We know you’re sold on you’re business’ potential for success, but are you also aware of any looming risks and problems. Most of us spend more time thinking about everything that can go right in our new venture, than everything that can go wrong. And, it’s a good thing we do think this way, otherwise we wouldn’t dare to start up a new business. Although we don’t want you to drown in your business’ potential risks; being aware of them helps you to stay afloat. As well, investors don’t like to uncover, on their own, negative aspects of your business. It’s much better if you tell them yourself. Identifying and discussing the risks in your venture demonstrates your skill as a manager and boosts your credibility with investors. This shows investors that you have given some thought to what can go wrong in your venture, and know what to do if it arises. Potential risks could be anything relating to your industry, company and its personnel, product market appeal, or the timing and financing of your start-up. Some possibilities follow:
- price cutting by your competitors
- unfavorable industry-wide trends
- design or manufacturing costs in excess of estimates
- unattainable sales projections
- delay in product development
- problems getting bank loans
- difficulties or long lead times encountered in getting parts or raw materials
- larger than expected innovation and development costs to stay competitive
Discuss only those business plan assumptions or potential problems relevant to the success of your business, and describe your plans for minimizing the impact of these risks. A viable and sensible plan of action can go a long way in quieting investors’ doubts.
It’s more important to know your weaknesses than your strengths.