Economic downturn, political change, and loss of employees are just some of the things that could negatively affect your business. There are some things we can plan for, such as a higher demand for your product, but there are other things we might see coming but be unsure of their effects, such as Brexit. However, the more foresight we have the better, and both large and small risks should hold a place in your business plan.
Why do I need to complete a risk analysis?
Many businesses fail due to problems that could have been predicted with a little foresight. Understanding the risks to your business and planning for them in advance means you’re more likely to succeed. And while you may not be able to plan for every eventuality, the more you prepare for, the more likely your business is to survive – even when things go wrong.
Does my business have risks?
Every new business has risks, so if you are concerned that completing a risk assessment will turn off investors, don’t worry. A business plan that doesn’t mention risks or challenges is not a realistic business plan. In fact, by identifying the risks to your business and showing how you will mitigate them, you are proving that you are a sensible, forward-thinking entrepreneur who may be worth investing in.
What are the risks to my business?
Some risks will be more relevant to your business than others, so focus on the ones that pose the biggest problems for you, or those that are most likely to occur. Here are a few examples:
Product risk – You could have problems with creating or redesigning your product. You may have trouble sourcing the materials you need or getting your prototype to work.
Market risk – The market could develop in an unexpected way. You may find it difficult to attract customers, or you could struggle to meet a high demand.
People risk – You could lose an employee who is instrumental to your business or the development of your product.
Financial risk – The company could run into cash flow problems.
Competitive risk – You could find that your niche is very competitive, and your potential customers are shopping elsewhere.
How do I analyse the risks?
Once you have identified some of the risks that could apply to you, you need to ask yourself a few questions:
What is the likelihood of this happening?
What would it mean for my business?
If the business suffers negative effects, how will I recover?
How long would it take to recover?
How do I mitigate risks?
The most important question you’ll need to answer is “How do I reduce this risk?” For example, are there actions you could take to improve employee retention? Perhaps you need a backup plan to ensure you could meet a higher demand for your product if you needed to. Or maybe you need to carry out some competitor analysis to find out what your competitors are doing, why people might choose to go to them, and how you can stand out more in the market and meet customer demands.
Once you have evaluated your risks and set out a plan to prepare for them, you should be well on your way to completing a business plan that is both well thought-out and realistic.
If you would like any help with writing your business plan, please get in touch with cbm. Our expert team is ready to help you – call 01604 420 420 or use the contact form on the right to get started.