Section 7 - Risk
Introduction:
Some people think that you should not discuss risks in your business plan. However, readers will want to know that you have thought about what could go wrong and that you have taken steps to protect your business. In this section, we will ask you to identify any risks that could affect the success of your business and discuss how you would overcome them.
TOPICS:
1. Market Risk:
Instruction: Are there any events that could affect your customers' need or demand for your products and/or services during the term of the business plan? If yes, discuss how likely it is that these events will occur and what steps you will take to limit the impact should these events occur.
Sample Answer:
Due to the limited barriers to entry and the limited capital reuired an increasing number of people are manufacturing shirts. Increased competition for small business clients and the potential entry of large firms into small business as well poses some degree of market risk. To develop and maintain a reasonable market share we will give our clients exclusive and quality products at competitive prices. Our long term goal is to expand our operations so that we become the leading small business firm in the region.
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2. Market Risk:
Instruction:Discuss any other risks that could affect the success of your business and how you will overcome them.
Sample Answer:
There are several other risks that could affect our operations including cyclical cash flow problems and liability issues. Manufacturing firms can experience cash flow problems because the industry is project driven. We always receive our payments after we deliver our products to our dealers with our invoice. To avoid this situation, our firm will ask for 40% of the price at the beginning of a production, an additional 50% half way through the production and the remainder upon completion of the production.
Sudden rise in raw material is another major risk, which is involved, in the manufacturing units.Sudden change in fashion trends is another risk involved in this industry. Labour problems constant induction of labours, rejection of products due to defects , seconds sale in leading city halls.
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