Practical experience in developing business plans: risks, mistakes, decisions

Having carefully worked out all the details of the project of the future business and having drawn up the production, organizational, marketing and financial sections of the business plan, you should not rejoice ahead of time if you managed to obtain performance indicators that indicate investment attractiveness. Not a single owner of capital will invest in a project, the development of which does not analyze the factors of the external and internal environment of the company, which can change due to a combination of circumstances and negatively affect its activities. Such factors and conditions for their occurrence are risks - potential threats to disrupt plans, which should be taken into account and leveled in the appropriate section.

How to conduct a risk analysis

The section aimed at identifying risks is usually the last to develop as part of the business plan and not always with sufficient detail. Risks in the standard plan of a project requiring investment are drawn up in a list, often without reference to the specific conditions of the firm's functioning. Such an attitude is unprofessional and detrimental, both for business planning and because of the demonstration of their own insolvency in front of the investor, who will conclude that they are unable to anticipate difficulties and avoid them.

Global Threats of the Project

Each new business plan, regardless of the content of the project, is subject to environmental threats that do not depend on the will and capabilities of the entrepreneur, including:

  • declaration of war in the territory of the country or region of management;
  • flood or earthquake in the territory of the firm's location;
  • social tension, riots, coups, uprisings, revolutions, etc.;
  • changes in legislation and / or taxation;
  • devaluation of the national currency, etc.

It will be enough to include this list of risks in the plan at the stage of their identification, it is necessary to understand the possibility of their implementation and develop subsequently compensating measures.

Algorithm for identifying individual risks

In fact, it is not too difficult to perform an analysis of potential risks, for this you need to re-conduct a sequential assessment of all the indicators that were adopted and calculated when developing sections of the business plan. The algorithm of actions in this case should be as follows:

1. Each statement made about the benefits of a product or service is considered, and a situation is assumed where a competitor can oppose a product with comparable characteristics. In this case, the competitive advantage is leveled, which means that the assumptions made about the potential sales market must be adjusted downward.

2. When developing the production section of the plan, a wide range of parameters are considered, each of which can change under the influence of external or internal factors, in particular:

  • the pledged cost of raw materials, parts and components can rise sharply due to inflation;
  • there is always a risk of fire or flooding for rented or purchased commercial real estate;
  • the proposed logistics scheme may be disrupted due to vehicle breakdowns and / or disruptions in the movement of rail, road and water transport, and the result will be equipment downtime in production;
  • purchased used equipment, in order to save funds during promotion, may fail and cannot be repaired, which means there is a risk of disruption of the production program and the need
  • additional investments in the acquisition of new machines and units;
  • warehouse stocks, including including finished products, can be robbed or damaged due to getting wet or damaged by rodents.

Drawing up a section; Risks; in a business plan: an example of calculation and evaluation

No serious business can be started without drawing up a business plan. You can sketch it yourself, but you should definitely show it to a lawyer, economist and marketer. Attorney Tatiana Protsenko, Managing Partner of Protsenko & Partners Law Firm, talks about typical mistakes when creating a business plan and how to avoid them.

Yes, yes, it is advisable for a lawyer to show your business plan, so as not to find out after multi-million dollar investments that the selected premises are categorically not suitable for the licensing requirements of a particular type of activity.

In addition to our own projects, directly or indirectly related to jurisprudence, it was possible to analyze other people's business plans submitted for legal expertise.

Of course, the history of every country or even any region knows amazing cases when a business was launched literally on its knees. Intuitively and without planning, just by the will of emotions and feelings. There are examples of the success of such a plan, but they are a drop in the ocean against the background of "drowned" improvisers and those who were not saved even by the business plan.

What is a business plan?

A business plan is a scheme for an entrepreneur or a company to carry out certain business operations for the systematic extraction of profit.

A sound business plan should contain not only the data for starting the project, but also, at least, the operational planning of the first year of work.

Approximate content of a business plan:

  • Basic business concept, field of activity and main directions of work.
  • Legal information: legal framework, information on licenses, restrictions, regulatory documents.
  • Financing plan and investment sources.
  • Project proposal for a specific activity, analysis of available assets, materials, means of implementation.
  • Deadline for the implementation of the business plan.
  • Calculation of costs for the initial start of the project, an approximate calculation of profitability / revenue.
  • Calculation of costs for current activities for a certain period.
  • Organizational structure, personnel.
  • Project promotion and marketing strategy.
  • Analysis of the market and possible demand.

Possible financial losses, risks, insurance against possible losses, and so on are also forecast. The more detailed each nuance is considered, the easier it will be to start and conduct work.

This is what a good business plan should be in theory. In practice, however, most business plans are drawn up very superficially, by simply reporting "debit with credit" and predicting the possible revenue.

And a number of mistakes even at the planning stage can not only bury a good undertaking, but also provide the initiators with serious debts - after all, sometimes it is not even possible to recoup all the costs.

What mistakes occur when developing business plans?

Algorithm for analyzing the external and internal environment in identifying risks. Calculation of the likelihood of a threat to the project. Compensatory measures. Registration of the

Business risk analysis

Basic definitions

A business plan is a document that describes the company's development strategy, its internal resources, and the external market environment. The task of a business plan is to provide an economic justification for the company's activities, to correctly predict its cash flows, profits, profitability and a number of other indicators. The business plan describes the stages of development of the company, analyzes its competitors and development prospects.

The table briefly describes the main sections of the business plan and their content. Depending on the specific industry and business goals, the business plan may contain other sections.

Section of the business plan Section Contents of the Firm and its business model Analysis of the relevance and prospects of the business model, general description of the company Product Detailed description of the firm's product and its advantages Market Analysis of the volume and dynamics of market development, consumer demand, industry development prospects Competitors Analysis of competitors, their strategies developmentFinanceCash flows of the organization, revenue, profit, profitability, EBITDA and other economic indicatorsProductionAnalysis of production resources and processes of the organizationMarketingMarketing strategy of the company, advertising and promotionOrganizational structure and personnelDescription of the structure of the company, a brief summary of management and key employees RisksEvaluation and prevention of negative situations arising in the course of the company's activities

Entrepreneurial risk is the risk that a firm will not achieve its intended results. Thus, the invested funds, resources, time and effort will be lost. Risk is also understood as the danger of economic damage in the course of doing business. Business risk analysis is a necessary element of a business plan; without it, the document loses its meaning. It is the identification and prevention of risks that give a business plan weight in the eyes of entrepreneurs and investors.

Business risk analysis

Business Risk Classification

General description of entrepreneurial risks is presented in the table.

Natural disasters Earthquakes, hurricanes, tsunamis, etc.

A modern business plan as a means of starting a successful business must include another element - risk. And risk assessment and management is an integral part of doing business.

First, ask yourself the question: “Will the business grow to its potential without proper analysis, assessment and management of business risk?” In my opinion, the answer is no.

Risk Assessment and Management

We can plan and predict what and how will happen in our business, sometimes even very carefully. But not always and not everything is in our hands. There are many external factors when it comes to entrepreneurship and business that influence the implementation of the planned actions, as well as the results of this work. It is these factors that must be taken into account in order to competently organize the risk management process during the implementation of a business plan.

What is risk from a risk assessment and management perspective?

Risk is the possibility of undesirable circumstances and dangerous consequences.

Key risk characteristics

1. The risk is partially unknown - it is tied to the future. An entrepreneur's job would be too easy if you could easily predict risk.

2. The risk changes over time. As a business operates in a dynamic environment, we cannot expect the risk to be stable and the same. Stability here is manifested only in the fact that by default the risk will always exist.

3. The risk is often not predictable. On the other hand, there are risks, and very many, which we can predict based on a systematic approach to business risk management.

Business risk analysis

Basic definitions

A business plan is a document that describes the company's development strategy, its internal resources, and the external market environment. The task of a business plan is to provide an economic justification for the company's activities, to correctly predict its cash flows, profits, profitability and a number of other indicators. The business plan describes the stages of development of the company, analyzes its competitors and development prospects.

The table briefly describes the main sections of the business plan and their content. Depending on the specific industry and business goals, the business plan may contain other sections.

Section of the business plan Section Contents Firm and its business model Analysis of the relevance and prospects of the business model, general description of the firm Product Detailed description of the firm's product and its advantages Market Analysis of the volume and dynamics of market development, consumer demand, industry development prospects Competitors Analysis of competitors, their development strategies Finance Cash flows of the organization, revenue, profit, profitability, EBITDA and other economic indicatorsProductionAnalysis of production resources and processes of the organizationMarketingMarketing strategy of the company, advertising and promotionOrganizational structure and personnelDescription of the structure of the company, a brief summary of management and key employees RisksEvaluation and prevention of negative situations arising in the course of the company's activities

Entrepreneurial risk is the risk that a firm will not achieve its intended results. Thus, the invested funds, resources, time and effort will be lost. Risk is also understood as the danger of economic damage in the course of doing business. Business risk analysis is a necessary element of a business plan; without it, the document loses its meaning. It is the identification and prevention of risks that give a business plan weight in the eyes of entrepreneurs and investors.

Business plan risk analysis

Business Risk Classification

General description of business risks is presented in the table.

Natural disasters Earthquakes, hurricanes, tsunamis, etc.

Currency risks Fluctuations in exchange rates, changes in the principles of currency regulation.

Change in taxation Increase in tax burden.

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