From the course: Creating a Business Plan

Financial risks

From the course: Creating a Business Plan

Financial risks

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- Every business faces financial risks and you should lay out in your business plan what those risks are and what you're going to do if they come to pass. What happens if you lose funding? What happens if you don't get that loan or the investment you are counting on? What if you lose a big customer or the economy turns south? What if that marketing campaign you thought was going to be huge, turns out to not work? What happens if you get sued for intellectual property or a major competitor emerges? All of these are bad things that could happen to your business. But if you think about them now and plan for them, you can put contingency plans in place. You could do things like cut expenses or lay off staff. You might seek additional loans or additional investment or the founders might put more money in. You could drop prices, market more, offer retention discounts for some of your customers. You may even say we would sell out to a competitor or partner with another firm. Having these contingency plans in place enables you to react more quickly. I invested in a startup at one point and the sales didn't happen as quickly as they thought they would. They ran into a cash crunch and they needed more money, but they had a plan in place. They issued some new equity to bring in more cash. They sold part of their business off and they cut expenses across the board to maintain the business as a viable entity. They had a good plan. It wasn't fun to put it in place but they didn't panic when the bad things happened. So think through what the risks your organization faces are and put them in your business plan along with the contingency plans to go along with it.

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