5.4 Opportunities and risks

5.3.3 Key Performance Indicators

The opportunities and risks of the business plan should be worked out. They should already be addressed in the description of the modules. It is important to develop an idea of the opportunities and risks in the business plan. It should be made clear how intensively and professionally the business start-up or take-over has been dealt with. The person who recognises the risks in the planning can deal with them quite differently than the person who is surprised in reality.

Risk: Product description and sales forecast

Among the serious misjudgements in business plans are the inadequate product description and the resulting sales forecast. The offer is only described superficially. Buzzwords are supposed to make the character of the service clear. Anyone who wants to trade must be able to describe the idea of how certain goods are traded in a specific industry. Those who want to advise companies must know how companies function as a whole. Without sufficient experience in management responsibility, such a business idea is almost hopeless. Anyone who wants to sell goods on the internet must conceptually represent more than just creating a functional homepage.

The sales forecast stands and falls with the precisely defined and specified product. Demand is the decisive variable in a business plan. Sales determine the revenue or income. If the target group is wrongly estimated and with it the demand, the business is doomed to failure. The target group description must be directly linked to the product or service. General target group descriptions do not help. What does a distinction between private customers and business customers mean? It has to be much more specific. Target customers must not be recorded globally, but quasi "locally" and "by name".

For example, if you cannot define your target customers precisely, you will have to spend disproportionately high amounts in advertising because the hit rate is correspondingly low. 

Risk: Market assessment and sales forecast

The specific market in which a business idea is to be implemented is only insufficiently perceived. There is no or insufficient preoccupation with the specifics of the market, the industry and especially the competition. Those who believe they can simply "run" into the market are mistaken. The markets are distributed and occupied. The markets are defended by competitors with all means. New markets are very rare. Historically, it is a matter of exceptional situations when new markets emerge, such as the internet market. It is common to have to enter a cut-throat competition as a start-up. The experienced companies know "almost" all the tricks of the trade. They usually have more capital and learn quickly. The advantages of a start-up must be worked out so that it can be understood. Advantages usually lie in flexibility, mobility, low costs. That is what needs to be described. 

 

 

Risk: Financing and cost accounting

Business ideas rarely fail because of capital; they fail much more because of the founders themselves and inadequate financial planning and cost accounting. According to a study by KfW Mittelstandsbank, the linchpin is the founders themselves. Founders rarely lack professional qualifications. But they lack commercial and entrepreneurial knowledge all the more. Good industry experience is the key to success.

If the financing of a company is weak and then the cost accounting or the preparation of the P&L is delayed, the failure of the company can hardly be avoided. Adequate financing is able to survive even economically weak stretches.

Many founders have often misjudged their short-term capital needs when financing their start-up, and as a result have planned their liquidity incorrectly. Problems arise in this situation especially when customers are slow or do not pay. It is also dangerous if the price for a company purchase is too high or if the amount for a company succession is too high. 

Turning risks into opportunities

In the business plan, it is important to identify risks in order to turn them into opportunities. Risks must be designed in such a way that a company can deal with them successfully. This is possible when the "pain thresholds" are calculated at the minimum or maximum. In any case, the possible minimum must be determined in the sales forecast or turnover planning in order to determine how large the financial requirements are. It represents, so to speak, the lower limit of revenues and income.

The aim is to develop and calculate planning scenarios or variants that show the lowest and the highest possible risk. This makes it possible to identify a corridor for entrepreneurial action. Once the largest possible financial gap has been identified, the maximum liquidity credit can be correspondingly higher or lower. In reality, the lean period can be mastered and the enterprise can successfully establish itself in the market.

The prerequisite for recognising opportunities is to identify the risks and turn them into opportunities. A business plan is convincing when it can offer convincing arguments and solutions for the entrepreneurial risks.