organisational structure of a business plan

How to Write a Business Plan: Organization Structure

How to write a business plan: organizational structure, what is the organizational structure for a business plan.

The organization structure section should discuss whether your business will be a sole proprietor, limited liability corporation, or corporation, who will run your business, each person’s responsibility, and how your business will expand if needed.  There are numerous benefits to a detailed assessment of the company’s structure.  First, examining the structure of the business will help for tax purposes.  For example, limited liability and corporations are considered excellent for protecting shareholders concerning liabilities.  However, tax-wise, these firms often are double taxed.  The second benefit of a detailed assessment of a company’s structure is to understand how each owner will contribute to the company.  In other words, if there is more than one owner, what are their responsibilities, and how are these responsibilities to be carried out.

Why is the Organizational Structure important? 

There are numerous reasons why the organizational structure is essential for a business plan. In this section, the business owner will lay out how the company will be structured.  For example, this section will include job titles and responsibilities, resumes from owners and management, showing expertise in the industry, and supporting accolades for expertise.  Through discussing job responsibilities and experiences for management, readers will better understand why this type of business structure, and this management team, will be successful in the proposed business.

A second important reason for the organizational structure is that the section introduces business owners.  The owners and management team should not only be introduced in this section, but their experiences in the industry need to be highlighted and thoroughly explained.  In doing this, a sound foundation for management competence will be established.

A final reason for its importance is the job responsibility segment.  Ownership and management need to have a written document showing specific duties for each owner, if applicable, and specific job responsibilities for each position within the company.  By having this document, readers will see how the business will function and better understand the breakup of management responsibilities.

When to write the Organizational Structure?

The organizational structure should be written after the company description.   In the company description, readers will be introduced to the problem that the company is going to solve and how they propose to solve this problem.  This is usually the product or service offered.  The logical next step is to show a business structure that will allow the company to supply that product or service effectively and efficiently.  Thus the need for the organizational section follows immediately behind the company description.

How to write the Organizational Structure?

When I write my organizational structure for a business plan, for the most part, I start the first paragraph by reminding the readers of the company name.  From this, I then introduce how the company will be held in ownership.  For example, will the company be a limited liability corporation?  Sole proprietorship?  Next, I briefly introduce the management team and owners.  Further, I also briefly introduce their experience in the industry.

By following this structure, the first paragraph is an excellent summation of the section. This allows the reader to understand the breadth of the ownership structure without gaining significant details.

Organizational Structure:  Ownership

In the ownership section, I usually start writing the section by introducing the CEO/founder/majority owner.  In this portion, I usually write the segment, almost like a brief biography.  I will discuss the CEO's history in the industry and the reason why they feel that they are best suited to start and run the operation.

Once this is complete, I then follow the same structure with the other management team members and minority stakeholders.  When this is done, the reader should walk away with an excellent understanding of the qualifications of the ownership team and how their skills will complement each other.

Need Help Writing an Organizational Structure for a Business Plan?

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Organizational Structure:  Responsibilities

In the job responsibility section, I usually structure this portion as a bullet-pointed list.  At the top, I put the title such as CEO, project manager, or job title.  Following this, I list the responsibilities and expectations for each position.  Not only does this help show structure and foresight for the company.  But also, this will help management divvy up duties for the business.

Organizational Structure: Resume

The resume section is for senior managers and owners.  By including resumes, supporting documentation is available for claims made related to experience.  For example, if the CEO claims to have 20 years of experience in the industry, then the resume will show where this experience came from.  This adds credibility to previous claims made.

Organizational Structure: Compensation

Compensation is sometimes necessary to include in the organizational structure component.  Investors expect management to be compensated and employees as well.  However, excessive compensation is often an issue with startups and established businesses.  By showing reasonable compensation for each position, not only will a solid understanding of the pay for each position be shown, but restraint for compensation by the management team and ownership may be highlighted as well.

Organizational Structure: Achievements

This final section is almost like a cherry on top of the cake.  By this point, the reader should be well-versed in the experience and expertise of ownership and the management team.  Adding achievements highlights their expertise in their chosen industry.

Organizational Structure Example

Organizational structure.

Legal Structure

ABC Restaurant will be a limited liability corporation.

Management Summary

John Smith, Sr., MBA., is the founder and CEO of ABC Restaurant.  He has started and managed numerous successful small restaurants over the last ten years.  Restaurants started, and managed, including a breakfast cafe, food truck, and 24-hour diner.  For each business, he was responsible for all aspects of the organization, from marketing to strategic planning.

Job Responsibilities

• Create and execute marketing strategies for business growth.
• Align business strategies with the vision statement.
• Negotiating contracts with vendors.
• Ensure legal compliance for the business.
• Continually examine the firm’s external environment for new market opportunities.

General Manager:

• Control inventory to ensure optimal levels are attained.
• Manage day-to-day operations of the restaurant.
• Servers and cooks during high volume times.
• Interview and hire new employees.
• Assist in the onboarding process for new employees.
• Set up all workstations in the kitchen
• Prepare ingredients to use in cooked and non-cooked foods.
• Check food while cooking for appropriate temperatures.
• Ensure great presentation by dressing dishes as trained.
• Keep a sanitized and clean environment in the kitchen area.
• Stock dining area tables with needed items.
• Greet customers when they enter.
• Present dinner menus and help customers with food/beverages selections.
• Take and serve orders quickly and accurately.

Author: Paul Borosky, MBA., Doctoral Candidate, Published Author

Updated: 3/4/2022

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• Building Your Business
• Becoming an Owner
• Business Plans

Writing the Organization and Management Section of Your Business Plan

What is the organization and management section in a business plan.

• What to Put in the Organization and Management Section

Organization

The management team, helpful tips to write this section, frequently asked questions (faqs).

vm / E+ / Getty Images

Every business plan needs an organization and management section. This document will help you convey your vision for how your business will be structured. Here's how to write a good one.

Key Takeaways

• This section of your business plan details your corporate structure.
• It should explain the hierarchy of management, including details about the owners, the board of directors, and any professional partners.
• The point of this section is to clarify who will be in charge of each aspect of your business, as well as how those individuals will help the business succeed.

The organization and management section of your business plan should summarize information about your business structure and team. It usually comes after the market analysis section in a business plan . It's especially important to include this section if you have a partnership or a multi-member limited liability company (LLC). However, if you're starting a home business or are  writing  a business plan for one that's already operating, and you're the only person involved, then you don't need to include this section.

What To Put in the Organization and Management Section

You can separate the two terms to better understand how to write this section of the business plan.

The "organization" in this section refers to how your business is structured and the people involved. "Management" refers to the responsibilities different managers have and what those individuals bring to the company.

In the opening of the section, you want to give a summary of your management team, including size, composition, and a bit about each member's experience.

For example, you might write something like "Our management team of five has more than 20 years of experience in the industry."

The organization section sets up the hierarchy of the people involved in your business. It's often set up in a chart form. If you have a partnership or multi-member LLC, this is where you indicate who is president or CEO, the CFO, director of marketing, and any other roles you have in your business. If you're a single-person home business, this becomes easy as you're the only one on the chart.

Technically, this part of the plan is about owner members, but if you plan to outsource work or hire a virtual assistant, you can include them here, as well. For example, you might have a freelance webmaster, marketing assistant, and copywriter. You might even have a virtual assistant whose job it is to work with your other freelancers. These people aren't owners but have significant duties in your business.

Some common types of business structures include sole proprietorships, partnerships, LLCs, and corporations.

Sole Proprietorship

This type of business isn't a separate entity. Instead, business assets and liabilities are entwined with your personal finances. You're the sole person in charge, and you won't be allowed to sell stock or bring in new owners. If you don't register as any other kind of business, you'll automatically be considered a sole proprietorship.

Partnership

Partnerships can be either limited (LP) or limited liability (LLP). LPs have one general partner who takes on the bulk of the liability for the company, while all other partner owners have limited liability (and limited control over the business). LLPs are like an LP without a general partner; all partners have limited liability from debts as well as the actions of other partners.

Limited Liability Company

A limited liability company (LLC) combines elements of partnership and corporate structures. Your personal liability is limited, and profits are passed through to your personal returns.

Corporation

There are many variations of corporate structure that an organization might choose. These include C corps, which allow companies to issue stock shares, pay corporate taxes (rather than passing profits through to personal returns), and offer the highest level of personal protection from business activities. There are also nonprofit corporations, which are similar to C corps, but they don't seek profits and don't pay state or federal income taxes.

This section highlights what you and the others involved in the running of your business bring to the table. This not only includes owners and managers but also your board of directors (if you have one) and support professionals. Start by indicating your business structure, and then list the team members.

Owner/Manager/Members

Provide the following information on each owner/manager/member:

• Percentage of ownership (LLC, corporation, etc.)
• Extent of involvement (active or silent partner)
• Type of ownership (stock options, general partner, etc.)
• Position in the business (CEO, CFO, etc.)
• Duties and responsibilities
• Educational background
• Experience or skills that are relevant to the business and the duties
• Past employment
• Skills will benefit the business
• Awards and recognition
• Compensation (how paid)
• How each person's skills and experience will complement you and each other

Board of Directors

A board of directors is another part of your management team. If you don't have a board of directors, you don't need this information. This section provides much of the same information as in the ownership and management team sub-section. 

• Position (if there are positions)
• Involvement with the company

Even a one-person business could benefit from a small group of other business owners providing feedback, support, and accountability as an advisory board. 

Support Professionals

Especially if you're seeking funding, let potential investors know you're on the ball with a lawyer, accountant, and other professionals that are involved in your business. This is the place to list any freelancers or contractors you're using. Like the other sections, you'll want to include:

• Background information such as education or certificates
• Services provided to your business
• Relationship information (retainer, as-needed, regular, etc.)
• Skills and experience making them ideal for the work you need
• Anything else that makes them stand out as quality professionals (awards, etc.)

Writing a business plan seems like an overwhelming activity, especially if you're starting a small, one-person business. But writing a business plan can be fairly simple.

Like other parts of the business plan, this is a section you'll want to update if you have team member changes, or if you and your team members receive any additional training, awards, or other resume changes that benefit the business.

Because it highlights the skills and experience you and your team offer, it can be a great resource to refer to when seeking publicity and marketing opportunities. You can refer to it when creating your media kit or pitching for publicity.

Why are organization and management important to a business plan?

The point of this section is to clarify who's in charge of what. This document can clarify these roles for yourself, as well as investors and employees.

What should you cover in the organization and management section of a business plan?

The organization and management section should explain the chain of command , roles, and responsibilities. It should also explain a bit about what makes each person particularly well-suited to take charge of their area of the business.

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Writing the Business Plan Organization and Management Section

It provides critical information for those looking for evidence that your staff has the necessary experience, skills, and pedigree to realize the objectives detailed in the rest of your business plan.

What Is the Organization and Management Section in a Business Plan?

The organization and management section of your business plan should provide details about your business structure and team. This section typically comes after the executive summary. However, some people have it further in the document after the market analysis section.

This section generally is separated into two parts. The first concerns the organization as a whole. It gives readers an overview of the company structure, which is an excellent opportunity for the reader to lift the roof off your office and peer into its inner workings. For your legal design, you may set up as a limited liability company (LLC) or nonprofit/ charity or form a partnership. It’s crucial to include this section. However, suppose you’re starting a home business or have an already operating business where you’re the only person involved. In that case, you can skip this section or show the company registration details from either the company’s house or the awarding .gov.

The second part focuses specifically on your management team and introduces readers to each member — your chance to impress them with the many accomplishments pinned to your organization’s management team.

This section may seem less important than some of the other parts of your business plan, but the truth is that your people are your business. If they’re highly competent and accomplished, the implication is that so is your business.

Of course, if you’re a sole proprietor with no management structure or any employees, this section is unnecessary other than to talk about yourself and your achievements.

The section on organization and management should outline the hierarchy, individual roles, and corresponding responsibilities. It should also highlight each person’s strengths and qualifications for their positions.

Business Plan Organization Section

The organizational section of your business plan outlines the hierarchy of individuals involved in your business, typically in a chart format. This section identifies the President or CEO, CFO, Director of Marketing, and other roles for partnerships or multi-member LLCs. If you’re a single-person home business, this section is straightforward as you are the only person on the chart.

Although this section primarily focuses on owner members, you can include outsourced workers or virtual assistants if you plan to hire them. For example, you may have a freelance web admin, marketing assistant, or copywriter. You may even have a virtual assistant who coordinates with your other freelancers. While these individuals are not owners, they hold significant responsibilities in your business.

There are various business structures, such as sole proprietorships, partnerships, LLCs, and corporations.

Detail the Legal Structure within the Business Plan Organization and Management Section

Here is an indicative list of business structures. It would help if you talked to your accountant and legal advisors to determine which legal form is the best for your business proposition.

Sole Proprietorship

When embarking on a business venture, it’s essential to consider the various structures available. A sole proprietorship is a structure whereby the business is not regarded as separate from its owner’s finances. The owner retains complete control and responsibility for the company. However, they are unable to sell stocks or bring in new owners. The business becomes a sole proprietorship if not registered under any other structure.

Partnership

When forming a partnership, it can either be a limited partnership (LP) or a limited liability partnership (LLP). One partner assumes most liability in a limited partnership (LP). In contrast, the other partners have limited liability and control over the business. Alternatively, in a limited liability partnership (LLP), all partners have limited liability from debts and actions of other partners, and there is no general partner.

Limited Liability Company

A limited company (LTD) or limited liability company (LLC) is a mixture of business structures that mixes aspects of partnerships and corporations. It offers limited personal liability to the owner and passes profits through to their tax returns.

Corporation

There are various types of corporate structures. A C-corporation enables the issuance of stock shares, pays corporate taxes instead of personal returns, and provides the highest level of personal protection from business activities. On the other hand, nonprofit corporations are similar to C corporations. However, they do not aim to make profits and are exempt from state or federal income taxes.

More information on company legal structures is available on UK.Gov and USA.SBA websites.

Describe Your Company’s Organizational Structure

This first step illustrates the positions in your organization’s employee hierarchy and how they all relate to each other.

This is usually done graphically as a guide, using an organizational chart, or “org chart” for short. People use a Microsoft tool, i.e., PowerPoint or Excel, to help.

Organization Charts typically follow a top-down hierarchy, starting with your CEO/ Managing Director in the top box at the top of the page. Lines extend down from that person’s name to boxes containing the terms of the CEO’s direct reports.

We have included an example organizational chart below for guidelines only.

Identify your business organization structure and list your team members’ strengths and skills.

Those managers then have lines extending to those who report to them, and so on, down to your lowest staff positions.

This section will give your readers a quick understanding of your management and governance structure, the size of your organization, and your lines of control and communication.

Describe your Team in your Business Plan Organization and Management Section

In your business plan’s Organization and Management section, please provide a detailed description of your team. Y ou will discuss the company’s management team, starting with the owners.

This section highlights who is involved in the running of your business and who are the support professionals. It also includes the roles and responsibilities of managers.

Suppose the company structure is a multi-owner arrangement or some other multi-owner arrangement. In that case, you’ll want to include information for every member and their percentage of ownership and ongoing involvement in the company.

It’s important to discuss how ownership interests are split, their responsibilities, what they did before securing their current position, and how they came to be involved with the company.

Here, it would help if you talked about some of your critical team members. These people are directly responsible for large portions of your business operations.

Owner/Manager/Members

Within your business o rganization and management section, y ou should introduce the team and talk about their experience, qualifications, previous companies and achievements, role in the company, and any special skills they bring with them. Please provide the following details for each owner, manager, or member of the business within your business plan:

• Percentage of ownership (if applicable)
• Level of involvement (active or silent partner)
• Type of ownership (e.g., stock options, general partner)
• Position in the company (CEO, CFO, etc.)
• Responsibilities and Duties
• Educational background
• Relevant experience and skills
• Previous employment history
• Skills that will benefit the business
• Awards or recognition received
• Compensation structure
• How each individual’s skills and experience will complement and contribute to the business’s success

Perhaps they’re an entrepreneur, business coach, exclusive advisor, or industry specialist to help you grow.

This is an ideal opportunity for companies with an Executive Board of Directors, Governance Structure, or Advisory Board to introduce them to your readers.

Executive Board

Having a board of directors is essential for your management team. Without one, you may be missing out on crucial information. This section includes details similar to those found in the ownership and management team sub-section, such as the names, areas of expertise, positions (if applicable), and involvement with the company of each board member.

Strategic Advisors

Suppose you’re looking for funding for your business or to fill a gap in your knowledge, or you may not have the funds to hire an executive board. In that case, you must inform potential partners and investors that you have a team of professionals assisting you. This includes lawyers, accountants, and any freelancers or contractors you may be working with. When listing these individuals, include their name, title, educational background, certifications, services they provide to your business, and their relationship with you (i.e., hourly rates, projects, retainer, as-needed, regular). Additionally, highlight their skills and experience that make them an asset to your team you need

Does anything else make them stand out as quality professionals (awards, past working with credible brands)?

Spotlight on the Wider Team Structure

Now, you’ve showcased the management team in its entirety. You can provide brief bios for hiring team needs or secondary members and talk at length about how the team’s combined skills complement each other and how they amplify the team’s effectiveness.

It’s also important to point out any gaps in the knowledge your team is currently suffering. Your readers will likely be savvy enough to pick up on existing holes.

Therefore, you’ll want to get ahead of these criticisms and demonstrate that you’re already aware of the positions and complementary skill sets your management team still requires and how you plan to address the knowledge gaps with future hires.

Do you need help writing your business plan o rganization and management section ? 

Every successful business plan should include the organization and management section, helping you communicate your legal structure and team.

Writing a business plan can seem overwhelming, especially when starting a small, one-person business. However, it can be a reasonably simple task. This section of the plan should be updated if there are any changes to the organization structure or team members, such as additional training, awards, or other resume changes that benefit the business.

Creating your comprehensive business plan takes planning, research, time, and a herculean effort. If, at any point, the work becomes too much to handle, we can step in to assist.

Do you want an expert “second opinion” before creating your business plan or financial forecasts? Let’s talk !

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How to make a business plan

Table of Contents

How to make a good business plan: step-by-step guide.

A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.

A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.

But where do you start? How do you create a business plan that sets you up for success?

This article will explore the step-by-step process of creating a comprehensive business plan.

What is a business plan?

A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.

As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.

Business plan vs. business model canvas

A business plan may seem similar to a business model canvas, but each document serves a different purpose.

A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.

A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.

A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.

Why is a business plan important?

A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.

Here are some of the many benefits of having a thorough business plan.

Helps to define the business goals and objectives

A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.

A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.

Guides decision-making

A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.

With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.

Attracts investors and secures funding

Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.

A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.

Identifies potential challenges and risks

A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.

Provides a basis for measuring success

A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:

Are we where we want to be at this point?

Did we achieve our goals?

If not, why not, and what do we need to do?

After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.

How to make a business plan step by step

The steps below will guide you through the process of creating a business plan and what key components you need to include.

1. Create an executive summary

Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.

Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.

2. Write your company description

Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.

Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.

3. Conduct a market analysis

Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.

Use the Competitive Analysis Template to brainstorm answers to simple questions like:

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

These questions should give you valuable insights into the current market and where your business stands.

4. Describe your products and services

Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.

Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.

5. Design a marketing and sales strategy

Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:

Pricing strategy

Advertising and promotional tactics

Sales channels

The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.

6. Determine budget and financial projections

Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.

As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.

8. Make an action plan

At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.

Types of business plans

Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.

Startup business plan

A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.

Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.

Strategic business plan

A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.

The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.

Operational business plan

An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.

Growth-business plan

A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.

The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).

One-page business plan

A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.

A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.

Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.

Be practical

Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.

Be specific

Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.

Be thorough with your research

Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.

Get input from others

It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.

Review and revise regularly

A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.

Create a winning business plan to chart your path to success

Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.

The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.

Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.

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Business Plan Section 3: Organization and Management

This section explains how your business runs and who’s on your team. Learn how to present the information in this section of your business plan.

This section of your business plan, Organization and Management, is where you’ll explain exactly how you’re set up to make your ideas happen, plus you’ll introduce the players on your team.

As always, remember your audience. If this is a plan for your internal use, you can be a little more general than if you’ll be presenting it to a potential lender or investor. No matter what its purpose, you’ll want to break the organization and management section into two segments: one describing the way you’ve set up the company to run (its organizational structure), and the other introducing the people involved (its management).

Business Organization

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 workflow. 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 onboard? 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.

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.

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.

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.

Similar 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 the organization and management section or your business plan.

NEXT ARTICLE > Business Plan Section 4: Products and Services

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7 Types of Organizational Structures +Examples, Key Elements

• Published March 15, 2022
• Updated: June 6, 2024

Hiring skillful employees is only the first step towards building a high-performing organization. You need to make every team member fit in. You need a clear organizational structure.

Large enterprises require an established, organized structure to coordinate large numbers of employees and avoid chaos. But smaller businesses and startups rarely think of designing an organizational structure in the first place.

This lack of structure leads to miscommunication, work delays, poor process flows, low morale, and other serious consequences that stunt business growth. In contrast, a strong organizational structure helps to coordinate teamwork, reduce conflicts, and boost productivity. 

How do you build one? What’s the right type of structure for your company? Read on to learn more.

What are the common types of organizational structures?

• Functional structure
• Divisional structure
• Matrix structure
• Team structure
• Network structure
• Hierarchical structure
• Flat organization structure

What Is Organizational Structure?

Organizational structure is the backbone of all the operating procedures and workflows at any company. It determines the place and the role of each employee in the business, and is key to  organizational development .

A clear structure allows every team member to be involved. When employees know what they’re responsible for and who they report to – which isn’t the case in many fast-growing companies – they’re more likely to take ownership of their work. 

To build an org structure, you need to consider your business size, life cycle, goals, and positioning. Apart from considering the current environment your company operates in, you should also think of where you want to see the organization in five years – as its a pillar of  organizational health .

6 Types of Organizational Change, Explained

14 Best Process Improvement Methodologies (2024)

The RACI Matrix, Explained (+Examples, Tools, & Template)

Basic Elements of Organizational Structure Design

An organizational structure is based on a range of elements, including:

Work specialization

• Departmentation

Chain of command

Span of control.

• Centralization/Decentralization

Formalization

Work specializations define how responsibilities are split between employees based on the job description. It’s used to split projects into smaller work activities and assign digestible tasks to individual employees. The most common results of improper specialization are low efficiency and burnout.

Documentation

Documentation is an act of grouping specialists on the basis of the job description, skills, location, or other factors that connect them. 

The biggest challenge is choosing the criteria for departmentation. In many cases, it’s no more enoug h to apply functional departmentation – where employees are grouped based on the tasks they perform. Startups often go for matrix departmentation that involves combining two types of departmentation and takes the best out of both worlds. For instance, functional departmentation can be joined by geographical departmentation to better serve clients in different locations.

Chain of command represents a system for passing instructions and reporting within an organization. Ideally, it distributes the power, supports knowledge sharing , and encourages employee accountability .

The traditional chain of command makes decision-making more complex and does not allow for much flexibility. On the contrary, modern approaches strive to enhance employee autonomy and avoid micromanagement.

Span of control regulates the number of direct reporters managed by a single supervisor. It heavily depends on the three aforementioned elements of organizational structure. Furthermore, to identify the right span of control, you need to evaluate your leaders’ capacity, workplace size,  and experience level of employees.

Centralization and decentralization

Centralization and decentralization are the concepts defining how managers, as well as employees, give input on company goals and strategy. While centralization gives leaders the ultimate control over decision-making processes, decentralization allows employees to impact business decisions. We’ll dive into centralized and decentralized organizational structures in the further section.

Formalization determines to which extent business processes, policies, and job descriptions are standardized. It may regulate communication between employees and managers, workplace culture, operational procedures, etc.

Centralized vs. Decentralized Organizational Structures

Back to centralization and decentralization. When designing an organizational structure, you’ll need to choose a side. Do you want to implement top-down or bottom-up management?

Centralized organizational structure

As has been said, in a centralized organizational structure, decisions are made by top managers and are distributed down the chain of command. 

For sure, the structure has a range of advantages. It ensures greater control over business processes. But most importantly, it only includes highly experienced professionals that are able to foresee the effect of decisions made in the long run.

The biggest drawback of a centralized organizational structure is the amount of time the decision-making process takes in large companies. Imagine a customer support manager being asked to implement an exclusive package for a high-ticket customer. To get permission, they’d need to run the request up the chain of command and wait for it to be processed by top management. When the request is approved, a high-ticket customer might no longer be there.

Decentralized organizational structure

To avoid this issue, large organizations turn to decentralization. In a decentralized structure, lower-level employees pinpoint issues and make decisions before communicating it to upper management. Greater autonomy not only empowers employees but also eliminates process delays, which are common for centralized systems.

However, decentralization also brings coordination challenges and higher expenses.

Often, it’s recommended that early-stage startups and small businesses go after a centralized organizational structure. Fast-growing companies and enterprises usually choose a decentralization framework.

7 Types of Organizational Structures

The key purpose of any organizational structure is to make the processes more straightforward. However, there are many ways to achieve that.

Let’s look into the seven common types of enterprise organizational structures to help you decide how you want to develop your company and its various departments and teams.

1. Functional structure

A functional structure groups employees into different departments by work specialization. Each department has a designated leader highly experienced in the job functions of each employee supervised by them.

Most often, it implements a top-down (centralized) decision-making process where department managers report to upper management. Ideally, leaders of different teams communicate regularly and coordinate their strategies while lower-level employees have little idea of the processes taking place outside their department.

The main challenge companies with a functional structure face is the lack of coordination between departments. Employees may lose the larger company context when focusing on very specific tasks and failing to interact with members of other departments. 

To create a functional organizational structure that works, you’ll need to train leaders to foster collaboration across departments.

Examples of organizations with a functional structure include: Amazon, Starbucks.

• Operational efficiency.
• Encourages employees to specialize their skillsets.
• Empowers employees to focus on their specific role and responsibilities.
• Empowers teams and departments with clear, specific goals that they can work towards. 
• Leads to poor cross-department communication.
• Builds silos.
• Creates obscure roles, processes, and workflows that are company or industry-specific.

2. Divisional structure

A divisional structure organizes employees around a common product or geographical location. Divisional organizations have teams focused on a specific market or product line.

Examples of companies applying a divisional structure are McDonald’s Corporation and Disney. These brands can’t help but split the entire organization by location to be able to adjust their strategies for audiences representing different markets.

These smaller groups are relatively independent and mainly follow a decentralized framework. Still, the leaders of each department are likely to operate under centralized corporate management. It means that company culture is dictated by top management, but operational decisions can be made by each division independently.

Giants such as McDonald’s and Disney also add functional units to their structure for better control.

Examples of organizations with a divisional structure include: Disney, GM, McDonalds.

• Understand individual markets better.
• Promotes flexibility.
• Faster responses to changes or needs that are locality or regional-based.
• Autonomous approaches lead to team experimentation and allow organizations to test multiple strategies, driving innovation.
• Duplication efforts.
• Poor documentation.
• Lack of organizational communication.
• Departments compete against one another.
• Lack of hierarchy understanding.

3. Matrix structure

Within a matrix organizational structure, team members report to several managers at once. Wait, what’ s the point?

Having multiple supervisors allows for company-wide interaction and faster project delivery. For instance, when answering to functional managers and project managers, employees have a chance to collect experience outside their team. While functional managers can help to solve job-specific issues, project managers can bring in knowledge or talents from other departments.

If you go after a matrix organizational structure, you’ll need to find a way to avoid authority confusion and prevent conflicts between managers. 

Examples of organizations with a matrix structure include: Caterpillar, Phillips, Texas Instruments.

• Flexibility to pull employees into more important projects at will.
• Empowers employees to build and test skillsets outside of their pre-determined roles.
• Faster project deliverables.
• Often leads to conflicts among leaders and managers.
• Confusion on authority.
• Frequency of change.

4. Team structure

A team-based organizational structure creates small teams that focus on delivering one product or service. These teams are capable of solving problems and making decisions without bringing in third parties.

Team members are responsible for managing their workload and have full control over the project. Team-based organizations are distinguished by little formalization and high flexibility. This structure works well for global organizations and manufacturers.

Examples of organizations with a team-based structure include: Apple, Cisco, Google, Whatfix.

• Drives growth and innovation.
• Promotes lateral career moves. 
• Provides experiences across departments and teams.
• Experience is valued over seniority.
• Less emphasis on management.
• Is more agile.
• No clear authority.
• Career path growth is not clear.
• Not formalized.

5. Network structure

A network structure goes far beyond your internal company structure. It’s an act of joining the efforts of two or more organizations with the goal of delivering one product or service. Typically, a network organization outsources independent contractors or vendors to complete the work.

In a network organization, teams are built from full-time employees as well as freelance specialists – this way, in-house workers can spend most of their time focusing on the work they specialize in. Such an approach allows companies to adapt to market changes and obtain the missing skills fast.

Working with individuals that aren’t integrated into your company culture results in lower formalization and higher agility.

Examples of organizations with a network structure include: Dow Chemical, H&M, IBM

• Promotes organizational agility and flexibility.
• Fosters collaboration across employees.
• Breaks down silos.
• Cultivates better understanding of industry, products, and customers.
• Creates a web of work-related relationships.
• Creates highly-specialized skillsets in employees.
• Extremely complex and convoluted.
• Lower formalization.
• High turnover.
• Feeling of inequality between full-time employees and contractors/freelancers.
• Difficult to know who has final approval.

6. Hierarchical structure

You must already have an idea of what a hierarchical structure is. It’s the most common organizational structure type that follows a direct chain of command.

A chain of command, in this case, goes from senior management to general employees through a range of executives on the departmental and team level. The highest-level executive has the highest power over the decision-making process.

On one hand, this structure enables organizations to streamline business processes, develop clear career paths, and reduce conflicts. A company hierarchy leaves no place for challenging managers’ authority, which can be good in some cases. 

On the other hand, a hierarchical structure slows down decision-making and may hurt employee morale.

Examples of organizations with a hierarchical structure include: Amazon, Sony

• Obvious chain-of-command.
• Clearly defined reporting structure and individual responsibilities.
• Sets clear career path growth.
• Builds niche skills and specialities.
• Departments and teams create a sense of “we’re in this together”.
• Bureaucracy, processes, and red-tape slow down innovation.
• More resistant to change .
• Employees focus on department goals and KPIs over what’s actually most important for the company.
• Employees at the bottom of the org structure feel like they don’t have an impact.
• Feeling that there is no place to challenge authority.

7. Flat organization structure

In a flat organizational structure, there are few middle managers between employees and top managers. The structure requires less supervision, increases employee involvement, and boosts trust in the workplace.

Due to its simple nature, a flat organization structure, also called a “flatarchy”, is typically used by small businesses and startups.

Examples of organizations with a flat structure include: Value, most small businesses.

• More responsibility for employees.
• Open communication.
• Clear path of approval.
• Implementation happens fast.
• Not scalable.
• Relies on one person to be the decision-maker.
• Leads to employees with generalized skillsets, with a lack of specializations.

Is It Possible to Change an Organization's Structure?

Of course, organizational design can be reconstructed if needed. The business landscape is constantly evolving, and keeping to a structure that has worked for years might simply become inefficient. 

To adapt to market changes, you might need to resort to organizational transformation which affects not only your strategy but also the structure. Whether you want to build an organizational structure from scratch or want to revisit the existing one, you’ll need to get down to the basics.

How to Design Your Organization’s Structure

Whatever structure you choose, you’ll need to make an effort to implement it. Here are eight simple steps towards designing an organizational structure from scratch.

1. Create a charter

First of all, you need to prepare documentation.

You need a project charter outlining the purpose of building a clear structure, key stakeholders, and their responsibilities. This is your rough plan for implementing an organizational structure that should give you a direction for your next steps.

When creating a charter, you’ll be able to answer the following questions:

• Why do we need to design (or re-design) an organizational structure?
• When do we start?
• Who are the key stakeholders in this project?
• What should we do first?
• Where is the company headed? Will our organizational structure be relevant in a year?

2. Build your strategy

To build a structure from scratch, you’ll need to start by outlining a long-term strategy and mapping out goals. Your future vision of your company determines which type of organizational structure will work best for you.

3. Assess your internal processes & systems

If your business has already been operating for quite some time, take a look at your current strategy and try to highlight the areas of improvement. Do you need to revisit your core ideology and company culture? You can only answer this question by talking to your employees and managers.

When you know where you stand and have a clear vision of what you want to achieve, creating an organizational direction shouldn’t be a problem.

4. Design your structure

A clear understanding of your company’s strategy lets you filter out irrelevant organizational structure types and pick the one that fits with your core values, mission, and goals.

Choose one of the seven organizational structures and use it as a template for designing a custom organizational chart. This chart is also known as an organogram  – it’s a diagram used to visualize the relationships between individuals, teams, and departments within an organization

5. Create a transition plan

Next, it’s time to design an optimal workflow for implementing or switching to a new structure. 

Talk to the stakeholders and decide on the deadlines for establishing a brand new organizational structure. Prepare a list of recommendations for top managers and team leaders that will help to communicate the change to the rest of the organization.

6. Implement your new structure

From there, leaders should create an implementation plan that includes training their teams to adopt new roles and skills, as well as how to follow a new decision-making and reporting framework. Week by week, employees will become accustomed to their new organizational structure and adapt to the change . 

7. Monitor the impact

The transition process might take months, and it’s very likely that the performance of individual employees or even entire teams will go down at some point. However, you can assess the impact of a new structure in action only after the transition is complete.

With a new organizational structure in place, run the performance review and talk to executives. It’s important that you monitor the contribution of each individual department – chances are the changes don’t work equally well for everyone at the company.

8. Gather feedback & improve

Again, once you implement an organizational structure, it’s never too late to make adjustments. Alongside performance checks, survey your employees to learn how they feel about a new structure. It can be that their input will help you fine-tune the organizational design without extra cost and effort.

Ready to learn more about building healthy, innovative organizations? These resources can help:

• Types of Organizational Change
• Overcoming Resistance to Change
• Employee Training Methods
• Digital Transformation Challenges

Request a demo to see how Whatfix empowers organizations to improve end-user adoption and provide on-demand customer support

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Business Plan Structure 101: Key Sections Explained

Introduction

Crafting a robust business plan is fundamental to the success of any enterprise. It is a blueprint that guides your business through various stages of growth. However, the process can be daunting, especially for new entrepreneurs. That is where BizPlanner.ai steps in, harnessing the power of AI to streamline your business planning.

1. Executive Summary

The executive summary is the doorway to your business plan. It succinctly outlines your business goals and strategy, making a compelling case to readers, like potential investors or partners. It should capture the essence of your business, highlighting key points that are elaborated upon in the following sections.

2. Business Description

This section provides a deeper dive into your business. It covers your business's mission, vision, history, and the nature of the industry. It is crucial to articulate what sets your business apart – your unique value proposition. Detailing this helps stakeholders understand your place in the market.

3. Market Research and Analysis

Market research and analysis form the backbone of your business plan. Understanding your target market, competition, and industry trends is vital. This section should demonstrate that there is a viable market for your product or service and how you plan to tap into it.

4. Organizational Structure and Management

Here, you will outline your business's organizational structure and introduce the management team. Detail the roles, responsibilities, and expertise of each team member. This section reassures stakeholders that your business is in capable hands.

5. Products or Services

What are you offering to your customers? This section should detail your products or services, focusing on customer benefits. Describe the lifecycle, production process, and any research and development activities.

6. Marketing and Sales Strategy

Your business plan must elucidate how you intend to attract and retain customers. This means outlining your marketing and sales strategy, including pricing, distribution, and promotional tactics. It is about showcasing how you will create demand for your products or services.

7. Operations Plan

This part delves into the operational aspects of your business. From day-to-day operations to suppliers, facilities, and logistics, it should paint a clear picture of how your business functions.

8. Financial Projections

Financial projections are crucial. This section should include income statements, cash flow statements, and balance sheets, projecting your business’s financial health over the next few years. It’s important to be realistic and transparent.

9. Risk Analysis

Every business faces risks. Identifying potential risks and outlining mitigation strategies shows foresight and preparedness. It is about demonstrating that you are ready to tackle challenges head-on.

While crafting a business plan is essential, it can be time-consuming and complex. That is where BizPlanner.ai comes in. Our AI-powered tool simplifies the process, helping you create a structured, comprehensive business plan tailored to your unique needs. With BizPlanner.ai, you can focus on growing your business, assured that your planning is in good hands.

Ready to bring your business vision to life? Let BizPlanner.ai help you create a winning business plan.

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The Ultimate Business Plan for Ecommerce Startups: Crafted with AI

In the dynamic world of online entrepreneurship, crafting a meticulous business plan for ecommerce or any e-business company is crucial for success. Below, we present a detailed example or a template of a business plan specifically tailored for an e-commerce business.

How to Write an Executive Summary: A Step-by-Step Guide

The Executive Summary is often considered the most crucial part of a business plan. It is the first section that investors, partners, and other stakeholders read, and it sets the tone for what follows.

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What Is an Organizational Structure?

Understanding an organizational structure, centralized vs. decentralized organizational structures, types of organizational structures, benefits of organizational structures, the bottom line, organizational structure for companies with examples and benefits.

Ariel Courage is an experienced editor, researcher, and former fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.

Investopedia / Julie Bang

An organizational structure is a system that outlines how certain activities are directed in order to achieve the goals of an organization. These activities can include rules, roles, and responsibilities.

The organizational structure also determines how information flows between levels within the company. For example, in a centralized structure, decisions flow from the top down, while in a decentralized structure, decision-making power is distributed among various levels of the organization. Having an organizational structure in place allows companies to remain efficient and focused.

Key Takeaways

• An organizational structure outlines how certain activities are directed to achieve the goals of an organization.
• Successful organizational structures define each employee's job and how it fits within the overall system.
• A centralized structure has a defined chain of command, while decentralized structures give almost every employee receiving a high level of personal agency.
• Types of organizational structures include functional, divisional, flatarchy, and matrix structures.
• Senior leaders should consider a variety of factors before deciding which type of organization is best for their business, including the business goals, industry, and culture of the company.

Businesses of all shapes and sizes use organizational structures heavily. They define a specific hierarchy within an organization. A successful organizational structure defines each employee's job and how it fits within the overall system. Put simply, the organizational structure lays out who does what so the company can meet its objectives.

This structuring provides a company with a visual representation of how it is shaped and how it can best move forward in achieving its goals. Organizational structures are normally illustrated in some sort of chart or diagram like a pyramid, where the most powerful members of the organization sit at the top, while those with the least amount of power are at the bottom.

Not having a formal structure in place may prove difficult for certain organizations. For instance, employees may have difficulty knowing to whom they should report. That can lead to uncertainty as to who is responsible for what in the organization.

Having a structure in place can help with efficiency and provide clarity for everyone at every level. That also means each and every department can be more productive, as they are likely to be more focused on energy and time.

An organizational structure is either centralized or decentralized. Traditionally, organizations have been structured with centralized leadership and a defined chain of command. The military is an organization famous for its highly centralized structure, with a long and specific hierarchy of superiors and subordinates. In a centralized organizational system, there are very clear responsibilities for each role, with subordinate roles defaulting to the guidance of their superiors.

There has been a rise in decentralized organizations, as is the case with many technology startups . This allows companies to remain fast, agile, and adaptable, with almost every employee receiving a high level of personal agency. For example, Johnson & Johnson is a company that's known for its decentralized structure.

As a large company with many business units and brands that function in sometimes very different industries, each operates autonomously. Even in decentralized companies, there are still usually built-in hierarchies (such as the chief operating officer operating at a higher level than an entry-level associate). However, teams are empowered to make their own decisions and come to the best conclusion without necessarily getting "approval" from up top.

Functional Structure

Four types of common organizational structures are implemented in the real world. The first and most common is a functional structure. This is also referred to as a bureaucratic organizational structure and breaks up a company based on the specialization of its workforce. Most small-to-medium-sized businesses implement a functional structure. Dividing the firm into departments consisting of marketing, sales, and operations is the act of using a bureaucratic organizational structure.

Divisional or Multidivisional Structure

The second type is common among large companies with many business units. Called the divisional or multidivisional (M-Form) structure, a company that uses this method structures its leadership team based on the products, projects, or subsidiaries they operate. A good example of this structure is Johnson & Johnson. With thousands of products and lines of business, the company structures itself so each business unit operates as its own company with its own president.

Divisions may also be designated geographically in addition to specialization. For instance, a global corporation may have a North American Division and a European Division.

Similar to divisional or functional structures, team-based organizations segregate into close-knit teams of employees that serve particular goals and functions, but where each team is a unit that contains both leaders and workers.

Flat (Flatarchy) Structure

Flatarchy, also known as a horizontal structure, is relatively newer, and is used among many startups. As the name alludes, it flattens the hierarchy and chain of command and gives its employees a lot of autonomy. Companies that use this type of structure have a high speed of implementation.

Matrix Structure

Firms can also have a matrix structure. It is also the most confusing and the least used. This structure matrixes employees across different superiors, divisions, or departments. An employee working for a matrixed company, for example, may have duties in both sales and customer service .

Circular Structure

Circular structures are hierarchical, but they are said to be circular as it places higher-level employees and managers at the center of the organization with concentric rings expanding outward, which contain lower-level employees and staff. This way of organizing is intended to encourage open communication and collaboration among the different ranks.

Network Structure

The network structure organizes contractors and third-party vendors to carry out certain key functions. It features a relatively small headquarters with geographically-dispersed satellite offices, along with key functions outsourced to other firms and consultants.

Putting an organizational structure in place can be very beneficial to a company. The structure not only defines a company's hierarchy but also allows the firm to lay out the pay structure for its employees. By putting the organizational structure in place, the firm can decide salary grades and ranges for each position.

The structure also makes operations more efficient and much more effective. By separating employees and functions into different departments, the company can perform different operations at once seamlessly.

In addition, a very clear organizational structure informs employees on how best to get their jobs done. For example, in a hierarchical organization, employees will have to work harder at buying favor or courting those with decision-making power. In a decentralized organization, employees must take on more initiative and bring creative problem solving to the table. This can also help set expectations for how employees can track their own growth within a company and emphasize a certain set of skills—as well as for potential employees to gauge if such a company would be a good fit with their own interests and work styles.

What Are Some Types of Organizational Structures?

The four types of organizational structures are functional, multi-divisional, flat, and matrix structures. Others include circular, team-based, and network structures.

What Are the Key Elements of an Organizational Structure?

Key elements of an organizational structure include how certain activities are directed in order to achieve the goals of an organization, such as rules, roles, responsibilities, and how information flows between levels within the company.

What Is an Organizational Structure Example?

An example of an organizational structure is a decentralized structure, which gives individuals and teams high degrees of autonomy without needing a core team to regularly approve business decisions. A good example of this decentralized structure is Johnson & Johnson. With thousands of products and lines of business, the company structures itself so each business unit operates as its own company with its own president.

What Is an Organizational Structure Chart?

Organizational structures are normally illustrated in some sort of chart or diagram like a pyramid, where the most powerful members of the organization sit at the top, while those with the least amount of power are at the bottom.

What Is the Best Organizational Structure?

There is no one best organizational structure, as it depends on the nature of the company and the industry it operates in.

There are entire fields of study based on how to optimize and best structure organizations to be the most effective and productive. Senior leaders should consider a variety of factors before deciding which type of organization is best for their business , including the business goals, industry, and culture of the company.

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Types of Organizational Structures to Consider for Your Business

An organizational structure helps you determine your company's leadership hierarchy and flow of information.

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Running a business means successfully delegating tasks among your employees. It also means having the final say on all projects or, if your company is on the larger side, hiring people whom you trust enough to give full approval powers. An organizational structure for your business can help you make sense of where and with whom your company’s responsibilities lie, and you have plenty of types from which to choose.

What is an organizational structure?

An organizational structure is a set of rules, roles, relationships and responsibilities that determine how a company’s activities should be directed to achieve its goals. It also governs the flow of information through levels of the company and outlines the reporting relationship among midlevel staff, senior management, executives and owners. It is effectively a hierarchy for a company, though some organizational structures emphasize a near-total lack of hierarchy.

How many types of organizational structures are there?

In your research, you may at first read that there are two types of organizational structures: centralized and decentralized. However, using just these two classifications for every possible team structure may paint with too broad a brush. That’s why experts have come up with eight types of organizational structures, each of which is either centralized or decentralized:

• Hierarchical structure (also known as line structure)
• Functional structure
• Divisional structure (also known as multidivisional structure)
• Flatarchy structure (also known as horizontal, or flat, structure)
• Matrix structure
• Team structure
• Network structure
• Projectized structure

All of these are centralized except for the flat, team and network structures. In a centralized structure, power flows up the chain of command to the executives and owners, whereas decentralized organization structures give far more power to non-executives and non-owners. We’ll get more into how this works in just a moment.

Types of organizational structure to consider for your business

Now that you know the eight types of organizational structures, you’re probably wondering which one is best for your business. The answer, as with many business matters, is that the right choice differs by company. Below, we’ll detail what each organizational structure entails so you can discern which model best fits your ongoing business practices and future business needs.

1. Hierarchical structure

A hierarchical structure, also known as a line organization, is the most common type of organizational structure. Its chain of command is the one that likely comes to mind when you think of any company: Power flows from the board of directors down to the CEO through the rest of the company from top to bottom. This makes the hierarchical structure a centralized organizational structure.

In a hierarchical structure, a staff director often supervises all departments and reports to the CEO. This structure is well suited for any business in any industry.

These are some advantages of a hierarchical structure:

• It clearly defines reporting relationships, project organization and division of authority.
• It details your company’s corporate ladder and promotional structure, thereby encouraging high-quality work.
• It helps to specialize each employee’s work.
• It cultivates stronger relationships among employees within a team.

There are also some drawbacks of choosing a hierarchical structure:

• Bureaucratic hurdles could delay project completion and discourage employees from taking risks.
• It may encourage employees to prioritize their own department and direct supervisors instead of the whole company.
• It can make employees feel like they have no say in how to approach their projects.

2. Functional structure

The functional structure is a centralized structure that greatly overlaps with the hierarchical structure. However, the role of a staff director instead falls to each department head – in other words, each department has its own staff director, who reports to the CEO. Any company with several modestly sized departments may find the functional structure to be a fit. 

These are some advantages of a functional structure:

• It helps employees develop specific, specialized roles.
• It boosts individual departments’ and employees’ self-sufficiency and innovation.
• It scales easily to work for companies of all sizes.

These are some disadvantages of a functional structure:

• It doesn’t encourage communication and interaction among different departments.
• It hides key details of departmental processes and strategies from employees outside that department.

3. Divisional structure

The centralized structure, known as a divisional organization, is more common in enterprise companies with many large departments, markets or territories. For example, a food conglomerate may operate on a divisional structure so that each of its food lines and products can have full autonomy. In the divisional structure, each line or product has its own chief commanding executive. Large companies of any sort, but especially in manufacturing industries, are the best fit for this structure. 

These are the main advantages of a divisional organization:

• The different departments have some flexibility to operate separately from the company at large.
• It’s more adaptable to customer needs.
• Individual departments have more autonomy and room for innovation.

These are some disadvantages of a divisional structure:

• It risks accidental duplication of resources.
• It encourages poor communication and low interaction among different departments.
• It encourages internal competition across departments rather than uniting the company against outside competitors.

4. Flat structure

A flat structure is a decentralized organizational structure in which almost all employees have equal power. At most, executives may have just a bit more authority than employees. This organizational structure is common in startups that take a modern approach to work or don’t yet have enough employees to divide into departments. That makes flat structures especially well suited to the tech industry, which is home to many small startups with flexible work arrangements.

These are some advantages of a flat structure:

• Employees have more responsibility and independence.
• It improves communication and interaction among employees.
• It’s faster to implement new practices or ideas, with less risk of error.

These are the main disadvantages of a flat structure:

• Employees lack supervision.
• There could be confusion around reporting procedures.
• Employees lack or don’t develop specialized skills.
• It has poor scalability as the company grows.

5. Matrix structure

The matrix structure is a fluid form of the classic hierarchical structure. This centralized organization structure allows employees to move from one department to another as needed. You might encounter this structure in industries home to highly skilled employees who might be their company’s only experts in their field.

These are the main advantages of a matrix organization:

• Supervisors have the flexibility to choose the best employees for a project.
• It allows a dynamic org chart with varying responsibilities for employees.
• Employees have the opportunity to learn and foster skills outside their primary roles.

These are some disadvantages of a matrix organization:

• There could be conflicts of interest between the needs for project organization and department organization.
• The organizational chart is prone to regular changes.

6. Team structure

A team structure is a decentralized but formal structure that allows department heads to collaborate with employees from other departments as needed. It is similar to a matrix structure, but the focus is less on employee fluidity than on supervisor fluidity, leading to a decentralized functional structure. Any industry in which flat or matrix structures are common might also be home to many companies with team structures.

These are the advantages of a team structure:

• The lack of compartmentalized labor drives productivity, growth and transparency.
• It prioritizes employee experience over seniority.
• It minimizes employee management tasks.

These are some disadvantages of a team structure:

• It could confuse employees, given the potential subversion of traditional executive and lower-level roles.
• It obscures the corporate ladder and may disincentivize employees from working harder to be promoted.

7. Network structure

A network structure is especially suitable for a large, multicity or even international company operating in the modern era. It organizes the relationships not just among departments in one office location, but also among different locations and each location’s team of freelancers, third-party companies to whom certain tasks are outsourced, and more. 

While this may sound like a lot for one type of network structure to detail, this decentralized structure can be useful for understanding the human resources your company has on hand. You’ll commonly encounter network structures among distributors, tech companies or logistics companies with international branches.

These are potential advantages of a network structure:

• It improves understanding of how functional roles are distributed among on-site employees, off-site employees, freelancers and outsourced third parties.
• It boosts flexibility for one department or location to delegate tasks to another.
• It drives employee communication, collaboration and innovation.
• It clearly outlines workflows and chains of commands in large businesses.

These are the possible disadvantages of a network structure:

• It’s complex, especially in regard to out-of-office processes.
• It’s vague as to which employee, department or office should make the final decisions.

8. Projectized structure

In a projectized structure, the focus is on one project at a time. In this centralized organizational structure, project managers act as supervisors, not just resource allocators and decision-makers. 

Unlike other structure types, a projectized structure involves the demobilization of teams and resources upon a project’s completion. But it’s like other types of organizational structures in that an obvious hierarchy exists. Software development teams may benefit from projectized structures given the complexity that can go into app or website development.

These are some advantages of a projectized structure:

• It fosters more efficient decision-making and communication.
• The sense of urgency around project completion increases employee cooperation.
• It increases employee flexibility and versatility.

These are some disadvantages of a projectized structure:

• The strict deadlines could increase workers’ stress.
• The power might be too strongly centralized with the project manager.
• It lacks the opportunity for long-term skill development among employees.

Below is a chart summarizing the eight types of organizational structures.

Which organizational structure is best?

No one organizational structure is best for all businesses. When determining the right one for your company, think about how much power you would like to give your employees, how much room you would like to leave for innovation, how large your company is and how much interaction among employees matters to you. After weighing these factors, you’ll likely know which organizational structure is best for you – and if you get it wrong, you can always switch to another organizational structure.

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9 Types of Organizational Structure Every Company Should Consider

Published: June 01, 2023

Choosing the best organizational structure for your company, division, or team is a lot like picking out a new car.

At the most basic level, you're always looking for something road-worthy — something that can take you (and your passengers) from point A to point B without a hitch.

But beyond that, there are a lot of options to consider. Automatic or manual? Four-wheel drive or two? Built-in GPS? Leather interior? Flux capacitor? (Only if you're going back in time , of course.)

In the world of organizational structures, the options you have to choose from include things like chain of command (long or short?), span of control (wide or narrow?), and centralization (centralized or decentralized decision-making?), just to name a few.

Organizational Structure

A company’s organizational structure is the hierarchy of the business’s teams, leaders, managers, and individual contributors. Organizational structures determine what employees do, whom they report to, and how decisions are made. At a minimum, an org structure chart should include employees’ titles and basic relationships across teams.

Organizational structures can use functions, markets, products, geographies, or processes as their guide, and cater to businesses of specific sizes and industries.

What's the point of an organizational structure? As a business leader, do you even need one? As your company gets bigger, an organizational structure can also be helpful for new employees as they learn who manages what processes at your company.

Then, if you need to pivot or shift your leadership, you can visualize how the workflows would work by adjusting your organizational structure diagrams.

To put it simply, an organizational structure is like a map that simply explains how your company works and how its roles are organized.

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Four Basic Elements of Organizational Structure

An organizational structure typically has four essential elements; you can add more building blocks or components , depending on your business needs.

No matter what, ensure you include the following basic elements:

Chain of Command

Your chain of command is how tasks are delegated and work is approved. An org structure allows you to define how many " rungs of the ladder " a particular department or business line should have. In other words, who tells whom to do what? And how are issues, requests, and proposals communicated up and down that ladder?

Departmentation

Departmentation is one of the most important elements of your organizational structure. It clusters your teams by similar roles and responsibilities and allows you to understand how each department connects to one another.

Span of Control

Your span of control can represent two things: who falls under a manager's, well, management ... and which tasks fall under a department's responsibility. Having a defined span of control not only avoids double-work from your different teams, but helps you identify gaps in your structure.

Centralization

Centralization describes where decisions are ultimately made. Once you've established your chain of command, you'll need to consider which people and departments have a say in each decision. A business can lean toward centralized, where final decisions are made by just one or two entities; or decentralized, where final decisions are made within the team or department in charge of carrying out that decision.

You might not need an org structure right away, but the more products you develop and people you hire, the harder it'll be to lead your company without this crucial diagram.

Below, we'll explore how you can combine those components to form different types of organizational structures. We'll also highlight the benefits and drawbacks of different structure types so you can evaluate which is the best option for your company, division, or team. Let's dive in.

Mechanistic vs. Organic Organizational Structures

Organizational structures fall on a spectrum, with "mechanistic" at one end and "organic" at the other.

Take a look at the diagram below. As you'll probably be able to tell, the mechanistic structure represents the traditional, top-down approach to organizational structure, whereas the organic structure represents a more collaborative, flexible approach.

Here's a breakdown of both ends of the structural spectrum, their advantages and disadvantages, and which types of businesses are suited for them.

Mechanistic Structure

Mechanistic structures, also called bureaucratic structures , are known for having narrow spans of control, as well as high centralization, specialization, and formalization. They're also quite rigid in what specific departments are designed and permitted to do for the company.

This organizational structure is much more formal than organic structure, using specific standards and practices to govern every decision the business makes. And while this model does hold staff more accountable for their work, it can become a hindrance to the creativity and agility the organization needs to keep up with random changes in its market.

As daunting and inflexible as mechanistic structure sounds, the chain of command, whether long or short, is always clear under this model. As a company grows, it needs to make sure everyone (and every team) knows what's expected of them. Teams collaborating with other teams as needed might help get a business off the ground in its early stages, but sustaining that growth — with more people and projects to keep track of — will eventually require some policymaking. In other words, keep mechanistic structure in your back pocket ... you never know when you'll need it.

Organic Structure

Organic structures (also known as "flat" structures) are known for their wide spans of control, decentralization, low specialization, and loose departmentalization. What's that all mean? This model might have multiple teams answering to one person and taking on projects based on their importance and what the team is capable of — rather than what the team is designed to do.

As you can probably tell, this organizational structure is much less formal than mechanistic, and takes a bit of an ad-hoc approach to business needs. This can sometimes make the chain of command, whether long or short, difficult to decipher. And as a result, leaders might give certain projects the green light more quickly but cause confusion in a project's division of labor.

Nonetheless, the flexibility that an organic structure allows for can be extremely helpful to a business that's navigating a fast-moving industry, or simply trying to stabilize itself after a rough quarter. It also empowers employees to try new things and develop as professionals, making the organization's workforce more powerful in the long run. Bottom line? Startups are often perfect for organic structure, since they're simply trying to gain brand recognition and get their wheels off the ground.

Now, let's uncover more specific types of organizational structures, most of which fall on the more traditional, mechanistic side of the spectrum.

Types of Organizational Structure

• Functional Organizational Structure
• Product-Based Divisional Structure
• Market-Based Divisional Structure
• Geographical Divisional Structure
• Process-Based Structure
• Matrix Structure
• Circular Structure
• Flat Structure
• Network Structure

Depending on the size of a business and its goals, the organizational structure of the team will vary. Each type has its advantages and disadvantages; however, there is a universal benefit to establishing a clear organizational structure. It helps employees understand their role within a company, which enables them to manage expectations and goals.

A business needs to have an organizational structure in place to be successful. There are several types of organizational structures commonly used by companies, nine of which we expand upon below.

1. Functional Organizational Structure

One of the most common types of organizational structures, the functional structure departmentalizes an organization based on common job functions.

An organization with a functional org structure, for instance, would group all of the marketers together in one department, group all of the salespeople together in a separate department, and group all of the customer service people together in a third department.

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The functional structure allows for a high degree of specialization for employees, and is easily scalable should the organization grow. Also this structure is mechanistic in nature — which has the potential to inhibit an employee's growth — putting staff in skill-based departments can still allow them to delve deep into their field and find out what they're good at.

Disadvantages

• Functional structure has the potential to create barriers between different functions — and it can be inefficient if the organization has a variety of different products or target markets.
• The barriers created between departments can also limit peoples' knowledge of and communication with other departments, especially those that depend on other departments to succeed.
• Functional organization increases efficiency, provides stability, and boosts accountability.
• It also allows departments — with employees who share similar skills and knowledge — to focus on their specialized tasks within their respective fields.
• Because the roles and responsibilities of this organizational structure example rarely change, department employees can consistently work on similar assignments and hone their skills.

The fixed structure of functional organization also operates through management. It provides employees with a chain of command. It guides communication between the team and keeps the team accountable.

2. Product-Based Divisional Structure

A divisional organizational structure is comprised of multiple, smaller functional structures (i.e. each division within a divisional structure can have its own marketing team, its own sales team, and so on). In this case — a product-based divisional structure — each division within the organization is dedicated to a particular product line.

This type of structure is ideal for organizations with multiple products and can help shorten product development cycles. This allows small businesses to go to market with new offerings fast.

• It can be difficult to scale under a product-based divisional structure.
• The organization could end up with duplicate resources as different divisions strive to develop new offerings.
• Companies and their employees can experience the benefits of the product-based divisional structure.
• If one division performs poorly, this does not automatically translate across the organization.
• Because of their separation, divisions may flourish (or fail) concurrently. This system allows companies to mitigate risk.

3. Market-Based Divisional Structure

Another variety of the divisional organizational structure is the market-based structure, wherein the divisions of an organization are based around markets, industries, or customer types.

The market-based structure is ideal for an organization that has products or services that are unique to specific market segments, and is particularly effective if that organization has advanced knowledge of those segments. This organizational structure also keeps the business constantly aware of demand changes among its different audience segments.

• Too much autonomy within each market-based team can lead to divisions developing systems that are incompatible with one another.
• Divisions might also end up inadvertently duplicating activities that other divisions are already handling.
• Because this organizational structure focuses on specific market segments, it provides each division with autonomy.
• The divisions work separately, which allows employees to work independently and enables them to focus on the needs of their particular industry.

4. Geographical Divisional Structure

The geographical organizational structure establishes its divisions based on — you guessed it — geography. More specifically, the divisions of a geographical structure can include territories, regions, or districts.

This type of structure is best-suited to organizations that need to be near sources of supply and/or customers (e.g. for deliveries or for on-site support). It also brings together many forms of business expertise, allowing each geographical division to make decisions from more diverse points of view.

• It can be easy for decision- making to become decentralized, as geographic divisions (which can be hundreds, if not thousands of miles away from corporate headquarters) often have a great deal of autonomy.
• When you have more than one marketing department — one for each region — you run the risk of creating campaigns that compete with (and weaken) other divisions across your digital channels.
• Geographical divisions allow companies the advantage of catering to a specific customer. Based on the differences in language, culture, and customs one would find across the world, companies cannot necessarily expect the same operations to work in different locations. 
• Not only does it allow organizations to tailor their approach based on geography, but it allows the division to react quickly and efficiently to any geographical market changes.

5. Process-Based Structure

Process-based organizational structures are designed around the end-to-end flow of different processes, such as "Research & Development," "Customer Acquisition," and "Order Fulfillment." Unlike a strictly functional structure, a process-based structure considers not only the activities employees perform, but also how those different activities interact with one another.

In order to fully understand the diagram below, you need to look at it from left to right: The customer acquisition process can't start until you have a fully developed product to sell. By the same token, the order fulfillment process can't start until customers have been acquired and there are product orders to fill.

Process-based organizational structure is ideal for improving the speed and efficiency of a business, and is best-suited for those in rapidly changing industries, as it is easily adaptable.

• Similar to a few other structures on this list, process-based structure can erect barriers between the different process groups.
• It may lead to problems communicating and handing off work to other teams and employees.
• As mentioned, one of the most significant benefits of the process-based structure is that it increases efficiency and speed. If Department B cannot start its processes until Department A finishes, this compels Department A to work promptly and proficiently.
• This organizational model also promotes intradepartmental (within the department) and interdepartmental (across multiple departments) teamwork.

6. Matrix Structure

Unlike the other structures we've looked at so far, a matrix organizational structure doesn't follow the traditional, hierarchical model. Instead, all employees (represented by the green boxes) have dual reporting relationships. Typically, there is a functional reporting line (shown in blue) as well as a product- based reporting line (shown in yellow).

When looking at a matrix structure org chart, solid lines represent strong, direct-reporting relationships, whereas dotted lines indicate that the relationship is secondary, or not as strong. In our example below, it's clear that functional reporting takes precedence over product-based reporting.

The main appeal of the matrix structure is that it can provide both flexibility and more balanced decision-making (as there are two chains of command instead of just one). Having a single project overseen by more than one business line also creates opportunities for these business lines to share resources and communicate more openly with each other — things they might not otherwise be able to do regularly.

• The primary pitfall of the matrix organizational structure? Complexity. The more layers of approval employees have to go through, the more confused they can be about who they're supposed to answer to.
• This confusion can ultimately cause frustration over who has authority over which decisions and products — and who's responsible for those decisions when things go wrong.
• An advantage of a matrix structure is that it promotes collaboration and communication.
• This open line of communication ultimately allows businesses to share resources and allows employees to develop new skills from working with different departments.

7. Circular Structure

While it might appear drastically different from the other organizational structures highlighted in this section, the circular structure still relies on hierarchy, with higher-level employees occupying the inner rings of the circle and lower-level employees occupying the outer rings.

That being said, the leaders or executives in a circular organization aren't seen as sitting atop the organization, sending directives down the chain of command. Instead, they're at the center of the organization, spreading their vision outward.

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From an ideological perspective, a circular structure is meant to promote communication and the free flow of information between different parts of the organization. Whereas a traditional structure shows different departments or divisions as occupying individual, semi-autonomous branches, the circular structure depicts all divisions as being part of the same whole.

• From a practical perspective, the circular structure can be confusing, especially for new employees.
• Unlike with a more traditional, top-down structure, a circular structure can make it difficult for employees to figure out who they report to and how they're meant to fit into the organization.
• Most examples of organizational structure have a top-down hierarchy. Alternatively, this type of structure follows an outward flow and contributes to information flowing freely across the business.
• Its benefits include keeping all employees aligned with the processes and goals of the company and encouraging employees to collaborate between departments.

8. Flat Structure

While a more traditional organizational structure might look more like a pyramid — with multiple tiers of supervisors, managers and directors between staff and leadership, the flat structure limits the levels of management so all staff are only a few steps away from leadership. It also might not always take the form or a pyramid, or any shape for that matter. As we mentioned earlier, It's also a form of the "Organic Structure" we noted above.

• If there's a time when teams in a flat organization disagree on something, such as a project, it can be hard to get aligned and back on track without executive decisions from a leader or manager.
• Because of how complicated the structure's design is, it can be tricky to determine which manager an employee should go to if they need approval or an executive decision for something.
• If you do choose to have a flat organization, you should have a clearly marked tier of management or path that employers can refer to when they run into these scenarios.
• The elimination of middle management employees defines the flat structure type. Its advantages are instantaneous. First, it reduces the expenses of the company.
• Second, it allows staff to build direct relationships with upper management.
• Lastly, it shortens the decision-making process.

9. Network Structure

A network structure is often created when one company works with another to share resources — or if your company has multiple locations with different functions and leadership. You might also use this structure to explain your company workflows if much of your staffing or services is outsourced to freelancers or multiple other businesses.

The structure looks nearly the same as the Divisional Structure, shown above. However, instead of offices, it might list outsourced services or satellite locations outside of the office.

If your company doesn't do everything under one roof, this is a great way to show employees or stakeholders how outsourcing of off-site processes work. For example, if an employee needs help from a web developer for a blogging project and the company's web developers are outsourced, the could look at this type of chart and know which office or which person to contact outside of their own work location.

• The shape of the chart can vary based on how many companies or locations you're working with. If it's not kept simple and clear, there may be a lot of confusion if multiple offices or freelancers do similar things.
• If you do outsource or have multiple office locations, make sure your org chart clearly states where each specific role and job function lies so someone can easily understand your basic company processes.
• The outsourcing nature of the network structure provides companies with the advantages of lower costs, more focus, and increased flexibility.
• Outsourcing allows organizations to save money, as they don’t have to bear the expense of setting up a department for the same purpose.
• It also gives companies the flexibility to change their processes and the ability to focus on their core functions.

Organizational Structure Examples

Organizational structure can both refer to your company’s structure at large, or your individual teams. No matter what, you usually want to have a different structure for each department, due to the distinct needs and functions of each one.

We’ll start with organizational structure examples for both companies and nonprofits, then delve into team-specific charts.

1. Company Organizational Structure Example: Matrix Type

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This matrix organizational structure example for an imaginary engineering company starts with the CEO at the helm. However, instead of including a C-suite (such as a chief marketing officer, a chief finance officer, a chief technology officer, and so on), it includes vice presidents who then oversee individual contributors.

Each contributor works cross-collaboratively with members of others teams on a specific customer project. This is a good example to follow if you run a small-to-medium company in a project-based or region-based firm.

2. Nonprofit Organizational Structure Example: Flat Type

Nonprofits are structured differently than a company, and are usually much smaller and scrappier. In this nonprofit organizational structure example, we see a flat-type of structure, where every employee is only just a few steps away from the director. There are no internal movement opportunities, which works well at most nonprofits. Instead, the focus is on steering the organization to meet its program goals.

Notice that the leader is not the director, but rather the board, who interfaces directly with the director to relay organizational decisions.

3. Marketing Organizational Structure Example: Functional Type

A marketing team’s organizational structure  will vary depending on the size of a company. In this example, we see a functional structure type, where the teams are split based on job function. Here, the marketing team is headed by a chief marketing officer (CMO) , who overlooks smaller departments divided into six functions: Social media, content, product, SEO, website, and acquisition.

Your marketing team, however, can also adopt a matrix organizational structure if you laterally divide your individual contributors and managers based on region, country, project, or another factor.

4. Sales Organizational Structure Example: Functional Type

In many sales organizations, organizational structures are deeply hierarchical, where a vice president of sales overlooks a director of sales, and then the director of sales overlooks a team of sales managers, and the sales managers overlook a team of sales representatives, and so on.

In this example of a sales organizational structure, roles are not as hierarchically structured, and instead divided based on function. The VP of sales overlooks a varied team, which includes a director of sales, a sales development manager, a director of revenue operations, a sales enablement manager, and an account enablement manager.

While these are each at different stages of their careers, they are all at the same level and are responsible for a specific function within the team.

5. IT Organizational Structure Example: Functional Type

This is another functional org chart example, but this time, it’s for IT. In this example from the University of Michigan, the IT department is divided based on function. Overseen by a Chief Technology Officer, three directors supervise security, infrastructure, and operations; applications; and institutional research and effectiveness.

Within each team is a specialization. For instance, the director of applications oversees both the application team and the CRM team. If you run an IT org, you can take a similar approach, or divide your leadership based on specific processes, such as system maintenance or IT services.

6. Product Organizational Structure Example: Divisional Type

For product organizations, the most common organizational structure is divisional, where teams are divided based on the product they’re working on. Within each product team, there’s typically a product manager, an engineer, a marketer, and even a customer support manager. Depending on how big or small your company is, you may have multiple product managers for one product.

Conversely, if there’s only one product, then the entire company may be a product organization. This time, the organization would be structured based on process, like the example below.

In the above example, the company is divided by processes such as product management, sales and marketing, product development, service and support, and operations. This is a good example to follow if your company is small.

7. HR Organizational Structure Example: Matrix Type

This HR organizational chart is an excellent example of the matrix structure type. Here, the VP of HR oversees three different regions, all of which have an HRBP, two recruiters, and one trainer. Horizontally, the HRBPs, recruiters, and trainers are all aligned.

This is an excellent example to follow if your company is a large enterprise with hiring operations in different regions. It’s especially useful if there are different hiring laws in each region where you operate.

Organizational Structure: Things to Know

What is an organizational structure chart.

An organizational structure chart is a diagram that shows your departments, starting from C-Suite leaders to individual contributors, as well as your company’s order of command and decision-making flow.

Why is having an organizational structure important?

Imagine a business that has no organizational structure. Instantly, questions arise about the systems and processes. Who makes the decisions? How are employees held accountable? What are the company’s goals? These questions are practically impossible to answer without a functional organizational structure.

Organizational structure is necessary for running a successful business because it improves workflow and efficiency, promotes communication, identifies company needs, and aligns employees with company goals. It directly affects how a business operates daily. When a company establishes a structure that works, the combined efforts of its employees, in conjunction with its systems and processes, allow the company to make better decisions for its future.

What is the best organizational structure?

The best organizational structure varies from business to business and largely depends on your team size, company type, and product offerings. That said, a functional organizational structure (also named “traditional line organizational structure” or “hierarchical structure”) is an excellent place to start if you’re not sure which org structure is right for you.

What are the four basic forms of organizational structure?

The four basic forms of organizational structure are functional, divisional, matrix, and flat structures.

Functional organizational structures divide your company teams based on job functions and responsibilities.

Divisional organizational structures groups your teams based on products, markets, or regions, with smaller organizational structures for each division of your business.

Matrix organizational structures divide your company teams in a grid-based fashion, where every team has dual reporting relationships with the C-Suite and another team.

A flat organizational structure keeps hierarchy to a minimum by eliminating middle management and keeping individual contributors as close as possible to leadership.

How do businesses determine organizational structure?

Businesses determine organizational structure by taking stock of their current workforce and teams, then carefully aligning their company strategy, employee feedback, and leadership goals with a specific structure.

Some companies may have naturally fallen into a functional org structure, in which case it’s only a matter of creating an org diagram. Others may be in the process of creating one. Here are the steps to determine an org structure from scratch:

• Audit your organization’s teams and roles. First, it’s essential to understand which teams and roles already exist within your business. If your business is new, create a list of planned teams and hires.
• Draft a company strategy . Your org structure should support your strategy, not detract from it. If your strategy is to launch X new products in the market, then a product-based divisional structure might work well for you.
• Gather feedback from existing employees . Your existing employees are a gold mine of information when creating an organizational structure. Some employees might want to be closer to leadership; others might want advancement opportunities. For the first, a flat structure would fit, and for the second, a functional structure would be best.
• Gather feedback from other leaders . Just as employees’ voices matter, so, too, do leaders’ voices matter. Understand their key goals and the support they need to do their best work at your firm.
• Align your company strategy, employee feedback, and leadership feedback with an org structure . Take a look at organizational structure types and try to align them with the data and observations you’ve collected. Sometimes, the decision will be clear; other times, you’ll need to continue interviewing and gathering data to find the best structure for you.
• Create an org chart . Now that you’ve chosen the right org structure, it’s time to create a visual chart that shows your company’s chain of command, departmentation, span of control, and centralization at a minimum. Share this chart over email and be sure to keep it in an easy place for all employees to access.

Navigating Organizational Structures

Organizational structures are central to a successful team. Employees can move comfortably, confidently, and efficiently when given a clear definition of their role within an organization.

Structure types will vary from business to business, so it’s important to remember that these structures are not one size fits all. Every type may not suit your organization, but chances are, one of them will. Use this post to determine which organizational structure works for you, and then it’s time for the real work to begin.

Editor's note: This post was originally published in December 2014 and has been updated for comprehensiveness.

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How to implement the right organizational structure for your business?

When it comes to building a successful business, one of the foundational elements that often gets overlooked is the organizational structure. An effective organizational structure can streamline operations, improve communication, and drive overall efficiency.

Published by Orgvue   November 20, 2023

Home > Resources > article > How to implement the right organizational structure for your business?

What is organizational structure?

Organizational structure refers to the framework that defines how an organization’s activities are organized, directed, and coordinated. A macro of organizational design , it defines roles, responsibilities, and reporting relationships within the company. Think of it as the blueprint for how your business functions and how decisions are made.

Understanding an organizational structure in business

The organizational structure of a business helps employees understand their roles, reporting lines, and how they fit into the larger picture. It defines how authority is distributed and how tasks are allocated. A well-designed structure ensures that everyone is clear about their responsibilities, which leads to smoother operations.

Types of organizational structure

There are several types of corporate structuring, each with its own set of advantages and disadvantages. Here are some common ones:

1.  Centralized organizational structure

In a centralized structure, decision-making authority is concentrated at the top of the hierarchy. This structure is common in smaller organizations or those with a strict chain of command.

2.  De-centralized organizational structure

Conversely, a decentralized structure disperses decision-making throughout the organization. It’s often seen in larger companies, as it allows for faster responses to local issues:

Functional structure – This structure groups employees based on their specialized functions, such as marketing, finance, or operations. It’s efficient for businesses with a narrow focus.

Multidivisional structure – Large organizations with diverse business units often use a multidivisional structure, where each unit operates somewhat independently.

Team-based – In a team-based structure, employees are organized into cross-functional teams that collaborate on projects. This structure promotes innovation and flexibility.

Flat structure – A flat structure has few layers of management between top executives and employees. It’s known for open communication and quick decision-making.

Circular structure – In a circular structure, there are no traditional hierarchical levels. Instead, employees work in a circular network, making decisions collectively.

Network structure – This structure relies on strategic partnerships and outsourcing. It’s common in the digital age, where companies connect with various suppliers and service providers.

Benefits of organizational structure

Implementing the right organizational structure of a company offers numerous benefits:

• Clarity:  It clarifies roles and responsibilities, reducing confusion among employees.
• Efficiency:  A well-designed structure improves workflow and task allocation, leading to increased productivity.
• Flexibility:  The right structure can adapt to changes in the business environment and allow for innovation.
• Accountability:  Clearly defined roles make it easier to hold individuals and teams accountable for their performance.

Implementing an organizational structure into a business lan

To implement an organizational structure that aligns with your business goals, consider the following steps:

1. Define your objectives

Start by outlining your business objectives and how you envision your company’s growth. Consider factors like industry, size and market dynamics.

2. Assess your current state

Evaluate your existing structure and identify any pain points or inefficiencies. Consider seeking input from employees at all levels to understand their perspectives.

3. Choose the right structure

Based on your objectives and assessment, select an organizational structure that best suits your business. Be open to hybrid structures that combine elements from different types.

4. Define roles and responsibilities

Clearly define the roles and responsibilities of each position within your organization. Ensure that everyone understands their role in achieving the company’s goals.

5. Communicate the changes

Introduce the new structure to your employees and explain the reasons behind it. Address any concerns and be transparent about how the changes will affect them.

6. Provide training and support

Offer training and resources to help employees adapt to the new structure. This may include leadership development programs or cross-functional training.

7. Monitor and adjust

Regularly assess the effectiveness of your organizational structure. Be prepared to make adjustments as your business evolves or as you identify areas for improvement.

The process for creating an organizational structure plan

Here are the key steps to follow in the process of creating an organizational structure in business plan:

• Assess your business needs: – Begin by evaluating your current business objectives, size, and industry. – Identify the key functions and departments required to achieve your goals.
• Determine leadership roles: – Define the leadership positions needed in your organization. – Determine the organizational structure hierarchy, including top-level executives, middle managers, and front-line supervisors.
• Identify functional areas: – Break down your business into functional areas, such as marketing, finance, operations, and human resources. – Determine which functions are essential to your operations.
• Clarify roles and responsibilities: – Clearly define the roles and responsibilities of each position within the organization. – Ensure that each employee understands their specific duties and how they contribute to the company’s objectives.
• Choose an organizational structure: – Select the most appropriate organizational structure based on your business needs. – Consider options such as hierarchical, functional, matrix, or hybrid structures.
• Establish reporting relationships: – Define reporting relationships to establish lines of communication and authority. – Specify who reports to whom to create a clear chain of command.
• Allocate resources: – Determine the allocation of resources, including personnel, budget, and equipment, to each department or function. – Ensure that resources align with the importance and needs of each area.
• Plan for growth and flexibility: – Anticipate future growth and changes in your business. – Design the structure to accommodate expansion and adaptability.
• Communicate the structure: – Clearly communicate the new HR organizational structure to all employees. – Explain the reasons behind the changes and how they will benefit the organization.
• Provide training and support: – Offer training and development opportunities to employees, especially those in leadership positions. – Support employees in adapting to their new roles and responsibilities.
• Implement the structure: – Put the organizational structure plan into action. – Assign employees to their designated positions and departments.
• Monitor and evaluate: – Continuously monitor  the effectiveness of the organizational structure. – Solicit feedback from employees and managers to identify any issues or areas for improvement.
• Make adjustments as needed: – Be prepared to make adjustments to the structure based on feedback and changing business needs. – Adapt to evolving market conditions and growth patterns.
• Review regularly: – Schedule regular reviews of the organizational structure to ensure it remains aligned with the company’s objectives. – Consider conducting comprehensive organizational assessments periodically.
• Document the structure: – Create an organizational chart or diagram that visually represents the structure. – Maintain documentation that outlines roles, responsibilities, and reporting relationships.
• Seek expert guidance if necessary: – If you’re unsure about the best structure for your business, consider consulting with organizational development experts or business consultants.
• Align with company culture: – Ensure that the span of control in organizational structure aligns with the company’s culture, values, and long-term vision. – Encourage a culture of collaboration and communication within the structure.

Organizational structure examples: final thoughts

The right organizational structure can be a powerful tool for achieving your business objectives. Whether you opt for a traditional hierarchy or a more innovative approach, the key is to align your structure with your goals and continuously evaluate its effectiveness.

Remember that there is no one-size-fits-all solution, and flexibility is crucial in today’s ever-changing business landscape.

When thoughtfully designed and implemented, your organizational structure can empower your employees, improve efficiency, and drive your business toward success. So, take the time to consider your options and choose the structure that best suits your unique needs and aspirations.

Let Orgvue shape your organization to better achieve its strategy. Book a demo  today.

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What is organizational structure and why is it important?

Many company organizational structures are pretty linear — or, more accurately, pretty triangular. The traditional “org chart” images of a pyramid depict companies with a few powerful individuals at the top of the company. Under that is a slightly wider level that reports to them. Each subsequent level gets wider and wider, with a large base of entry-level employees at the “bottom.”

However, just because many organizations are structured in this way doesn’t mean that yours should be. Depending on the size of your team and how your workflows are structured, you may benefit from any number of alternative organizational structures. It can also give you some insight into areas of fraction and possible opportunities for development. If your teams are not delivering the outcomes you need, the organizational structure is one possible culprit. Outcomes are the way to assess whether your systems and structures are working as intended. 

Choosing the right structure for your team requires you to think about how your team currently works and where you’re going. Before you draw up that org chart or start proposing new headcount, read on. We’ll dig into the various types of organizational structures, what they are, and ways to implement them.

What is an organizational structure?

An organizational structure is the way that a company, organization, or team is set up. It can be hierarchical, with different levels of management. Or it can be divisional, with different product lines and divisions. Sometimes, there’s little to no hierarchy at all. Every company and team has an organizational structure, even if it’s not formally defined.

An organizational structure defines how job titles, roles, and responsibilities are assigned within a company. It helps determine who reports to whom, and who makes decisions about what.

Startups often have a matrix organizational structure, with different departments working together on projects. Large organizations usually have a hierarchical structure with a clear chain of command. 

Most people only think of organizational structure as it relates to entire companies. But the same structural concepts also apply to how teams get organized within a function, department, or business unit. Organizational structures and restructuring are largely about decision-making authority, information flows, priorities, and allocating resources. 

Each organization is unique (and has unique needs). Even so, each organizational structure will have a few key components in common.

Key elements of an organizational structure

No matter the organization’s size, certain aspects of workplace decision-making and processes need to be clear. Many small businesses handle these designations informally. As a company grows, though, it’s helpful to revisit and clarify these hierarchies (or lack thereof). At the minimum, each organization needs to designate:

Work specialization

Work specializations are less formally known as roles or job descriptions. They outline what a person is responsible for within an organization or on a smaller team. Clear work specializations allow you to make the best use of talent. They make it clear what an individual person’s responsibilities and measures of success are, and help safeguard against a thinning of resources..

Chain of command

If your organization, like many, relies on a mix of people managers and individual contributors , you need to establish a chain of command. This gives people clear direction on who they should reach out to for support. When people from other departments need to check on the status of cross-functional projects, it makes it easy to find out who’s driving them.

Departmentalization and compartmentalization

Compartmentalizing people into departments creates teams of people whose jobs are organized around a specific type of work. A department could be human resources, sales, marketing, or IT. People in these departments often share common skill sets and work together frequently on projects. Each department is typically led by an executive.

Span of control

The number of team members that report to a given manager is formally referred to as “span of control.” If a manager has a large number of direct reports , the team is often subdivided into smaller departments. This happens often at large companies, where multiple people may fill a similar job function.

Centralization and decentralization

Better thought of as “ top-down vs. bottom-up management ,” the terms centralization and decentralization refer to how much influence upper-level leaders have over an organization. Of course, all leaders have power over their organizations. But decentralized management structures tend to have more agile decision making happening at all levels. Employees are empowered to perform their roles and make decisions as they see fit.

Formalization

Formalization determines how much standardizing there is across the organization. It may affect functions, systems, job descriptions, and the flow of information. Organizations with high formalization are often more mature and highly systematized. Done well, this kind of structure should boost innovation, not stifle it.

The importance of organizational structures

Organizational structures are important because they help businesses implement efficient decision-making processes. By assigning specialized roles to lower-level employees, businesses can make better decisions faster. 

Additionally, organizational structures provide a clear org chart that helps businesses keep track of their human resources. When your company is small, it’s hard to imagine that you’d ever lose track of what everyone is doing. After all, in startups and small businesses, it often feels like everyone is doing everything .

As you grow, these silos become more distinct from each other. At that point, an organizational structure helps you identify gaps in skills and support within your business. People’s roles become more specialized and individual teams grow bigger. Revisiting the allocation of work prevents the duplication of effort and reflects business priorities.

Keep in mind, however, that behind these flowcharts are real people. The leaders and employees represented in an organizational chart each work best under different circumstances and with different leadership styles. If you don’t keep them included in the what and why of your organizational shifts, they’re more likely to resist changes when they occur.

Since change is inevitable, it’s a good idea to communicate early and often as things shift. Strive for as much transparency in the workplace as possible. And if you do make changes in your organization, make time to check in with the people being affected. You can try to minimize the impact to them and help create a transition plan if need be.

Types of organizational structures

There are several different types of organizational structures, each with its own advantages and disadvantages. The most common are functional , divisional , matrix , project team , flat , and network .

Functional organizational structures are best for small businesses because they allow for clear decision-making hierarchies. Each team operates as an individual “silo.” Once teams grow, they benefit from making these functional structures less rigid. Teams often move faster and collaborate better with more overlap.

Divisional structures are best for large businesses because they allow for more specialization. For example, a global company might divide their business into regions (such as EMEA/APAC), or broad service categories (like B2B/D2C).

In the matrix structure , employees work in both functional and project teams which may be structured differently. Employees then typically report to two bosses: one who oversees their day-to-day work, as well as another boss that oversees larger projects or tasks.

A project team approach would include any number of functions working together on a specific project without a permanent hierarchy. Employees report up through their individual bosses. But they also contribute to team efforts led by managers from other departments on the team as needed.

Flat organizations have as little hierarchical structure as possible. Middle managers are largely absent from staff. Instead, the workforce often reports directly to managers or leaders at the “highest” level. Highly-autonomous employees often thrive in these environments. The lack of hierarchy motivates people to make decisions, take ownership, and facilitates problem-solving.

In a network structure , individual freelancers, groups, or associations work together. They each work as separate functional teams, but may share an overarching entity. Professional associations often have this type of structure.

Choosing the best organizational structure for your company

When it comes to organizational structures, there is no one-size-fits-all solution. The best way to choose an organizational structure for your company is to first assess your business needs and goals. From there, you can match those needs with one of the common organizational structures. 

Although there isn’t a “right” answer, some organization structures are a better fit for your team than others. And while we normally advocate for trying several solutions until you find what works, that doesn’t work as well with organizational development . 

Company reorganizations (especially repeated ones) tend to destroy employee morale . Even when handled well, reorgs create uncertainty and stress on employees. Since they’re often a precursor to layoffs, people tend to fear losing their jobs — even when the changes are generally positive. And if there’s a pattern of other major changes rapidly coming down the line? That’s a recipe for cynicism and workplace burnout .

When deciding on an organizational structure, it’s important to keep these four factors in mind:

The structure you choose will depend on the type of company you run. For example, companies that rely on a number of front-line employees are structured a lot differently than nonprofit organizations. Each will have a different organizational chart based on what they do and where they need to prioritize their efforts. 

To build an effective organization , you need to know which team members are there to facilitate the work of the people in the field and which employees support the leaders. For example, C-suite executives often have a team dedicated to supporting their efforts. But the customer service team exists to support the end user. Some roles, like marketing or product development, sit squarely in the middle. Your allocation of resources needs to reflect a balance between these two sets of needs.

Company size is critical to consider when determining a formal organizational structure. Smaller companies often have a high deree of overlap in roles. They have less formalized structures. This lack of standardization can present some challenges, but it frees teams to grow rapidly. 

On the other hand, larger organizations tend to grow faster with a more centralized, formal structure. Why? It makes it easier for people to know where to find information, who to talk to in order to get things done, and avoid duplicating efforts needlessly. The challenges and unique strengths of each differently sized organization help inform the best type of arrangement.

3. Stage 

In order to create standardized systems, there (usually) needs to be something to systematize. It’s pretty hard — or deceptively easy — to develop systems for a business that has no clients, no services, and no employees.

In the early stages, not only do small companies benefit from a less formalized structure — they don’t need one. Once workflows emerge, patterns arise, and problems occur, they can reflect those learnings as a formal process. The need for reporting relationships and divisional structure arises as the need for systems does.

4. Systems 

Organizations at every stage — even with just one person — tend to organize their work by function. There’s accounting, marketing, and service right from day one. When this work is handled by a single person, there’s no need to articulate systems. More people means more need to define how, when, and why teamwork happens. 

Both the existing and desired systems play a role in organization structure. If you need or want faster collaboration and communication across teams, you’ll want to design a “flatter” structure. If leaders need to be removed from day-to-day activities, it will help to have a structure that delegates authority and accountability to others .

Building a healthy organization means more than just functioning well — although that is important. It means creating plans to support your employees and the workplace in their growth. Giving some thought to the types of authority that currently exist can help you choose the right organizational structure. But knowing where you want to go and the outcomes you want to achieve in the future will help you get there.

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Allaya Cooks-Campbell

With over 15 years of content experience, Allaya Cooks Campbell has written for outlets such as ScaryMommy, HRzone, and HuffPost. She holds a B.A. in Psychology and is a certified yoga instructor as well as a certified Integrative Wellness & Life Coach. Allaya is passionate about whole-person wellness, yoga, and mental health.

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Best Organizational Structures for a Business

Blueprints on how companies are run and how information is passed within the organization

What are the Best Organizational Structures for a Business?

Organizational structures are essentially blueprints that reveal how companies are run and managed and how information is passed within the organization. An organizational structure is literally a chart or diagram that depicts the logistical organization of a company.

Finding the most appropriate organizational structure for a business depends on a number of factors. Below are three of the most important factors to consider in choosing among the best organizational structures for a business:

• The industry the company fits into
• The overall size of the company
• The company’s goals (what it hopes to achieve, whether that be in terms of finances or how the company intends to be of service to its customers)
• Organizational structures are essentially blueprints that reveal how companies are run and how information is passed within the organization.
• Traditional line organizational structures are simplistic but rigid. It can take a good deal of time for information to pass through the company, with each link reporting to ONE direct supervisor. Such a structure is best suited to smaller companies.
• Functional organizational structures are similar to line structures; however, each tier may share information and offer direction horizontally (to one another). This structure is ideal for large companies with many departments and for those companies that need to meet strict deadlines.

Types of Organizational Structures

1. traditional.

A traditional line organizational structure is truly the place to start for most companies, especially the smaller ones that don’t necessarily comprise a vast number of departments or require a major number of links in the chain of command/communication. The image above is an example of what a traditional line organizational structure looks like.

With the traditional structure, simplicity is the primary distinguishing feature. It is a top-down approach. Direction and communication start with the head of the company (in this example, the company is led by the chief executive officer ). The next tier or link in the chain is a director. This is the individual (or office) that oversees a department or segment of the company. Finally, within each department, there are managers and employees.

With the traditional line organizational structure, the process of communicating information is very much narrowly focused. All information starts at the top and is passed down, typically from one individual to the next. While the practice keeps things simple, it’s a rather rigid organizational structure and, because there is no horizontal sharing of information, it can take a substantial amount of time to process information throughout the company. The traditional organizational structure is best suited to small businesses that, again, comprise a fairly small number of departments and a limited number of employees.

2. Functional

The image above reveals what a functional organizational structure looks like. It differs from the traditional line structure by means of the existence of established channels for the horizontal sharing of information and direction, with a substantial increase in the sheer number of lines of communication .

With the traditional structure, individual employees communicate directly with their immediate supervisors. With the functional structure, however, employees often communicate with individuals whose control they don’t fall immediately under.

The functional type of organizational structure is ideal for larger companies with a lot of departments and for companies that need to meet short timeframe deadlines.

3. Project-based

One final organizational structure to look at is the project-based structure. It breaks a company up into groups based upon the projects it needs to complete. There is, of course, a primary leader – the director. Then, there is a manager appointed to oversee the team assigned to complete each project.

The project-based structure features the best of both the traditional line and functional organizational structures: it’s simple, with the first tiers answering only to a direct supervisor. The final tier is the team responsible for completing whatever project is set before them. However, each member of the team can easily get information and assistance from the other members.

Related Readings

Thank you for reading CFI’s guide to the Best Organizational Structures for a Business. To keep learning and advancing your career, the following CFI resources will be helpful:

• Forms of Business Structure Course
• Board of Directors
• Key Performance Indicators (KPIs)
• How to Assess Effective Management
• Types of Organizations
• See all management & strategy resources
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8 Types of Business Organizational Structures [+ Free Downloadable Org Charts]

Large or small, every organization should operate with a defined organizational structure. A well thought out and strategic business configuration clarifies reporting relationships and supports good communication – resulting in efficient and effective work process flow.

The board and senior leadership should be the group who determines the type of organizational structure that would best support the internal operations, how work is carried out and the chain-of-command.

Determining the best structure is done by answering the questions:

What are the functional groupings of work processes?

Are there natural groupings of teams, work groups or units?

Senior leadership looks at all functions and determines how they would like work activities to be organized and carried out. This process also identifies natural reporting relationships and chain-of-command. Reporting relationships can be both vertical as well as horizontal.

8 Common Business Organizational Structures

1. hierarchical organizational structure.

Organizations that use a traditional hierarchical structure rely on a vertical chain of command as the prime method of organizing employees and their responsibilities. Military, government, and other very large organizations use a hierarchy to determine the level of control employees have over their work as well as their rank relative to others.

Hierarchical structures typically feature multiple layers of management and are therefore prone to bureaucracy and the creation of silos that prevent cross-team collaboration.

An example of hierarchical organizational structures:

Easy layout to understand

Communicate reporting relationships

Built-in understanding of future promotion opportunities

Prone to bureaucracy

Can create organizational silos

Ready to build your own organizational chart?

2. Flat or Horizontal Organizational Structure

Companies with flat or horizontal structures often have fewer levels of management or executives over employees. Most people that have worked for a small company such as a startup will have experienced this type of structure. At most, there is one layer of middle managers between an executive(s) and employees, but oftentimes there are no middle managers present at the company.

The advantage of a horizontal structure is that it gives employees more responsibilities which in turn requires them to have more transparency within the greater organization. It also removes the bureaucratic nature of large hierarchical structures, allowing for quick decisions to be made and executed on.

The disadvantage of a flat structure is that it requires multidisciplinary professionals who don’t desire to specialize. Middle managers also have a tendency to be stretched thin within this structure as they’ll be overseeing many types of professionals and projects.

Recommended Reading: Hierarchical vs. Flat Organizational Structures and Benefits of Each

Employees often receive more responsibilities

Requires employees given more transparency

Allows for quick communication and decision making

Challenging for employees to specialize

Managers can easily be stretched thin in this structure

3. Matrix Organizational Structure

A matrix structure provides for reporting levels both horizontally as well as vertically. Employees may be part of a functional group (i.e. engineer) but may serve on a team that supports new product development (i.e. new album). This kind of structure may have members of different groups working together to develop a new product line.

For example, a recording engineer who works for a music publisher, may have engineers who report to him but may also use his expertise and work with teams to develop new music albums.

Easily allow cross-functional work between teams

Gives employees opportunity via their department projects and for organizational projects

Employees might have multiple managers at one time

Requires employees to make more difficult prioritization decisions

4. Functional Organizational Structure

Functional organizational structures are the most common. A structure of this type groups individuals by specific functions performed. Common departments such as human resources, accounting and purchasing are organized by separating each of these areas and managing them independently of the others.

For example, managers of different functional areas all report up to one director or vice president who has responsibility for all of the operational areas.

The advantage of this type of structure is that functions are separated by expertise but the challenges comes in when different functional areas turn into silos that focus only on their area of responsibility and don’t support the function of other departments.

An example of functional organizational structures:

Most common and therefore understood by employees

Departments have plenty of specialized expertise

Prone to Silos

Employees may feel it’s not their responsibility to oversee that their work or project is successfully handed off to the other team

Ready to build your own functional organizational chart?

5. Product Organizational Structure

Another common structure is to be organized by a specific product type. Each product group falls within the reporting structure of an executive and that person oversees everything related to that particular product line.

For example, an executive over Kraft products would be responsible for every product under that label – dressings, meats, sauces, etc.

The advantage of this type of structure is that it organizes products by category but can create completely separate processes from other product lines within the organization.

An example of product organizational structures:

Organizes products by categories

Focus on specific market segments

Allows for specialization

Can encourage healthy competition between departments

Other product teams might be cut off from innovations and learning opportunities by other teams at the same company

Can create inefficient/duplicative functions and resources

Can nurture negative rivalries across departments

Ready to build your own product organizational chart?

6. Customer Organizational Structure

Certain industries will organize by customer type. This is done in an effort to ensure specific customer expectations are met by a customized service approach.

An example of this would be in healthcare. A patient seen as an outpatient has very different needs than those of patients who spend time in the hospital as inpatients.  A customer centered structure creates customized care for those patients.

The advantage of this type of structure is that it specializes in the needs of each customer group but can ignore the needs of different customer types.

An example of customer organizational structures:

Creates a focus on customer satisfaction

Customer groups are not always easily defined and segmented

It can be challenging to operationalize competing customer demands

Ready to build your customer organizational chart?

7. Geographic Organizational Structure

For organizations that cover a span of geographic regions, it sometimes makes sense to organize by region. This is done to better support logistical demands and differences in geographic customer needs.

Typically a structure that is organized by geographical regions reports up to a central oversight person. You see this type of structure in companies that go beyond a city or state limit and may have customers all across the country or in multiple states.

An example of geographic organizational structures:

Better supports logistical demands

Caters to different cultural and geographic customer expectations

Can cause conflicts between local and central management

Duplication of jobs, resources, and functions

Ready to build your geographic organizational chart?

8. Network Organizational Structure

Network organizational structures work for businesses that employ freelancers, subcontractors, and vendors dispersed between satellite offices. This type of structure organizes the proper distribution of the company’s resources. Employees can visualize workflows, processes, and relationships with on- and off-site coworkers.

The communication inherent in network organizational structures encourages employees to collaborate to complete projects. As there isn’t a strict hierarchy, employees are empowered to take initiative and make decisions.

An advantage of the network organizational structure is that it emphasizes open employee communication in the workplace over hierarchy. There isn’t a chain of command. It lets employees know each other’s project involvement so they can easily collaborate.

An example of network organizational charts

Encourages collaboration and communication

Employees encouraged to take the initiative in key decisions

Requires more complex relationships within the fluid organizational structure

Lacks easy-to-understand hierarchies

Start Building Your Organizational Structure With Pingboard

Deliberate time and thought should go into the design of an organization’s structure and the build out of an org chart. This is important so employees have a visual of how the organization functions and understands the chain-of-command. Operating within a defined structure, with good communication processes and work-flows, help to ensure efficient management of resources – people, time and money.

Build an org chart today by importing your people data into Pingboard or simply drag and drop people into the org chart. Workforce planning is easy with Pingboard because you can create multiple versions of your org chart and share a private link with colleagues for collaboration. When you are ready to share with your staff give everyone a secure link to the org chart so they can see reporting structures across your organization, and insightful employee profiles of coworkers.

Try us out for free today! If you need any help setting up your account we’re always here.

Browse Organizational Structure Templates By Industry

We make it easy to structure your business and add transparency for all levels of employees. After compiling data from thousands of org charts, we invite you to check out our pre-built org chart templates designed with your industry in mind .

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How To Start A Business In 11 Steps (2024 Guide)

Updated: Apr 7, 2024, 1:44pm

Table of Contents

Before you begin: get in the right mindset, 1. determine your business concept, 2. research your competitors and market, 3. create your business plan, 4. choose your business structure, 5. register your business and get licenses, 6. get your finances in order, 7. fund your business, 8. apply for business insurance, 9. get the right business tools, 10. market your business, 11. scale your business, what are the best states to start a business, bottom line, frequently asked questions (faqs).

Starting a business is one of the most exciting and rewarding experiences you can have. But where do you begin? There are several ways to approach creating a business, along with many important considerations. To help take the guesswork out of the process and improve your chances of success, follow our comprehensive guide on how to start a business. We’ll walk you through each step of the process, from defining your business idea to registering, launching and growing your business .

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The public often hears about overnight successes because they make for a great headline. However, it’s rarely that simple—they don’t see the years of dreaming, building and positioning before a big public launch. For this reason, remember to focus on your business journey and don’t measure your success against someone else’s.

Consistency Is Key

New business owners tend to feed off their motivation initially but get frustrated when that motivation wanes. This is why it’s essential to create habits and follow routines that power you through when motivation goes away.

Take the Next Step

Some business owners dive in headfirst without looking and make things up as they go along. Then, there are business owners who stay stuck in analysis paralysis and never start. Perhaps you’re a mixture of the two—and that’s right where you need to be. The best way to accomplish any business or personal goal is to write out every possible step it takes to achieve the goal. Then, order those steps by what needs to happen first. Some steps may take minutes while others take a long time. The point is to always take the next step.

Most business advice tells you to monetize what you love, but it misses two other very important elements: it needs to be profitable and something you’re good at. For example, you may love music, but how viable is your business idea if you’re not a great singer or songwriter? Maybe you love making soap and want to open a soap shop in your small town that already has three close by—it won’t be easy to corner the market when you’re creating the same product as other nearby stores.

If you don’t have a firm idea of what your business will entail, ask yourself the following questions:

• What do you love to do?
• What do you hate to do?
• Can you think of something that would make those things easier?
• What are you good at?
• What do others come to you for advice about?
• If you were given ten minutes to give a five-minute speech on any topic, what would it be?
• What’s something you’ve always wanted to do, but lacked resources for?

These questions can lead you to an idea for your business. If you already have an idea, they might help you expand it. Once you have your idea, measure it against whether you’re good at it and if it’s profitable.

Your business idea also doesn’t have to be the next Scrub Daddy or Squatty Potty. Instead, you can take an existing product and improve upon it. You can also sell a digital product so there’s little overhead.

What Kind of Business Should You Start?

Before you choose the type of business to start, there are some key things to consider:

• What type of funding do you have?
• How much time do you have to invest in your business?
• Do you prefer to work from home or at an office or workshop?
• What interests and passions do you have?
• Can you sell information (such as a course), rather than a product?
• What skills or expertise do you have?
• How fast do you need to scale your business?
• What kind of support do you have to start your business?
• Are you partnering with someone else?
• Does the franchise model make more sense to you?

Consider Popular Business Ideas

Not sure what business to start? Consider one of these popular business ideas:

• Start a Franchise
• Start a Blog
• Start an Online Store
• Start a Dropshipping Business
• Start a Cleaning Business
• Start a Bookkeeping Business
• Start a Clothing Business
• Start a Landscaping Business
• Start a Consulting Business
• Start a Photography Business
• Start a Vending Machine Business

Most entrepreneurs spend more time on their products than they do getting to know the competition. If you ever apply for outside funding, the potential lender or partner wants to know: what sets you (or your business idea) apart? If market analysis indicates your product or service is saturated in your area, see if you can think of a different approach. Take housekeeping, for example—rather than general cleaning services, you might specialize in homes with pets or focus on garage cleanups.

Primary Research

The first stage of any competition study is primary research, which entails obtaining data directly from potential customers rather than basing your conclusions on past data. You can use questionnaires, surveys and interviews to learn what consumers want. Surveying friends and family isn’t recommended unless they’re your target market. People who say they’d buy something and people who do are very different. The last thing you want is to take so much stock in what they say, create the product and flop when you try to sell it because all of the people who said they’d buy it don’t because the product isn’t something they’d buy.

Secondary Research

Utilize existing sources of information, such as census data, to gather information when you do secondary research. The current data may be studied, compiled and analyzed in various ways that are appropriate for your needs but it may not be as detailed as primary research.

Conduct a SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities and threats. Conducting a SWOT analysis allows you to look at the facts about how your product or idea might perform if taken to market, and it can also help you make decisions about the direction of your idea. Your business idea might have some weaknesses that you hadn’t considered or there may be some opportunities to improve on a competitor’s product.

Asking pertinent questions during a SWOT analysis can help you identify and address weaknesses before they tank your new business.

A business plan is a dynamic document that serves as a roadmap for establishing a new business. This document makes it simple for potential investors, financial institutions and company management to understand and absorb. Even if you intend to self-finance, a business plan can help you flesh out your idea and spot potential problems. When writing a well-rounded business plan, include the following sections:

• Executive summary: The executive summary should be the first item in the business plan, but it should be written last. It describes the proposed new business and highlights the goals of the company and the methods to achieve them.
• Company description: The company description covers what problems your product or service solves and why your business or idea is best. For example, maybe your background is in molecular engineering, and you’ve used that background to create a new type of athletic wear—you have the proper credentials to make the best material.
• Market analysis: This section of the business plan analyzes how well a company is positioned against its competitors. The market analysis should include target market, segmentation analysis, market size, growth rate, trends and a competitive environment assessment.
• Organization and structure: Write about the type of business organization you expect, what risk management strategies you propose and who will staff the management team. What are their qualifications? Will your business be a single-member limited liability company (LLC) or a corporation ?
• Mission and goals: This section should contain a brief mission statement and detail what the business wishes to accomplish and the steps to get there. These goals should be SMART (specific, measurable, action-orientated, realistic and time-bound).
• Products or services: This section describes how your business will operate. It includes what products you’ll offer to consumers at the beginning of the business, how they compare to existing competitors, how much your products cost, who will be responsible for creating the products, how you’ll source materials and how much they cost to make.
• Background summary: This portion of the business plan is the most time-consuming to write. Compile and summarize any data, articles and research studies on trends that could positively and negatively affect your business or industry.
• Marketing plan: The marketing plan identifies the characteristics of your product or service, summarizes the SWOT analysis and analyzes competitors. It also discusses how you’ll promote your business, how much money will be spent on marketing and how long the campaign is expected to last.
• Financial plan: The financial plan is perhaps the core of the business plan because, without money, the business will not move forward. Include a proposed budget in your financial plan along with projected financial statements, such as an income statement, a balance sheet and a statement of cash flows. Usually, five years of projected financial statements are acceptable. This section is also where you should include your funding request if you’re looking for outside funding.

Learn more: Download our free simple business plan template .

Come Up With an Exit Strategy

An exit strategy is important for any business that is seeking funding because it outlines how you’ll sell the company or transfer ownership if you decide to retire or move on to other projects. An exit strategy also allows you to get the most value out of your business when it’s time to sell. There are a few different options for exiting a business, and the best option for you depends on your goals and circumstances.

The most common exit strategies are:

• Selling the business to another party
• Passing the business down to family members
• Liquidating the business assets
• Closing the doors and walking away

Develop a Scalable Business Model

As your small business grows, it’s important to have a scalable business model so that you can accommodate additional customers without incurring additional costs. A scalable business model is one that can be replicated easily to serve more customers without a significant increase in expenses.

Some common scalable business models are:

• Subscription-based businesses
• Businesses that sell digital products
• Franchise businesses
• Network marketing businesses

Start Planning for Taxes

One of the most important things to do when starting a small business is to start planning for taxes. Taxes can be complex, and there are several different types of taxes you may be liable for, including income tax, self-employment tax, sales tax and property tax. Depending on the type of business you’re operating, you may also be required to pay other taxes, such as payroll tax or unemployment tax.

Start A Limited Liability Company Online Today with ZenBusiness

Click to get started.

When structuring your business, it’s essential to consider how each structure impacts the amount of taxes you owe, daily operations and whether your personal assets are at risk.

An LLC limits your personal liability for business debts. LLCs can be owned by one or more people or companies and must include a registered agent . These owners are referred to as members.

• LLCs offer liability protection for the owners
• They’re one of the easiest business entities to set up
• You can have a single-member LLC
• You may be required to file additional paperwork with your state on a regular basis
• LLCs can’t issue stock
• You’ll need to pay annual filing fees to your state

Limited Liability Partnership (LLP)

An LLP is similar to an LLC but is typically used for licensed business professionals such as an attorney or accountant. These arrangements require a partnership agreement.

• Partners have limited liability for the debts and actions of the LLP
• LLPs are easy to form and don’t require much paperwork
• There’s no limit to the number of partners in an LLP
• Partners are required to actively take part in the business
• LLPs can’t issue stock
• All partners are personally liable for any malpractice claims against the business

Sole Proprietorship

If you start a solo business, you might consider a sole proprietorship . The company and the owner, for legal and tax purposes, are considered the same. The business owner assumes liability for the business. So, if the business fails, the owner is personally and financially responsible for all business debts.

• Sole proprietorships are easy to form
• There’s no need to file additional paperwork with your state
• You’re in complete control of the business
• You’re personally liable for all business debts
• It can be difficult to raise money for a sole proprietorship
• The business may have a limited lifespan

Corporation

A corporation limits your personal liability for business debts just as an LLC does. A corporation can be taxed as a C corporation (C-corp) or an S corporation (S-corp). S-corp status offers pass-through taxation to small corporations that meet certain IRS requirements. Larger companies and startups hoping to attract venture capital are usually taxed as C-corps.

• Corporations offer liability protection for the owners
• The life span of a corporation is not limited
• A corporation can have an unlimited number of shareholders
• Corporations are subject to double taxation
• They’re more expensive and complicated to set up than other business structures
• The shareholders may have limited liability

Before you decide on a business structure, discuss your situation with a small business accountant and possibly an attorney, as each business type has different tax treatments that could affect your bottom line.

Helpful Resources

• How To Set Up an LLC in 7 Steps
• How To Start a Sole Proprietorship
• How To Start a Corporation
• How To Start a Nonprofit
• How To Start a 501(c)(3)

There are several legal issues to address when starting a business after choosing the business structure. The following is a good checklist of items to consider when establishing your business:

Choose Your Business Name

Make it memorable but not too difficult. Choose the same domain name, if available, to establish your internet presence. A business name cannot be the same as another registered company in your state, nor can it infringe on another trademark or service mark that is already registered with the United States Patent and Trademark Office (USPTO).

Business Name vs. DBA

There are business names, and then there are fictitious business names known as “Doing Business As” or DBA. You may need to file a DBA if you’re operating under a name that’s different from the legal name of your business. For example, “Mike’s Bike Shop” is doing business as “Mike’s Bikes.” The legal name of the business is “Mike’s Bike Shop,” and “Mike’s Bikes” is the DBA.

You may need to file a DBA with your state, county or city government offices. The benefits of a DBA include:

• It can help you open a business bank account under your business name
• A DBA can be used as a “trade name” to brand your products or services
• A DBA can be used to get a business license

Register Your Business and Obtain an EIN

You’ll officially create a corporation, LLC or other business entity by filing forms with your state’s business agency―usually the Secretary of State. As part of this process, you’ll need to choose a registered agent to accept legal documents on behalf of your business. You’ll also pay a filing fee. The state will send you a certificate that you can use to apply for licenses, a tax identification number (TIN) and business bank accounts.

Next, apply for an employer identification number (EIN) . All businesses, other than sole proprietorships with no employees, must have a federal employer identification number. Submit your application to the IRS and you’ll typically receive your number in minutes.

Get Appropriate Licenses and Permits

Legal requirements are determined by your industry and jurisdiction. Most businesses need a mixture of local, state and federal licenses to operate. Check with your local government office (and even an attorney) for licensing information tailored to your area.

• Best LLC Services
• How To Register a Business Name
• How To Register a DBA
• How To Get an EIN for an LLC
• How To Get a Business License

Start an LLC Online Today With ZenBusiness

Click on the state below to get started.

Open a Business Bank Account

Keep your business and personal finances separate. Here’s how to choose a business checking account —and why separate business accounts are essential. When you open a business bank account, you’ll need to provide your business name and your business tax identification number (EIN). This business bank account can be used for your business transactions, such as paying suppliers or invoicing customers. Most times, a bank will require a separate business bank account to issue a business loan or line of credit.

Hire a Bookkeeper or Get Accounting Software

If you sell a product, you need an inventory function in your accounting software to manage and track inventory. The software should have ledger and journal entries and the ability to generate financial statements.

Some software programs double as bookkeeping tools. These often include features such as check writing and managing receivables and payables. You can also use this software to track your income and expenses, generate invoices, run reports and calculate taxes.

There are many bookkeeping services available that can do all of this for you, and more. These services can be accessed online from any computer or mobile device and often include features such as bank reconciliation and invoicing. Check out the best accounting software for small business, or see if you want to handle the bookkeeping yourself.

Determine Your Break-Even Point

Before you fund your business, you must get an idea of your startup costs. To determine these, make a list of all the physical supplies you need, estimate the cost of any professional services you will require, determine the price of any licenses or permits required to operate and calculate the cost of office space or other real estate. Add in the costs of payroll and benefits, if applicable.

Businesses can take years to turn a profit, so it’s better to overestimate the startup costs and have too much money than too little. Many experts recommend having enough cash on hand to cover six months of operating expenses.

When you know how much you need to get started with your business, you need to know the point at which your business makes money. This figure is your break-even point.

In contrast, the contribution margin = total sales revenue – cost to make product

For example, let’s say you’re starting a small business that sells miniature birdhouses for fairy gardens. You have determined that it will cost you $500 in startup costs. Your variable costs are $0.40 per birdhouse produced, and you sell them for $1.50 each.

Let’s write these out so it’s easy to follow:

This means that you need to sell at least 456 units just to cover your costs. If you can sell more than 456 units in your first month, you will make a profit.

• The Best Business Checking Accounts
• The Best Accounting Software for Small Business
• How To Open a Bank Account

There are many different ways to fund your business—some require considerable effort, while others are easier to obtain. Two categories of funding exist: internal and external.

Internal funding includes:

• Personal savings
• Credit cards
• Funds from friends and family

If you finance the business with your own funds or with credit cards, you have to pay the debt on the credit cards and you’ve lost a chunk of your wealth if the business fails. By allowing your family members or friends to invest in your business, you are risking hard feelings and strained relationships if the company goes under. Business owners who want to minimize these risks may consider external funding.

External funding includes:

• Small business loans
• Small business grants
• Angel investors
• Venture capital
• Crowdfunding

Small businesses may have to use a combination of several sources of capital. Consider how much money is needed, how long it will take before the company can repay it and how risk-tolerant you are. No matter which source you use, plan for profit. It’s far better to take home six figures than make seven figures and only keep $80,000 of it.

Funding ideas include:

• Invoice factoring: With invoice factoring , you can sell your unpaid invoices to a third party at a discount.
• Business lines of credit: Apply for a business line of credit , which is similar to a personal line of credit. The credit limit and interest rate will be based on your business’s revenue, credit score and financial history.
• Equipment financing: If you need to purchase expensive equipment for your business, you can finance it with a loan or lease.
• Small Business Administration (SBA) microloans: Microloans are up to $50,000 loans that can be used for working capital, inventory or supplies and machinery or equipment.
• Grants: The federal government offers grants for businesses that promote innovation, export growth or are located in historically disadvantaged areas. You can also find grants through local and regional organizations.
• Crowdfunding: With crowdfunding , you can raise money from a large group of people by soliciting donations or selling equity in your company.

Choose the right funding source for your business by considering the amount of money you need, the time frame for repayment and your tolerance for risk.

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You need to have insurance for your business , even if it’s a home-based business or you don’t have any employees. The type of insurance you need depends on your business model and what risks you face. You might need more than one type of policy, and you might need additional coverage as your business grows. In most states, workers’ compensation insurance is required by law if you have employees.

Work With an Agent To Get Insured

An insurance agent can help determine what coverages are appropriate for your business and find policies from insurers that offer the best rates. An independent insurance agent represents several different insurers, so they can shop around for the best rates and coverage options.

Basic Types of Business Insurance Coverage

• Liability insurance protects your business against third-party claims of bodily injury, property damage and personal injury such as defamation or false advertising.
• Property insurance covers the physical assets of your business, including your office space, equipment and inventory.
• Business interruption insurance pays for the loss of income if your business is forced to close temporarily due to a covered event such as a natural disaster.
• Product liability insurance protects against claims that your products caused bodily injury or property damage.
• Employee practices liability insurance covers claims from employees alleging discrimination, sexual harassment or other wrongful termination.
• Workers’ compensation insurance covers medical expenses and income replacement for employees who are injured on the job.
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Business tools can help make your life easier and make your business run more smoothly. The right tools can help you save time, automate tasks and make better decisions.

Consider the following tools in your arsenal:

• Accounting software : Track your business income and expenses, prepare financial statements and file taxes. Examples include QuickBooks and FreshBooks.
• Customer relationship management (CRM) software : This will help you manage your customer relationships, track sales and marketing data and automate tasks like customer service and follow-ups. Examples include Zoho CRM and monday.com.
• Project management software : Plan, execute and track projects. It can also be used to manage employee tasks and allocate resources. Examples include Airtable and ClickUp.
• Credit card processor : This will allow you to accept credit card payments from customers. Examples include Stripe and PayPal.
• Point of sale (POS) : A system that allows you to process customer payments. Some accounting software and CRM software have POS features built-in. Examples include Clover and Lightspeed.
• Virtual private network (VPN) : Provides a secure, private connection between your computer and the internet. This is important for businesses that handle sensitive data. Examples include NordVPN and ExpressVPN.
• Merchant services : When customers make a purchase, the money is deposited into your business account. You can also use merchant services to set up recurring billing or subscription payments. Examples include Square and Stripe.
• Email hosting : This allows you to create a professional email address with your own domain name. Examples include G Suite and Microsoft Office 365.

Many business owners spend so much money creating their products that there isn’t a marketing budget by the time they’ve launched. Alternatively, they’ve spent so much time developing the product that marketing is an afterthought.

Create a Website

Even if you’re a brick-and-mortar business, a web presence is essential. Creating a website doesn’t take long, either—you can have one done in as little as a weekend. You can make a standard informational website or an e-commerce site where you sell products online. If you sell products or services offline, include a page on your site where customers can find your locations and hours. Other pages to add include an “About Us” page, product or service pages, frequently asked questions (FAQs), a blog and contact information.

Optimize Your Site for SEO

After getting a website or e-commerce store, focus on optimizing it for search engines (SEO). This way, when a potential customer searches for specific keywords for your products, the search engine can point them to your site. SEO is a long-term strategy, so don’t expect a ton of traffic from search engines initially—even if you’re using all the right keywords.

Create Relevant Content

Provide quality digital content on your site that makes it easy for customers to find the correct answers to their questions. Content marketing ideas include videos, customer testimonials, blog posts and demos. Consider content marketing one of the most critical tasks on your daily to-do list. This is used in conjunction with posting on social media.

Get Listed in Online Directories

Customers use online directories like Yelp, Google My Business and Facebook to find local businesses. Some city halls and chambers of commerce have business directories too. Include your business in as many relevant directories as possible. You can also create listings for your business on specific directories that focus on your industry.

Develop a Social Media Strategy

Your potential customers are using social media every day—you need to be there too. Post content that’s interesting and relevant to your audience. Use social media to drive traffic back to your website where customers can learn more about what you do and buy your products or services.

You don’t necessarily need to be on every social media platform available. However, you should have a presence on Facebook and Instagram because they offer e-commerce features that allow you to sell directly from your social media accounts. Both of these platforms have free ad training to help you market your business.

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To scale your business, you need to grow your customer base and revenue. This can be done by expanding your marketing efforts, improving your product or service, collaborating with other creators or adding new products or services that complement what you already offer.

Think about ways you can automate or outsource certain tasks so you can focus on scaling the business. For example, if social media marketing is taking up too much of your time, consider using a platform such as Hootsuite to help you manage your accounts more efficiently. You can also consider outsourcing the time-consumer completely.

You can also use technology to automate certain business processes, including accounting, email marketing and lead generation. Doing this will give you more time to focus on other aspects of your business.

When scaling your business, it’s important to keep an eye on your finances and make sure you’re still profitable. If you’re not making enough money to cover your costs, you need to either reduce your expenses or find ways to increase your revenue.

Build a Team

As your business grows, you’ll need to delegate tasks and put together a team of people who can help you run the day-to-day operations. This might include hiring additional staff, contractors or freelancers.

Resources for building a team include:

• Hiring platforms: To find the right candidates, hiring platforms, such as Indeed and Glassdoor, can help you post job descriptions, screen résumés and conduct video interviews.
• Job boards: Job boards such as Craigslist and Indeed allow you to post open positions for free.
• Social media: You can also use social media platforms such as LinkedIn and Facebook to find potential employees.
• Freelance platforms: Using Upwork, Freelancer and Fiverr can help you find talented freelancers for one-time or short-term projects. You can also outsource certain tasks, such as customer service, social media marketing or bookkeeping.

You might also consider partnering with other businesses in your industry. For example, if you’re a wedding planner, you could partner with a florist, photographer, catering company or venue. This way, you can offer your customers a one-stop shop for all their wedding needs. Another example is an e-commerce store that partners with a fulfillment center. This type of partnership can help you save money on shipping and storage costs, and it can also help you get your products to your customers faster.

To find potential partnerships, search for businesses in your industry that complement what you do. For example, if you’re a web designer, you could partner with a digital marketing agency.

You can also search for businesses that serve the same target market as you but offer different products or services. For example, if you sell women’s clothing, you could partner with a jewelry store or a hair salon.

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To rank the best states to start a business in 2024, Forbes Advisor analyzed 18 key metrics across five categories to determine which states are the best and worst to start a business in. Our ranking takes into consideration factors that impact businesses and their ability to succeed, such as business costs, business climate, economy, workforce and financial accessibility in each state. Check out the full report .

Starting a small business takes time, effort and perseverance. But if you’re willing to put in the work, it can be a great way to achieve your dreams and goals. Be sure to do your research, create a solid business plan and pivot along the way. Once you’re operational, don’t forget to stay focused and organized so you can continue to grow your business.

How do I start a small business with no money?

There are several funding sources for brand-new businesses and most require a business plan to secure it. These include the SBA , private grants, angel investors, crowdfunding and venture capital.

What is the best business structure?

The best business structure for your business will depend entirely on what kind of company you form, your industry and what you want to accomplish. But any successful business structure will be one that will help your company set realistic goals and follow through on set tasks.

Do I need a business credit card?

You don’t need one, but a business credit card can be helpful for new small businesses. It allows you to start building business credit, which can help you down the road when you need to take out a loan or line of credit. Additionally, business credit cards often come with rewards and perks that can save you money on business expenses.

Do I need a special license or permit to start a small business?

The answer to this question will depend on the type of business you want to start and where you’re located. Some businesses, such as restaurants, will require a special permit or license to operate. Others, such as home daycare providers, may need to register with the state.

How much does it cost to create a business?

The cost of starting a business will vary depending on the size and type of company you want to create. For example, a home-based business will be less expensive to start than a brick-and-mortar store. Additionally, the cost of starting a business will increase if you need to rent or buy commercial space, hire employees or purchase inventory. You could potentially get started for free by dropshipping or selling digital goods.

How do I get a loan for a new business?

The best way to get a loan for a new business is to approach banks or other financial institutions and provide them with a business plan and your financial history. You can also look into government-backed loans, such as those offered by the SBA. Startups may also be able to get loans from alternative lenders, including online platforms such as Kiva.

Do I need a business degree to start a business?

No, you don’t need a business degree to start a business. However, acquiring a degree in business or a related field can provide you with the understanding and ability to run an effective company. Additionally, you may want to consider taking some business courses if you don’t have a degree to learn more about starting and running a business. You can find these online and at your local Small Business Administration office.

What are some easy businesses to start?

One of the easiest businesses to start also has the lowest overhead: selling digital goods. This can include items such as e-books, online courses, audio files or software. If you have expertise in a particular area or niche, this is a great option for you. Dropshipping is also a great option because you don’t have to keep inventory. You could also buy wholesale products or create your own. Once you create your product, you can sell it through your own website or third-party platforms such as Amazon or Etsy.

What is the most profitable type of business?

There is no one answer to this question because the most profitable type of business will vary depending on a number of factors, such as your industry, location, target market and business model. However, some businesses tend to be more profitable than others, such as luxury goods, high-end services, business-to-business companies and subscription-based businesses. If you’re not sure what type of business to start, consider your strengths and interests, as well as the needs of your target market, to help you choose a profitable business idea.

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Katherine Haan is a small business owner with nearly two decades of experience helping other business owners increase their incomes.

14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.

A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.

A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.

Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?

Good questions. Here’s every reason why you need a business plan.

• 1. Business planning is proven to help you grow 30 percent faster

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The  process  of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed. 

You don’t have to just take our word for it. Studies have  proven that companies that plan  and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience  cash flow crises  that threaten to close them down. 

• 2. Planning is a necessary part of the fundraising process

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture. 

A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality. 

Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money. 

• 3. Having a business plan minimizes your risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations. 

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can  do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans. 

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

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• 4. Crafts a roadmap to achieve important milestones

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones. 

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

• 5. A plan helps you figure out if your idea can become a business

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

• If there is a market for your product or service
• Who your target audience is
• How you will gain an edge over the current competition
• If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.

6. You’ll make big spending decisions with confidence

As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase. 

These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.

7. You’re more likely to catch critical cash flow challenges early

The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your  cash flow statement  is one of the three key financial statements you’ll put together for your business plan. (The other two are your  balance sheet  and your  income statement  (P&L). 

Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills. 

• 8. Position your brand against the competition

Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:

• What is your competition doing well? What are they doing poorly?
• What can you do to set yourself apart?
• What can you learn from them?
• How can you make your business stand out?
• What key business areas can you outcompete?
• How can you identify your target market?

Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete. 

• 9. Determines financial needs and revenue models

A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind. 

Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business. 

Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.

• 10. Helps you think through your marketing strategy

A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers. 

Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc. 

Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.

• 11. Clarifies your vision and ensures everyone is on the same page

In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there. 

Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.

• 12. Future-proof your business

A business plan helps you to evaluate your current situation and make realistic projections for the future.

This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.

Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.

By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.

You’ll also be in a better position to seize opportunities as they arise.

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.

By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.  

Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.

• 14. Your business plan is an asset if you ever want to sell

Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

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• Writing your business plan

By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one. 

Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• 6. You’ll make big spending decisions with confidence
• 7. You’re more likely to catch critical cash flow challenges early

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Business Plan Management Structure: What You Need to Know

A business plan management structure can help your business identify its goals, growth plan, and structure for management. 3 min read updated on February 01, 2023

Business Organization

Every business, regardless of size, needs to have a solid plan in place for how it will be run. Without a business plan, it is nearly impossible to run the company smoothly or successfully. One aspect of the business plan should include the positions in the company and definitions for each position. Those definitions can identify roles and responsibilities, as well as the reporting structure for each role. As the needs of the business change and shift, the business structure likely will change as well. It's easier to make changes as you go when you have a plan in place.

When you're starting a business and need funding, you might not have any employees to fit the roles you have outlined in your plan. This list of roles could be more idealistic for how the company will operate when you have funding and more opportunities to hire employees. Smaller businesses tend to have less complicated needs than larger ones, so the process is usually more streamlined. However, all businesses need to show a clear understanding of workflow and demonstrate how it will be handled through every phase of growth and expansion.

The business plan should include:

• Administration
• Marketing and sales
• Production and distribution of product or service execution

Larger companies need a more detailed organizational plan with procedures that have been well thought out and documented. By creating this detailed plan, you can avoid internal confusion about who is responsible for what as well as avoid duplicated efforts that waste time. When your business runs and operates smoothly, it will be more cost-effective and efficient than a business that is disorganized. With a detailed and informative business plan, it becomes clear to potential investors and employees that you know what you're doing as a business owner. Larger companies may also need additional resources to operate, such as research and development or human resources.

Organizational Structure

You can use graphics to show your company's organizational structure. Simple flowcharts and diagrams offer visual representations of the management levels within your business, as well as the positions that fall beneath each level. With a graphic, it's easier to show the reporting structure and how various departments and divisions work together. This graphic will also help you show the other employee levels within the business.

The lower-level employees are responsible for the daily tasks of the business, so you'll need to identify and recognize the types of individuals you plan to hire, the number of people needed, and their qualifications. You might choose to include details about your hiring plan, such as where you will find employees and their estimated salaries. Don't forget to include your plan for hiring independent contractors, freelance workers, or consultants. Finally, the hiring plan should include any future positions that would be added if the business is able to expand.

Management Team Section of a Business Plan

Your company's management team is essential to business success. The management team is responsible for identifying and analyzing the objectives and goals of the company. After completing these tasks, experienced management professionals can implement and enforce strategies that will lead to success. In your business plan, this team should include the managers, owners, and board of directors (if applicable).

You can include information about the management team in several sections of your business plan, depending on the style. Regardless of where you place the details in the plan, make sure to include information about the company's legal structure and a list of owners. The owner's education, experience, and other related skills should be outlined. Discuss how much of the company each owner has, as well as the role of each owner in the business operations.

If your company has a board of directors, include the name of each member. Along with their names, you should also expand on their experience, background, and credentials, as well as include their contact information. Provide additional details on the contributions provided by each member to the company, along with information about how the members will contribute to the future growth and expansion of the business.

If you need help with a business plan management structure, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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The Walt Disney Company Announces Strategic Restructuring, Restoring Accountability to Creative Businesses

The Walt Disney Company today announced details of its strategic restructuring that will refocus the organization on creativity, empower creative leaders and ensure they are accountable for all aspects of their businesses globally, and put the company’s streaming business on a path to sustained growth and profitability. Effective immediately, the company will be organized into three core, collaborative business segments: Disney Entertainment, ESPN, and Disney Parks, Experiences and Products. The leaders of each business segment will have full operational control and financial responsibility for creative development, marketing, technology, sales, and distribution, and will be accountable for driving business efficiencies globally.

“For nearly 100 years, storytelling and creativity have fueled The Walt Disney Company, with virtually every interaction we have with our consumers emanating from something creative,” said Robert A. Iger, Chief Executive Officer, The Walt Disney Company. “I am committed to positioning this company for a new era of growth. Our strategic restructuring will return creativity to the center of the company, increase accountability, improve results, and ensure the quality of our content and experiences.”

Disney Entertainment will be co-chaired by Alan Bergman and Dana Walden, who will be responsible for the company’s full portfolio of entertainment media and content businesses globally, including streaming.

ESPN will include ESPN networks and ESPN+ and will be led by Jimmy Pitaro. Pitaro will also be responsible for the management and supervision of the company’s full portfolio of sports content, products, and experiences across all of Disney’s platforms worldwide, including its international sports channels.

The streaming business remains a top priority for the company. Disney’s unparalleled collection of renowned and trusted franchises and brands, combined with the reach of the streaming portfolio (consisting of Disney+, ESPN+, Hulu, Star+, and Hotstar) creates rich and direct connections between the consumer and the company’s stories and characters, powering growth across the entire company.

“Every day, I am reminded of what incredible talent we have leading the many facets of this company,” Iger said. “Thanks to my management team and our exceptional business leaders, who have acted quickly and strategically on the important changes we are undertaking today, I am as encouraged as ever by what the future holds for The Walt Disney Company.”

Bergman and Walden will oversee the company’s global entertainment streaming businesses and manage all content decisions for those services, including Disney+ and Hulu.

Bergman will also have primary oversight of the following businesses and content brands: Disney Live Action, Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios, Lucasfilm, 20th Century Studios, and Searchlight Pictures, as well as Disney Music Group and Disney Theatrical Group.

Walden will also have primary oversight of the following businesses and content brands: ABC Entertainment, ABC News, ABC Owned Televisions Stations, Disney Branded Television, Disney Television Studios, Freeform, FX, Hulu Originals, National Geographic Content, and Onyx Collective.

Pitaro will continue to oversee eight linear networks, including ESPN and ESPN2; sports content across all Disney domestic and, going forward, international platforms; ESPN+; ESPN Audio; ESPN Digital; ESPN Social; ESPN Fantasy; and a variety of owned sports events.

Effective immediately, several shared-service organizations across the company will support both Disney Entertainment and ESPN, facilitating company-wide efficiencies and creating a more cost-effective, coordinated, and streamlined approach to operations. These include Product and Technology, led by Aaron LaBerge; Advertising Sales, led by Rita Ferro; and Platform Distribution, led by Justin Connolly—excluding Theatrical Distribution and Music, which will be overseen by Bergman.

Outside of North America, the company’s media, entertainment, and sports content and operations will continue to be managed regionally by Luke Kang, President Asia Pacific; Jan Koeppen, President EMEA; Diego Lerner, President LATAM; and K Madhavan, President India. These leaders will report to Bergman, Walden, and Pitaro as part of their global responsibilities. As a result of the changes, Rebecca Campbell, Chairman, International Content and Operations, has decided to leave the company. An esteemed leader and longtime industry veteran, Campbell will stay on through June to help with the transition.

Disney Parks, Experiences and Products—encompassing the company’s award-winning theme parks, cruise line, resort destinations, and Adventures by Disney and National Geographic Expeditions, as well as Disney’s global consumer products, games, and publishing businesses—will continue under the leadership of Chairman Josh D’Amaro.

The organizational changes will be implemented immediately, and the company will begin reporting financial results under the new business structure by the end of the fiscal year.

Forward-Looking Statements

Certain statements in this email may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future structure, growth, profitability, positioning, results, creativity, quality, expenses, targets and other statements that are not historical in nature. These statements are made on the basis of management’s views and assumptions regarding future events and business performance as of the time the statements are made. Management does not undertake any obligation to update these statements.

Actual results may differ materially from those expressed or implied. Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments, asset acquisitions or dispositions, new or expanded business lines or cessation of certain operations), our execution of our business plans (including the content we create and IP we invest in, our pricing decisions, our cost structure and our management and other personnel decisions) or other business decisions, as well as from developments beyond the Company’s control, including:

• further deterioration in domestic and global economic conditions;
• deterioration in or pressures from competitive conditions, including competition to create or acquire content and competition for talent;
• consumer preferences and acceptance of our content, offerings, pricing model and price increases and the market for advertising sales on our DTC services and linear networks;
• health concerns and their impact on our businesses and productions;
• international, regulatory, legal, political, or military developments;
• technological developments;
• labor markets and activities;
• adverse weather conditions or natural disasters; and
• availability of content.

Each such risk includes the current and future impacts of, and may be amplified by, COVID-19 and related mitigation efforts.

Such developments may further affect entertainment, travel and leisure businesses generally and may, among other things, affect (or further affect, as applicable):

• our operations, business plans or profitability;
• demand for our products and services;
• the performance of the Company’s content;
• our ability to create or obtain desirable content at or under the value we assign the content;
• the advertising market for programming;
• income tax expense; and
• performance of some or all Company businesses either directly or through their impact on those who distribute our products.

Additional factors are set forth in the Company’s Annual Report on Form 10-K for the year ended October 1, 2022, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” quarterly reports on Form 10-Q, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and subsequent filings with the Securities and Exchange Commission.

The terms “Company,” “we,” and “our” are used above to refer collectively to the parent company and the subsidiaries through which our various businesses are actually conducted.

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