It’s OK to Have Risks… Investors Expect Risks!
We usually don’t want to talk about risks in our business because it diminishes our opportunity for raising capital, growing, or selling it.
To build trust and maintain your credibility as a smart, flexible business executive, it’s better to acknowledge what can go wrong upfront and describe how you will minimize or eliminate these risks (perhaps with investment) — before an investor, lender, partner, or acquirer asks the questions compelling you to respond in defense.
Risk Looms Larger as Your Deal Closes
Risk becomes the last big issue before actually signing most deals.
This is your opportunity to smoke out the risks and reduce their influence on your deal.
Real Sample Template Text You Can Use
Here’s a section straight out of our BizPlanBuilder business planning system.
It’s what you’ll find when you scroll through the planning system templates.
The green text gives guidance for customizing the text to suit your purpose.
The black text prompts you what to say and how to say it — just edit (or delete) as needed. It’s that easy to use.
If you bring it up first, you demonstrate that you have thought through your challenges and are likely to be aware and experienced in what you are doing.
If you have a long list of risks, maybe just list the highlights in your plan but refer to them in a separate ‘disclosure’ document.
You must eliminate as much risk (real & perceived) as possible before investors, bankers, and others can even hear or think about their ROI.
And, some of your investment can be used to eliminate or reduce risk — you may be at risk now, but with investment…
Like any operation, there is always some risk associated with operating a business. For [COMPANY NAME], we see our greatest exposure in the [current absence of competition / willingness of some customers to drive great distances / possibility of a sudden, drastic change in the local economy, etc.] in this area. A significant threat to our business would most likely derive from a sudden influx of competing [companies], backed by a major corporation or conglomerate, setting up multiple locations within the [city / county / region name] area.
In the event of a major change in the [INDUSTRY NAME] market, we might also expect to see [some reduction in sales / some increase in sales / a shift to a different related market that would still drive sales our way… We feel that we are sufficiently aware of potential risks and have contingency plans in place to either minimize or eliminate them.
Top business risks for [COMPANY NAME] as we [create / enter / expand in] the [INDUSTRY NAME] market include [current lack of awareness / economic slowing or recession / recent losses in related industries / explosive growth that exceeds our ability to respond — whatever your top risks are].
Changes in [the market / the environment / legislative regulations / the economy] may also require that we make adjustments to account for [describe the next specific area of risk].
Each Section of BizPlanBuilder Includes a Tutorial Video
What to think about as you edit the “RISK” section of your plan and what investors, lenders (crowdfunding, angels, venture capital, SBA), and acquirers look for as they consider funding your start-up or growing company. Or buying your business.
More Risks Covered
In addition to the above risk description, BizPlanBuilder includes Commercial, Technological, Financial, Environmental, and Legislative (think Cannabis) risks as well.
Click Here to Start Your 2 Week Trial — Access All of Them.
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A good plan has everything prioritized,
A great plan keeps your priorities in perspective.
Businesses are complex with many moving parts…
- Start with your core purpose, priorities, and objectives
- Organize processes and procedures
- Operate efficiently and avoid making mistakes
Before the world gets any crazier, get your business sorted and ready to roll into the future.
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