With the start of every new academic year, and the focus of education on so many people’s minds, it is a good idea to revisit your own plan for continuing development of your business. This is an opportunity to see if you are keeping up with the latest information relevant to your success and reducing […]
With the start of every new academic year, and the focus of education on so many people’s minds, it is a good idea to revisit your own plan for continuing development of your business. This is an opportunity to see if you are keeping up with the latest information relevant to your success and reducing the overall risk profile of your organization.
Risk is the reason to get it off the shelf
Risk is a common and accepted part of any small business startup and operations — just ask any business developer. Entrepreneurs, educators, and small business technical-service providers commonly quote statistics detailing the failure rates of startups. Bureau of Labor Statistics data shows that about two-thirds of businesses survive at least two years (which translates into a 33 percent failure rate within two years) and about half survive at least five years (50 percent failure rate within five years).
Is there a way to improve the odds of becoming a success rather than a failure? One best practice is the continual review and revision of a risk-management component in your business plan. This action step requires an ongoing acquisition and ordering of new information that relates to your operations.
Two of the top five reasons that Investopedia gives for business failure are “rigidity” and “business plan problems.” So many people mistakenly put a finished business plan on the shelf and fail to update it and use it as the tool it was intended to be used. A risk-management component provides a good reason to regularly keep yourself educated in your field, so take that plan off the shelf for an annual review, and make adjustments for the next year.
Risks, resources, strategies, and metrics
Not only is it a good idea to identify and analyze risks to your business and include them in your written plan, but it’s also a good idea to include an inventory of your available resources, strategies, and measurement criteria. These four components of risks, resources, strategies, and metrics will combine to determine if you are meeting the required baselines you have identified as necessary to overcoming key potential risks to your particular business.
Outside secondary sources are a good place to start when looking at risk components to your business. Most all business types have an associated industry organization that undertakes regular research, news reporting, and communications with its members. Membership almost always comes with a price tag to the business owner, but then again, what doesn’t? The benefits can be huge though in keeping you up-to-date in business-specific areas that are relevant to risk management, such as technological advances in equipment and IT systems, changes in laws, competitor innovations and unique initiatives, and more.
When you move on to inventorying your resources and assets that will help you with managing potential risks, nothing is as simple as the classic SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. Performing your SWOT analysis can help you identify additional aspects specific to your unique business that might be overlooked by the outside secondary sources you peruse. This is a good opportunity to interact with your employees, customers, and partners to obtain first-hand feedback and accounts of experiences.
The U.S. Small Business Administration identifies the following possible key strategies to reducing risk: communication, setting expectations, support systems, staff training, insurance, risk assessment, and contingency planning. We’ve already mentioned how a few of these fit in, such as communication when performing the SWOT analysis, or risk assessment when educating yourself on the latest news in your field. Determining how you will incorporate these strategies into your business plan will provide you with a clear set of action steps with which to move forward.
Finally, how will the changes to your operations as identified through your risk-management plan affect your proposed financial metrics and timelines? A business plan is essentially a feasibility study. What does your vision look like when put on paper, with enough information to corroborate your assumptions and meet your goals and objectives? This feasibility analysis will be affected by every new risk or change to a previously identified risk about which you must be aware. Therefore, you must update your metrics and timelines and adjust your operations as necessary in reaction to those updates.
If you look at your business plan as the repository of your risk-management business component — which can be influenced continually by the latest news, trends, and events — it can become an invaluable piece of your operational framework.
Frank Cetera is a New York State Small Business Development Center (SBDC)-certified business advisor at the SBDC at Onondaga Community College. Contact him at ceteraf@sunyocc.edu