It’s always tempting to ignore the many risk factors that can compromise a new company, especially when everything seems to be going your way and you’ve even been able to round up all of the necessary funding you’ve been seeking. Yet paying too little attention now to the risk factors you’ve included in your business plan can cost you plenty at a later date.
If you’ll recall, some of the most common risk factors you must address include your competition (both local and upon the Internet -- depending upon your product/services); annual business cycles, and possible cost overruns.
Here’s some additional information that can help you further “flesh out” each risk factor within your business plan and help you include others you may have forgotten.
Most Common Risk Factors
Your competition. The old saying is true -- no one should ever underestimate their competition. However, overeager entrepreneurs often fail to complete enough research on every possible competitor they may have. For example, you may need to carefully check to see if each competitor has obtained all necessary patents for their products (while you make sure to file for any you may need for your products). It’s also wise to find out what type of capital resources they each have. Can they easily outspend you while trying to reach the same customer base you’re hoping to attract? Who are their top leaders and is there any chance you might hire away any of them? These are just some of the many questions you must ask yourself while doing research regarding every likely competitor in your field;
Cost overruns. Regardless of the clever nature of a new circuitry or software program that your company has designed, you can always meet up with unexpected cost overruns. Be sure to ask one of your company’s mentors how much added capital you should always keep in reserve to handle these types of unexpected expenses. You may need to take your company public much sooner than you had initially expected if investors aren’t already lining up;
Problems with your workforce, suppliers or distributors. If your products are all mainly manufactured overseas, you should always keep in mind one or two stateside companies that might be able to help you should a crisis develop elsewhere around the globe. Likewise, be sure you fully understand how to negotiate with your workers, especially if they belong to some type of union. Make sure you regularly visit all of your suppliers and distributors and keep track of the weather conditions in other parts of the world that may put you on notice that some of your goods may be delayed in reaching you;
Unexpected social, political or economic developments. You always risk obtaining all of your products on time when you handle most or all of your manufacturing in other countries due to these destabilizing forces. Give very serious thought to acquiring the positive reputation that comes from being a company that wants to put more Americans back to work, if it means earning somewhat lower profits. It’s amazing how many companies claim to be loyal to America, yet always seem to prefer hiring foreign labor;
Business Cycles. If you’re offering a new approach that helps people file their taxes each year, you’ll obviously be busiest in the spring of every year and will have to decide what other business services you can offer during the balance of the year when far fewer people are needing your tax services. The same is true regarding products based upon food harvests. You need to hire the very best accountants and risk analysis experts who can help you be fully prepared in case of a critical crop failure – always being ready to purchase the same foods elsewhere.
Other risk factors can include a change in industry trends, possibly brought on by a marvelous new product marketed by one of your competitors. You must also make sure you know how to respond if your company fails to meet its own sales projections. Some businesses also struggle with new technological developments that can suddenly compromise the value of the goods and services they are currently offering their clients.
While it may seem unnecessary, you should always carve out plenty of time to brainstorm with all of your business partners, accountants, mentors, and your Peachtree City business attorney when drafting the “Risk Factors” section of your business plan. Finally, be sure to review this section of your plan (along with every other section) throughout the year so you can do your best to be ready for the many unexpected events that frequently unfold in the business world.
To obtain help with handling all of your Georgia business planning needs, please contact the Law Offices of Shane Smith today. You can schedule your free initial consultation with a knowledgeable Peachtree City estate planning attorney by calling: (770) 487-8999.