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Developing a Business Planning Process Business Planning Top Tips Professional Service Leverage Models Leverage in a consultancy business Vision, Mission and Objectives Values and Principles Building a Service Proposition Framework Market and Competitor Analysis Strategy and Execution Financial Analysis (Part 01) Financial Analysis (Part 02) …this post looks at another key business plan element: Risk Analysis. This has been a long series of blog posts but, hopefully, you have now got a sense of the basics your business plan should cover.Analyzing risk factors allows the management team to be confident it is ready for whatever business environment the company may face in the upcoming year and beyond.
If the investor believes the risks could severely hurt the company should they occur, he may decline to make the investment.
As a practical matter, sophisticated investors do their own risk analysis prior to putting money in a company, but the fact the management team is aware of, and has strategies for dealing with, the risks can make the investors more confident about the management team’s abilities.
There is a risk to every business decision you make.
So instead of relying on gut instinct for an answer, you can feel far more confident by having risk management processes to help guide you. He drives trucks to move commercial products around Australia.
The management team assesses which risks are most likely to become actual threats and which have a very low likelihood of occurring.
Owners of companies will always have external threats to worry about, but the risk analysis process helps reduce the number of worries to those that have the potential to negatively impact their revenues or profits.Being aware of what could negatively impact the company is important, but the real value of including risk factors is the business owner’s thinking process to determine how she would mitigate the risks to minimize the financial damage to her company.The thinking process is referred to as contingency planning, also know as “what if” analysis.Begin by finding out about risk management practices and how you can use them in your business.You should also talk to others involved in your business (including your employees and your customers) to work out the best way to manage risk in your business.Risk factors are possible events that, should they happen, could cause a company’s revenues or profits to be lower than what the owner had forecast.They are a standard part of a thorough business plan, whether the plan is designed for internal use by the management team or will be presented to outside investors.Opportunity-based risks for a business include moving a business to a different location, buying a new property, or selling a new product or service.This type of risk comes from uncertainty around unknown or unexpected events.In final analysis, however, being a successful entrepreneur is about managing risk.This section, therefore, is about you stepping back from all the preceding analysis (market, competitor, financial etc) and asking yourself where the key risks (and opportunities! The activity of managing risk in your business is an existential, permanent one but the function of penning (and updating) your plan is an ideal opportunity to review the landscape.