Assignment 5

Assignment 5: Business Plan Part 5: Risk Assessment and Strategies for Growth

Darlene Smith Andrew

Professor Ellis Godwin

Bus 521: Entrepreneship and Innovation

December 16 2012

1. Identify and evaluate the main sources of risk for your business.

While there is certainly some level of risk in every new business, the process of starting a business should not be about taking risks: rather, it should be about managing the risk that is involved. There are two main sources of risk in a new venture: the risk due to uncertainty surrounding the business and: the risk due to what is at stake if the business should fail. No business is a sure thing, but much of the uncertainty can be resolved through analysis of three of its sources: the market, the operational model, and the financial model. Market risk is a result of many factors, including whether the market is large enough to support your business, whether the market is growing, what trends exist in the industry, how the competition is structured, and how distribution works. If industry trends are moving away from your product or service or if potential customers are already locked up by competitors, it will be difficult to gain customer momentum. The issue of market size is also important in feasibility analysis. Although, you cannot get rid of all the risk in entering a particular market, you can reduce your margin for error by understanding the nature of the market and customer buying behaviors.

Operational risk deals with whether the business can set up internally to deliver goods and services to customers effectively. It will also include logistical issues with delivery and returns and effective use of service staff.

The financial model risk refers to the risk that the business won’t work due to the numbers. The entrepreneur should understand what revenues and costs must be in order to make the business financially viable and what factors impact revenues and costs the most. This will...