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1/14/07

BUSINESS PLAN FORMATION PART 5

The Organizational Plan is not a long section in your business plan. The basic purpose of the Organizational Plan is to show the potential investor the hierarchy of your business. This section is NOT one of the main sections in your plan, but this does not mean that you should slop something together at the last minute. A basic Organizational Plan will have a chart that looks something like this:


Your Organizational Plan will probably not include this many positions. All I am trying to show is the hierarchy of your company so that when a potential investor asks, “Who is in charge of X,” you will be able to answer the question effectively.

In addition to showing some type of visual chart, you should write a brief summary of what each job position will involve. You should have already written some of this information in your Management team section. Even if you have explained these positions in a different section of your plan, you should still give a descriptive narrative of each position’s duties. Do NOT ramble on for a ten paragraphs, but do make sure you thoroughly, but concisely, describe each position.

One other suggestion, if you have something like forty (40) “ store workers” in your Organizational Plan, do NOT put forty (40) different squares for “store workers.” Instead, put one (1) “store worker” square and put a (40) under the “store worker” title. It will look something like this:


Think of the Organizational Plan as a visual Management Team section with ALL of the job titles described. If you have completed your Management Team section before you do your Organizational Plan, half of your work will be done. However, the same is true vice versa. Depending on what type of “thinker” you are, the section you should complete first is up to you. If you like to see the whole picture before describing the individual parts, doing the Organizational Plan first may be more beneficial to you. If you like to build the individual parts and put the whole together at the end, doing the Management Team section first may be more beneficial to you. Either way, make sure all the elements are in each respective section.


The Contingency Plan is more commonly known as “Plan B.” This is the section of your business plan that explains how additional sales, covers, etc. can be achieved if one of three scenarios occurs: (1) your idea/concept/product is producing revenue that is NOT achieving the “beak-even point” (explained later); (2) your idea/concept/product is producing revenue that is achieving only the “break-even point;” or (3) your idea/concept/product is producing revenue barely above the “break-even point.” In these three scenarios, your idea/concept/product is either losing money, or making just enough to stay afloat. Either way, your investors and you are not making enough money to be “happy.”

The purpose of this section is to show the potential investor that in the rare case that your idea/concept/product does not produce as much revenue as initially speculated, an additional step can be initiated in order to create more revenue. You may be asking, “If this Contingency Plan can produce more revenue, then why not initiate it in the beginning?” The reason you do not want to include this as part of the main plan is that a Contingency Plan usually deviates from your initial business plan and creates additional costs. For example, if your main business plan is for a restaurant, your Contingency Plan may be to turn the restaurant into a night club after your restaurant closes for the day. Another idea may be to deliver food from your restaurant or to double as a catering service. Whatever your Contingency Plan may be, note that additional costs will result. As such, do not take this section lightly. Whatever you do, do NOT come up with a last minute idea, throw it into the plan, and then expect a potential investor to take you seriously.

Your Contingency Plan should be well though out, but should not be overly descriptive. This is your secondary idea and should not take away from the main plan. Also, make sure that your plan is realistic. For example, if your product is not selling as well, do not have a new product line as your Contingency Plan. A Contingency Plan is not a “start over” plan. It is a plan that salvages the profitability of your current product. Think about it; why would an investor invest in a second product from you if your first product is failing?

Lastly, your Contingency Plan needs to show the additional costs that will result from your contingency. Make sure that these new costs do not overshadow the purpose of the Contingency Plan. The contingency has to be as cost-effective as possible. Remember, if you have to initiate this section of your plan, your idea/concept/product is not performing well. Therefore, cost effectiveness is key to a successful contingency.

Next time, the financials…

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