes to spur growth. An organizational analysis helps businesses find innovative ideas, such as new ways to structure objectives so that employees are more productive.
Businesses seeking a competitive edge can benefit from undertaking an organizational analysis. The information generated from an organizational analysis will help an entity understand what it needs to do in order to turn itself into a more successful, profitable venture. Whether the business is new or old, an organizational analysis can help owners and managers achieve a better understanding of their business.