Business Planning – Reducing the Risk of Failure by Developing a Low Cost Strategy

Many people believe that the risk of failure in starting a business on a low budget is a little high but I believe even a business with low budget can prosper if you can devise an intelligent strategy and stick to it. Just taking care of a few issues will eliminate the chances of failure. The economic situation of today’s world is not the best therefore many Guru’s would not advise you to start a business in a middle of economic turn down. Others have a completely different point of view and they consider this time to be an ideal opportunity to establish your business.

Entering the market at a time with a low budget when many potential competitors have taken their eye off the business ball does make sense. Low budget does not mean only mean spending less but it also means spending wisely.

First thing you need to start a business with a low budget is a fantastic idea. Keeping in view the market needs and customers demand you came come up with a real good idea.. A proper guidance is a must for a new entrepreneur therefore you require the services of skilled business consultant.

Your business does not only require obtaining finance and investment from a financial institution but a carefully crafted strategic business growth plan for a long term success. The strategy can be best designed by you with the help of skilled business consultant.

The start up of the business is the most difficult job because of tight cash flow. So it really doesn’t matter whether your start up investment is a bank loan, investment from some one else or a start up loan. If you can through the first few troublesome months then the chances of long term success are quite high.

The best way to market your business with a low budget would be keep as minimum as possible for advertising. This will help you strive hard to find methods of advertisement that are most economical. About 60% of world’s traditions businesses have their online counterparts this makes it clear that indeed online marketing is the most effective and economical way to promote your business. Most of the online marketing methods are free. Many businesses opt to promote there business through their online website so it would be a good idea to get your self an attractive website with almost all the information about the company and the products and look for economical methods for its promotion.

Reduce the Risk of Starting a Business

Most people consider starting your own business as one of the riskiest undertakings possible. Of course, most people are not entrepreneurs. True entrepreneurs know that successful startups are all about controlling and managing risk. Their entire outlook revolves around doing whatever it takes to identify threats and obstacles and find the way around, over, or through them.

The risks that non-entrepreneurs perceive cover four basic areas – financial, career, personal brand (ego), and lifestyle. Financial risk is the obvious concern. They worry that the failure of a startup will lead them directly to bankruptcy court. Of course, there are many ways to protect yourself and your personal assets…keeping your business and personal finances separate is just plain common sense.

Career and personal brand risk also cause worry. People are afraid that if they go out on their own and fail, they will lose traction on their previous career path and become known as the one who failed. In fact, if you have built a solid reputation and good networking relationships, returning to the workforce won’t be all that difficult (except that once you work for yourself, it is very difficult to report to someone else!). And, those who consider you a failure because your startup floundered are the type of people who cut others down just to feel better about themselves. Most people, especially those close to you, will consider you a hero for even giving it a shot!

The ideas about lifestyle risk are generally pretty accurate. Startups take up all of your thoughts and most of your time. You will probably not see your family and friends very much during the early stages, and when you do, you will probably not be the greatest company (unless they want to talk about your business). You are likely to be a walking ball of stress until your venture gets off the ground, and there is a possibility that you and your family will be enjoying Ramen noodles for every meal for a few months. But all of those lifestyle changes pay off in spades once your company takes off. As our favorite quote states, “Entrepreneurs are people who are willing to live like most won’t in order to live like most can’t!”

There are a number of specific actions a first-time entrepreneur can take to mitigate these risks into something manageable, if not unnoticeable. First, take the time to truly plan your business idea. Dig into the details of every aspect of your venture, break them down and look for better, faster, and smarter ways to get the job done. Second, be realistic about the financial repercussions of going out on your own. If you start a business with no working capital, you are going to be broke during the early stages. If you commit all of your personal resources to the effort, you are putting them all at risk. If you don’t learn to manage finances, both personal and business, you will have a hard time finding success in either area.

Third and finally, learn all you can about the fundamentals of business and the specifics of what you want to do. Striking a balance between the actual operations and the business of running a business is a critical, but often overlooked, necessity to controlling risk and finding the success you seek..

Calculated Risk Mangement for a Successful Startup

What is Risk Management?

It is basically taking risks for your startup in a controlled environment. So, when you take the risk you have got a backup plan to cover fire in case you run out of ammunition in the war zone (market). This is known as Risk Management in the world of startups. I will provide a brilliant example.

A person just started a small business of mobile accessories online. He knows there is enough market out there already that he needs to compete with to outreach his customers. So, before getting into the game he needs to understand that his product is unique and cheap at the very same time. Now, if the product is cheap; how can it be unique. For this particular purpose he needs to visit whole sale markets. When he finds what he needs, next step is placing a bulk order. Now, when he is selling his item online; he will get customers sooner or later. But, what matters is he took a risk placing a bulk order; at the same time he did research for uniqueness and price control. This is what exactly known as Risk Management in the world of startups.

Any start up in this world fails only when it runs out of a credit line. So, it’s completely clear that money is the lifeline of your startup. What needs your attention is Risk Management to check on the expenditure? How can you do that?

1) STOP SPENDING STUPIDLY:- You are not here to impress your girlfriend on a date. Don’t be a show off no one needs to know your spending capacity. Your clients are only seeking some brilliant product packaged with good services. They are not here to see your costly machineries, your heavily salaried employees and your mind blowing infrastructure. This is a big NO. It’s the beginning phase; focus only on good products, good services and amazing marketing. That’s all you need.

2) Don’t run with a blindfold on your eyes:- Another stupid reason for a startup failure is when you keep spending in the wrong product or services without seeking the market survey report. Why? You could lose a big fortune of money that’s why. Your customers are looking for something else and you are not ready to see that with your open eyes instead you choose to cover your eyes like a horse and run straight. Look around understand your market don’t get intimidated by a product or a service you like. Understand what the market needs, the customer’s demands and work accordingly.

I am not saying don’t take a risk. I am just saying don’t take one without a plan.

The CEO’s Guide To Succession Planning – Managing Risk & Ensuring Business Continuity

Introduction

Once reserved for the upper echelons of senior management, and often viewed as replacement planning should catastrophe strike, today’s succession planning is being redefined. The discipline has broadened in both breadth and scope to become a central component of board-level strategy.

Succession planning focuses on managing risk and ensuring continuity across all levels of the organization – risk of untimely departures of critical personnel, risk of retirees taking their skills and knowledge with them and leaving nothing behind, and risk of losing high value employees to competitors. It does so by helping your business leaders to identify top performers within the organization, create dynamic “talent pools” of this critical talent that other leaders can leverage, and prepare and develop these high performing employees for future roles.

If this was easy, everyone would be doing it. The problem that exists today is that succession planning is barely automated, let alone optimized. This CEO guide provides five key tips for jump starting your succession planning efforts.

1. Automate and Reduce Costs

Today’s succession planning efforts are characterized by fragmented, inconsistent, paper-based processes. Indeed, 67% of companies are still primarily paper-based, according to a global survey conducted by SumTotal.

Conventionally, business and HR leaders will spend weeks or even months manually scouring different parts of the organization for information needed to build lists and pools of nominees and successors for specific job families or positions. The information required to generate the lists often includes self assessments, past performance appraisals (often paper-based), and 360 feedback. After a lengthy period of information gathering and aggregation followed by manual analysis (e.g., nine-box, gap analysis), the results are printed and collated into large three-ring binders for use in executive planning meetings. This time-consuming, inefficient, and costly process is still commonplace today.

To effectively transform succession planning from a manual, paper-based process to one that is systematic and technology-enabled, CEOs must focus on laying a solid foundation supported by strong executive leadership.

Program & Process Foundation

  • Establish dedicated management function (e.g., program management office) with CEO-sponsored executive leader or council (with senior representation from line-of-business, geography, and corporate HR)
  • Define core succession process along with key constituents and tasks at each step of the process; Clearly articulate touch points to other business processes (e.g., performance management, career development)
  • Understand implications of change with emphasis on managers & employees
  • Align program with broader business strategy
  • Determine initial scope (e.g., enterprise-wide, divisional)
  • Define processes independent of technology

Technology Foundation

  • Must support and enable key processes
  • Must integrate learning and development
  • Must link seamlessly to other business processes, especially performance management
  • Must be flexible and configurable to meet unique needs
  • Must centralize and consolidate key information and data
  • Must be easy for managers and employees to use

2. Drive Succession Planning Deeper into Your Organization

Many CEOs still view succession planning as replacement planning to designate successors in the event of a catastrophe befalling senior company leaders. Indeed, succession planning penetrates only the highest levels of the organizational hierarchy, according to survey data. Only 35% of companies currently focus their succession planning efforts on most critical roles within the organization.

Yet a most dramatic transformation is underway: 65% of the organizations surveyed plan to extend succession planning to all critical positions within the two years. Applying succession planning beyond the top layers of management is critical to retaining high performers across all levels of the organization and mitigating the risk of untimely departures of personnel in high-value positions.

The key to extending succession planning into the organization is to provide career development planning to employees. Indeed, fully 97% of business and HR leaders believe that a systematic career development process positively impacts employee retention and engagement. These leaders also believe that providing career advancement opportunities as well as dedicated development planning to employees are the two most important mechanisms for retaining high performers.

Retaining existing employees not only has the potential to minimize the effects of talent shortages, it also provides significant and tangible cost savings (since replacement costs range from 100%-150% of the salary for a departing employee).

3. Establish Dynamic Talent Pools to Improve Pipeline Visibility

Centralized talent pools provide CEOs with global visibility into their talent pipeline and overall organization bench strength. They provide a mechanism for ensuring that the organization’s future staffing plans are adequate, thereby reducing risk and ensuring continuity. To be truly effective, talent pools need to be dynamic in nature. For instance, if an employee is terminated, that person should be automatically removed from existing successor pools. Alternatively, if an employee closes a key skill or certification gap that had previously kept her from being considered as a successor, the pool should be updated appropriately. Talent pools that are inaccessible or not up-to-date are of little use to decision makers.

A key element of making talent pools accessible is in-depth searching for talent exploration. A talent pool is not much good if managers cannot easily view, track, update, and search for potential successors. Dynamic talent pools should take the guess work out of succession planning by aligning employee assessments, competencies, development plans, and learning programs. Proactive system monitoring ensures that as employees learn and grow, talent pools are dynamically updated to reflect the changes. It is this element in particular – supported by robust reporting and analytic capabilities – that helps CEOs make more objective staffing decisions and better plan for future staffing needs.

4. Promote Talent Mobility to Retain High Performers

Industry analyst firm Bersin & Associates defines talent mobility as “a dynamic internal process for moving talent from role to role – at the leadership, professional and operational levels.” The company further states that “the ability to move talent to where it is needed and by when it is needed will be essential for building an adaptable and enduring organization.”[1]

Talent mobility is:

  • A business strategy that facilitates organizational agility and flexibility
  • A mechanism for acquiring and retaining high performing and potential talent
  • A recruiting philosophy that favors internal sourcing over costly external hiring
  • A method for aligning organizational and individual needs through development
  • A proactive and ongoing approach to succession planning rather than a reactive approach

A systematic talent mobility strategy enables business leaders to more effectively acquire, align, develop, engage, and retain high performing talent by implementing a consistent, repeatable, and global process for talent rotation. Without a cohesive talent mobility strategy, CEOs face several risks:

  • Focus on costly external recruiting vs. internal sourcing
  • Wrong hires (cost can be 3-5x person’s salary)
  • Increased high performer churn
  • Reduced employee engagement
  • Reduced flexibility as business conditions change

CEOs should consider the following integrated processes – and a complete technology platform to support them – to promote and enable talent mobility:

  • Current workforce analysis:Includes detailed talent profiles, employee summaries, organization charts, competencies, and job profiles.
  • Talent needs assessment: Assess employees on key areas of leadership potential, job performance, and risk of leaving.
  • Future needs analysis:Development-centric succession planning to create and manage dynamic, fully-populated talent pools.

5. Integrate Succession Planning to Broader Business Processes

Succession planning is not a silo. It implicitly relies on other talent processes and data, especially assessments that provide a performance and competency baseline. Yet unlike a performance management process, which can be executed in a relatively self-contained fashion (assuming it has access to core employee data), the same is not true for succession planning.

Succession planning requires foundational data (e.g., competencies, job profiles, talent profiles, and employee records) and inputs (e.g., appraisals, feedback). Outputs include nominee pools, successor pools, development/learning plans, and reports. To facilitate the level of integration required to get succession planning right, a single, natively-integrated technology platform that centralizes key talent processes and information is required. With this single platform, the time to develop succession plans can easily be reduced from weeks or months to mere hours. The benefits can be significant: reduce costs, reallocate personnel from tactical activities to more strategic endeavors, and mitigate the risk of untimely departures of essential personnel.

Additionally, a single technology platform promotes the linkage of learning and career development to succession planning. By bridging these processes, nominees who are not ready for advancement can be assigned detailed development plans that guide them to improve the competencies and skills required for new job positions. Learning paths and specific courses can be established for employees to facilitate their career growth. By providing learning opportunities and development plans to employees, CEOs can take a more active role in promoting employee growth, retention, and engagement.

Finally, with a single system of record, reporting and analysis is vastly improved, since all relevant talent data resides within a single data structure. Strategic cross-functional metrics can be readily established (e.g., measure the impact of learning and development programs on performance). Reporting and analysis are key to the CEO’s success in managing employee resources and implementing strategies that support corporate objectives and initiatives.

Conclusion

Organizations can realize significant efficiency gains and cost savings by moving from a manual, paper-based succession process to one that is fully technology-enabled. The shift to a single technology platform facilitates extending succession planning deeper into the organization, since a well-architected solution seamlessly links succession to career development and learning. A complete platform improves senior management’s global visibility into the talent pipeline and bench strength, and promoting talent mobility to retain high performers becomes a viable engagement strategy. Succession planning, done correctly, is all about process and supporting technology integration. Without integration, succession planning becomes just another organizational silo.

Endnotes

[1]Lamoureux, Kim. “Talent Mobility: A New Standard of Endurance.” Bersin & Associates, November 30, 2009.

Risk Management – Some Practical Ideas on How to Minimise Risk in a Business

Introduction

Risk is a given in any business and it can be damaging to a business and even threatens its survival. It is therefore essential to be aware of the various risks, to understand its potential impact on a business and to know how to manage it effectively. This article gives some practical guidelines on how to minimise risk. The discussion is done under the following headings:

  • Planning;
  • Relationships;
  • Hedging;
  • Discipline.

Planning

Detail planning goes a long way in reducing risk. Planning should include the following:

  • Feasibility studies. It is important to ascertain the viability of a new venture through a proper feasibility study.
  • Business planning. A business plan gives the detail of how, when and by whom the strategic goals will be achieved.
  • Cashflow projections. Too many businesses go under due to cashflow problems that could have been prevented. It is essential to plan for anticipated cash in- and outflows and the timings thereof.
  • Financial planning. Good financial planning covers many things including projected management accounts and the underlying ratios. Pre-emptive observation and correction of any potential profitability-, liquidity and solvency problems reduce the risk of running into financial troubles.
  • Project planning. Any substantial ad-hoc project in a company is normally handled more efficiently through proper project management. This includes mergers and acquisitions, new product launches and expansion into new territories.

Relationships

When companies evaluate risks they often forget about the human element. This is potentially one of the most fatal risk factors. Relationships should be nurtured. Specific relationships that are important include the following:

  • Suppliers. Good relationships with suppliers are just as important as with any other stakeholder in a business. It makes business sense to negotiate good credit terms with suppliers and to pay them as late as possible, but once an agreement is in place commitments need to be honoured.
  • Customers. Customers should always receive excellent service and be handled fairly and with respect. A large proportion of business normally emanates from existing clients. A specific bad practice is to try and make a quick buck out of a client through very high margins.
  • Employees. Companies often pay lip service as far as the importance of their employees are concerned. Confidentiality agreements and restraints of trade can reduce some risk of unhappy or dishonest personnel, but it can never be as effective as a team of loyal and motivated employees.
  • Financiers. Transparency and information is essential for investors and bankers. Nobody likes to be blindsided or to get unpleasant surprises. To deliver more than what is promised is also a good practice. In difficult times financing can mean survival.
  • Other Stakeholders. Relationships with all other stakeholders should also be kept in place. This can be the local government, governing bodies in the industry, service providers and others.

Hedging

The essence of hedging is to circumvent a potential negative effect in business through an action, product, etc. Hedging is typical in the financial domain, but by working cleverly it can also be achieved (to a certain extent) on an operational level. Some of the ways to hedge the operations of a business are given below:

  • Suppliers. To have back-up suppliers (especially for critical products, raw material and services) is a good practice. This keeps a company from being held ransom by an un-cooperative or out-of-stock supplier.
  • Products. Any company should continually add new products to its offering. To rely on only a few good products can be very risky.
  • Manufacturing. It is worthwhile to consider different manufacturing plants (if the size of the business justify it). The risk on the business due to factors such as natural disasters and labour disputes is thereby reduced.
  • Distribution. Back-up warehousing facilities and distribution channels are advisable.
  • Customers. We have seen successful companies that had serious problems when they lost their biggest customers. Customer risk can substantially be reduced through having many (and loyal) customers.
  • Geography. Political or economic instability in a country can be very dangerous for the businesses that operate there. Wherever possible it is advisable to spread the risk over many geographical areas.
  • Seasonality. Product- and service offerings that cater for various seasons have a very positive effect on cashflows and minimise the potential risks associated with it.
  • ICT. Very few companies can survive without proper information and communication technology. Back-up procedures and of-site facilities reduce the potential risk.
  • Financial. Financial risk management is very prevalent in large international businesses. If you sell your products in the international arena there are many products available to hedge the various risks. Risks that need to be catered for include currency, interest rate and commodity price risks.

Discipline

Discipline can reduce risks in all aspect of business. Discipline should apply to all aspects discussed above as well as to the following:

  • Expenditure. Expenses should be kept under control -especially in times of affluence.
  • Debt. Debt assists a business to grow. A business with too much debt is, however, very vulnerable for liquidation in adverse conditions.
  • Cashflow. A lack of sufficient cashflow is a potentially fatal business risk. Cashflows should be managed diligently.
  • Growth. Business growth requires additional working capital. Uncontrolled growth can lead to financial distress and even bankruptcy and should be avoided.

Summary

Risk in business is a reality. When these risks are successfully managed the rewards can be substantial. If not, a business can run into serious problems and even collapse. It is unnecessary (and stupid) to ignore risks. By adhering to a few basic principles these risks can be reduced drastically.

Copyright© 2008 – Wim Venter

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