Starting any business is a risk. When Richard and Maurice McDonald opened their first restaurant, a carhop drive-in that specialized in hotdogs, in Arcadia, CA in 1937 they didn’t know how well it would do; they didn’t know that 11 years later they would re-organize their barbecue place into a burger joint that would end up become world famous.
A few years ago I opened a small bakery. My friends, including one who owns a coffee house, really enjoyed what I made, and suggested I sell my stuff. I got excited at the idea of having my own business, and lept at the chance. But, in under a year it was no more.
So what happened? And maybe you might be asking why you should listen to me.
Well, I didn’t weigh the risk of the business. In truth I also did not make a business plan, I made a number of mistakes. All of them were learning experiences. But not weighing the risk of opening the bakery was a big one. I didn’t consider what people would be looking for in a bakery, here in America, or at least my part of it, it means a place that does a lot of sweet pastries, cakes, etc. things I didn’t make.
When starting to consider your business you will need to weigh the the risk of running your business, and use to to help devise your business plan.
Start by figuring out what the risk for your business is. Obviously there are financial ones, but be specific. Are you risk based in keeping your production cost under a certain level, or does it originate with having a perishable product, like a restaurant or gas station. Many places require licensing to operate particular types of businesses and you may have to wait for that licenses. You may have to pay rent for months on a place before you can start the business. So figure the details.
Next, you will want to figure out what you are going to do if one of these problems come up. If you are waiting for a license and have to pay rent for months before opening how does that change your bottom line. If you have perishable items, maybe you buy less, many restaurants work by creating a certain amount of a dish and once they run out for the day, they are out. Whatever the decision is, be ready with it, so you do not have to decide on the day what to do to fix things. And also figure out how long you are going to take to make the change.
If you are getting investors for your business you will want to include this in your Business Plan. Not only will it make them feel safer giving you their money, but it will let them know that you are ready for what could happen. And do not scrimp on the details, you can never be too ready for it. There is no such thing as be overly prepared to keep your business running incase it does run into a problem.