Angels and VCs know start-ups are incredibly risky. Most projects fail for reasons that could have been and sometimes were predicted far in advance.
Since entrepreneurs are optimistic folks by nature: They tend to brush off predictions of doom and charge ahead assuming they will find a way to overcome. You can often avoid the most dire scenarios with intelligent upfront risk planning.
Your plan can address several kinds of risk. What investors want is to know that you are prepared to respond to risks. To the extent possible, outline what your response is to the risk you anticipate. After all, assuming you get funding, those risks may really come to pass. And you will really have to do something about it.
What are the reasons you believe that would happen? What can you do to keep that from happening in the first place? It amazes me how many restaurants have a lousy menu selection or bad food and go under without ever asking customers, "Did you enjoy your meal?
What could we do to make it better? If things go wrong, you may decide to proactively invite critics to the restaurant for specific feedback on how to make writing a military service paper experience better. The key is acknowledging that things can go wrong and demonstrating some creativity in finding a solution. Your goal is to provide enough to help your investors feel secure that you have anticipated and dealt with major risks, and they can count on you to handle things that come up once the business is under way.
Stever Robbins is a consultant specializing in mastering overwhelm, power and influence. You can find his other articles and information at SteverRobbins. My Queue. There are no Videos in your queue. See Latest Videos. There are no Articles in your queue. See Latest Articles. There are no Podcasts in your queue. See Latest Podcasts. Starting a Business Business Plan Risks How to present your business risks without scaring away investors. Next Article -- shares Add to Queue.
Stever Robbins. December 11, 4 min read. A good business plan will enhance credibility, while also increasing the confidence that potential investors have in the business and its financial projections. It is important to be honest when discussing the potential business risks. Trying to gloss over the issues can lead to lack of confidence in the management. Risk analysis is especially important for small businesses and startups that are trying to secure capital for expansion or for ongoing operations.
The process of enterprise risk analysis begins with identifying the external and internal threats that can inhibit achieving the planned results. You can identify and address the potential risks in each category. Most businesses share the general business risks, but their effects or significance often varies by company.
New businesses or startups must gain the required experience in managing marketing, operational and other issues that will arise. Some potential threats include problems that can develop during marketing, quality control, promotion, distribution and other areas. The start-ups and companies in the early stages need to attract and build relationships with customers from their competitors. Established companies will have different similar problems but some are more vulnerable than others.
There are challenges and risks that are industry-specific and it is important for businesses to identify what they are. One major challenge is the issue of industry competition.
While this may be a common challenge, the business plan should address what the business can do to compete effectively. It is important to discuss marketing strategies while also discussing major competitors and identifying their strengths and weaknesses.
There are risks and uncertainties associated with different companies including recruitment issues. The risks are different depending on the stage the company is in. Startups will often have issues when it comes to obtaining start-up or working capital, which effectively affects operations.
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Any start-up idea will have enough risk to fill a dozen business plans.