For Entrepreneurs, Professionals and Growth Businessess Developing a Business Plan to Guide Growth and Secure Venture Funding

Monday 11 January 2010

Is a good management team necessary to secure funding for your business plan?

On the face of it the answer is obvious - Yes! Of course you need the right people in place to execute on your business plan. When looking at business opportunities one of the key factors in any Angel or VC investor decision will be the strength and commitment of the management team. The ideal situation of course is that all the experience you need exists within your core management team, with the exception of professional services like legal counsel and audit services.

But what if you have a great idea but don’t have the experience to execute on it? Is it possible to build a team round an idea with little experience in-house? What are the issues around this? I outline a few of these below.

You At the Core of Your Business
In many cases your experience will likely have led you to your business opportunity. Any investor in the business, or source of debt finance, will want to see you operating at the core of the business. However, it is possible that whilst you have experience in the general market place it may be limited to one particular area of business – e.g. sales, marketing, operations or administration. In this case the key is to be able to build a team around you with the skill-set and commitment to drive the business forward.

Necessary Skills and Experience
The first stage is to identify the skills and experience you need on board to execute on the business opportunity. Identifying your own weaknesses and that of any co-founders will be key here. This will not only identify where you can best add value to the business but also those skills that you are missing.

Once you are clear where there is a skills gap build a profile of the type of person that would bring the skills and experience required to the team. It is also important to consider at this stage the personality of the person you want in place – you will have to not only work with them on a professional level but you may also be entrusting a key part of the execution strategy.

Recruiting the Talent
Recruiting people at a start-up stage where minimal funding is in place can be both expensive and time consuming. Using your business networks to reach people can be an affordable alternative so building your network over time will help with this.

The alternative to paying hard cash in salary at this stage is to generate commitment and buy-in to the business by offering some form of ownership in the business (e.g. shares, share options). This has the advantage, if they are structured well, to bind your management team together and align them with your long-term goals for the business. Again, networking and leveraging your contacts to find people willing to operate on this basis is the cheapest and often most successful approach – especially if they come via recommendation.

Incentivising your management team in this way has the downside of relinquishing some ownership of the business. However, if they are linked to performance of the business, specific milestones or personal performance you can ensure that you are only using this as a reward for the growth of your own shareholding. You should seek some legal advice about how to structure any incentives.

Making The Most of Free Resources
Seeking assistance from free start-up resources can be a big bonus. When I was developing a business a few years ago we were fortunate enough to become part of a fast-growth enterprise hub that offered free business mentors. We identified one with experience in a related field and were able to draw on this for a year during the very early stages of development. So, exploring free resources through government back organisations like Business Link or your regional development agency is definitely worth a call.

Other Ways to Build a Skills Base
In the same way that you may recruit and secure the commitment of an individual it may be possible for you to do the same with an industry-related partner. Companies operating in your space my have the skills base to help you execute on your business plan and in return may be willing to accept lower payments up front in return for some form of longer term gain.

Building a strong Non-Executive Team will also bring experience to the management team and guide the growth of the business. Aligning these people with the longer term goals of the business through some form of ownership in the business not only reduces cash-flow but also assures that their commitment to the end game will be aligned with your own.

In summary, to help build a solid management team identify your skills base and any gaps. Whilst keeping the founders at the core of business operations in a role that maximises their own skill-set ensure that you have sufficient skills within the management team to execute on the business opportunity. In these are not in-house bind people or partners in with incentives that aligns your interests and goals for the business. Make best use of free resources and leverage your network to its full extent.

Jon Hunt
The Business Plan Team
www.TheBusinessPlanTeam.co.uk

1 comment:

  1. Lucy, Many thanks for your comment - feel free to comment as we go along. If you wnt to be notified of new posts just click ont eh "Followers" section on the right hand side. Kind regards, Jon

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