Adapted from content excerpted from the American Express® OPEN Small Business Network
No business is without risks. Your ability to identify and discuss them demonstrates your skills as a manager and increases your credibility with potential investors. You will show that you've taken the initiative to confront these issues and are capable of handling them. The opposite is also true. Should a potential investor discover any unstated negative factors, it will undermine the credibility of your plan and endanger your chances of gaining financing or other support.
The following list of problems is by no means complete, but should give you an idea of some possibilities.
|Your competitors cut their prices
|A key customer cancels a contract
|The industry's growth rate drops
|Design or manufacturing costs exceed your
|Your sales projections are not achieved
|An important ad campaign flounders
|Important subcontractors fail to make deliveries
|Your competitors up-the-ante by releasing a new, better
product or service
|Public opinion of your product or service changes
|You can't find trained labor
|Evaluate your risks honestly. Put yourself in a
"what if" situation. What if my competition meets
my Unique Selling Proposition...what sets my product apart?
What if I can't find the right employees?
|Instead of putting your risks in a separate section, you
can incorporate them into the various parts of your plan. For
instance, you could discuss possible long lead times for
subcontracted parts in the "manufacturing process"
section of the plan, or the impact of a lower than
anticipated response rate to a direct mail campaign in the
"sales tactics" section.
|In many industries, small companies innovate and large
companies copy and take the credit. This is always a risk you
need to consider. Think of ways you can stay ahead of your
competition and retain your Unique Selling Proposition.
|To generate a complete list of risks, examine all of your
assumptions about how your business will develop. The
flipside of many of them may be risks.
|Consider some commonly-made small business mistakes as
potential risks. Some of the biggies include: paying
employees too much; hiring friends rather than the most
qualified candidates to fill positions; underestimating
costs; underestimating the sales cycle; overlooking
competition; trying to be all things to all customers.
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