Page 136 - Business Plans that Work A Guide for Small Business

9 THE CRITICAL RISKS

AND OFFERING

PLAN SECTIONS

Critical Risks: Understanding the Critical Drivers to

Your Success

Every company faces a number of risks that may threaten its survival. The
risks are enhanced for new ventures. Although the business plan, to this
point, is creating a story of success, there are a number of threats that read-
ers will identify and recognize. As such, the plan needs to acknowledge
these potential risks, otherwise investors will believe that the entrepreneur
is naive or untrustworthy and may possibly withhold investment. It is also
important for you to understand these critical risks because they most
often are directly related to assumptions that will drive your venture’s
success or failure. For example, a common critical risk is market accep-
tance. Will your target customers really buy your product in the quantity
and price you expect? If they do, then your top line revenue projections
will likely hold true, but if not, your business could be in serious trouble.
How should you present these critical risks without scaring your investor,
or for that matter, so that you feel comfortable proceeding with the ven-
ture? Identify the risk and then state your contingency plan. For instance,
if your primary target customer doesn’t buy your product as expected,
a contingency might be to redirect your efforts toward a new customer
group. Critical assumptions vary from one company to another, but some
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