Analyze
Your Risks and Prosper
by: June Campbell 
When I started my full-time business,
I enrolled in a class with a group of other wanna-be entrepreneurs
to learn how to develop a business plan. One component of writing
a business plan is risk analysis -- i.e. the identification of
existing or potential threats to the success of your new business.
You identify all possible events, happenings or occurrences that
might stand between you and business success. Then you develop
a strategy to combat each one. One classmate said that she was
a believer in the power of positive thinking and that she would
jinx her business by thinking about the negative. Another refused
to identify threats because "I get depressed when I think
about what could go wrong." A third person simply said that
his business idea was perfect and that there were no "downsides"
to consider. All three businesses failed before they reached their
first anniversary. These three entrepreneurs are not alone.
I am often asked to assist with business
plan or proposal writing and I'm always surprised to see how
many people are unwilling consider potential problems. There
are two excellent reasons why your planning should include a
risk analysis.
1. No matter how great your idea may
be, there's no such thing as a risk-free business. The risks
are there whether you admit it or not. Successful entrepreneurs
face these challenges in advance and devise a strategy for handling
them if the time comes.
2. If you are hoping to raise money,
get a business loan, or attract a sponsor, the money-people
won't allow you to use their hard earned cash until they are
satisfied that you have done your homework. To an investor,
risk analyses is a sign of good planning, not an indication
that your business idea is a poor one because there are potential
threats.
Convinced of the value of risk analysis?
Start by asking "what if." Here are some examples
to get you started.
1. What if your direct competitors find
a way to undersell you? What will you do to remain competitive?
2. What if your direct competitors become
so numerous that no one can make much profit?
3. What if your indirect competitors
seize the lion's share of the market? Indirect competitors are
businesses providing a different service than you do but still
competing for a share of your customer's dollars. For example,
if you are selling books, indirect competitors are magazines,
newspapers, content-rich web sites, electronic books, etc.
4. What if your suppliers raise their
prices, go on strike, or go out of business?
5. What if your suppliers can't keep
up with the orders you are receiving?
6. What if you experience theft, vandalism,
fire, or damage caused by "Acts of God?"
7. What if you get caught in a "cash
flow" crisis? This can happen if you tie up cash with equipment,
inventory, etc., but sales are slow or customers are slow in
paying.
8. What if your employees unionize?
9. What if delivery costs escalate?
10. What if import or export regulations
change?
11. What if future trends affect your
business? In my area, once prevalent muffin shops are closing
down and coffee houses are taking their place. The muffin trend
is out; the coffee house trend is in.
12. How might changing technology impact
your business? For instance, many small web designers are feeling
the pinch as a consequence of software developments that make
it easier for people to design their own sites. The web designers
who find a strategy to remain competitive will survive.
13. What seasonal influences might you
be facing?
14. What if your bank, your suppliers
or your customers aren't prepared to handle Y2K issues? Identify
your problems in advance and you'll be a winner. Remember the
old saying, "If you fail to plan, you plan to fail."
June Campbell is a professional writer
whose work has appeared in a several international print publications.
She also provides business writing services as well as offering
online sales of "How-to Booklets and Templates for Business"
from her Web site. (http://www.nightcats.com).
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