on Jun 15th, 2008Risk Considerations in Business Planning – Business Plan Preparation Tip
It is amazing when I help entrepreneurs plan their businesses how many of them tell me the market is a 100 billion dollars, no competition and no risk. I try not to laugh, but I can never hold back the smile. The truth is there are risks in every business and the greater the opportunity, often the greater the risk. When preparing a business plan you will need a risk statement.
Below is a sample of a “Risk Considerations” statement for a Business Plan. This example comes from a Business Plan for a Product in the oral hygiene market. This product is real and was invented by Charles Shooster in the 1990’s, look closely at how this sample “rough draft” risk statement is formed:
Risk Considerations
We see many risk considerations, the biggest one is selling too many orders and getting behind the cash flow curve with too many receivables too early on. This does not mean we will have to quit business, because in essence our company will have little costs to run. It may however slow us down and prevent us from taking huge future orders until we are paid on our receivables, thus we realize that we must be careful in accepting credit terms and strict on payment policies.
Another risk, which we will shore up is that of a single source manufacturer, because if they go out of business or quit for any reason, even a natural disaster, we will be dead in the water. We plan on having triple redundancy on vendors and use this as leverage in controlling our costs through use of the competitive free markets.
Copycats are the norm and we assume that some unscrupulous company will try to come into our markets to compete with us stealing our “first use” concept, however, in reality we expect this and intend to keep our price low, thus an alternative to the higher priced item. Additionally, if a competing company is advertising quite a bit, then it will get consumers more use to using the product and we plan on being the most available, at the best price.
One problem in today’s world is being labeled a polluter or bad for the environment. We intend to shore up this problem in advance by using readily biodegradable packaging, products and making sure those who produce our materials or do the thermo-plastic welding are not harming the environment. All wrappers must be non-toxic to organic life.
Working with MLM companies might cheapen the brand and some MLM companies are somewhat sleezy, thus we must worry about brand name recognition and who we work with. The MLM market will therefore be a secondary market
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Remember that no business, whether a product or service is without risk considerations, failure to state this will raise eyebrows with your potential investors, so be honest with yourself and your investors and leave no stone unturned when it comes to risk. I hope this sample serves its purpose as you prepare your own business plan and continued success. Sincerely, Lance.
“Lance Winslow” – Online Think Tank forum board. If you have innovative thoughts and unique perspectives, come think with Lance; http://www.WorldThinkTank.net/. Lance is a guest writer for Our Spokane Magazine in Spokane, Washington
