Every good business plan involves risk mitigation. Risks like products not working, the costs of the raw material spiking, or inflation. A good entrepreneur prepares for the worst-case scenario but keeps working to achieve the best scenario.
How are business plan risks different for women entrepreneurs?
Only about 14% of the businesses in the country are woman-led. One of the reasons attributed to this significantly low number is risk aversion. Studies suggest women perceive risks differently and more harshly. However, this seems like an oversimplification of the matter so, let us understand where the risk aversion comes from.
l Conditioning
The world is changing, and glass ceilings are breaking, but most women still face the same challenges every day. There is still individual bias toward women's abilities in management or finance. The never-ending fight to prove their worth is exhausting.
l Work-work balance
Women seem to be doing amazingly well at balancing their careers and still managing to meet expectations at home. This means wanting to build a career means double the work for them.
l Resources
Most women do not receive the right financial literacy growing up. They either learn this from formal education or experience. This is the core reason behind their aversion to making big decisions involving money.
But, studies also suggest that women-led businesses are more likely to succeed and see financial prosperity.
A woman’s unique perspective, ability to multitask, productivity, collaboration, etc., make her a good leader. A country’s economy grows faster when women participate in it, and many women are proving that right now. So, if you are a woman who is starting her own business or is thinking of starting one, here is a guide that can help you create a strong business plan and assist in your success.
How to mitigate risk?
A risk mitigation plan should be at the center of your business plan. One way to achieve this is to list the factors that affect your business. Each factor should be studied, and risk mitigation strategies should be developed for each one.
A good approach to business plan risk mitigation is the 3(PM) - Product, Price, and People
l Product
Here is a table that will help start your inquiries.
Activity
|
Factors
|
Business Risks
|
Manufacturing
|
· Raw material,
· Process,
· Machinery,
· Set-up,
· Labour,
· Storage
|
· Costs
· Handling
· Permissions
· Licenses
· Trademarks
· Labor
· Storage costs
· Environment
|
· Machinery turning obsolete
· Increasing raw material costs
· High transport costs
· Storage and handling difficulties
· Theft
· Permissions and licenses,
· Loopholes in leasing,
· Labor strikes
· New laws
· Health codes, etc.
|
Services
|
· Raw material
· People
· Set-up
|
· Costs
· Storage
· Area of operation
· People costs
· Licenses
· Permissions
|
· Increasing material costs
· Increasing rent
· Wrong area (lowly populated, convenience issues, or less target audience, etc.)
· Expensive licensing
· Legal issues, etc.
|
l Price
Price is often influenced by external factors. Understanding these would help create a risk mitigation plan. A business works hard to justify and set a price that the market is comfortable with. Any change is bound to disturb the business, so it is smart to preempt such changes and prepare for them for the foreseeable future.
l People
The employees make the business. Therefore, it is important to prepare for the risks they bring, such as human error, confidentiality breaches, churn, key personnel loss, and theft.
l Money
Every entrepreneur seeks funds to run their operations, these can be borrowed or raised through equity. Reducing financial risk is essential to reducing business risk. Increased interest rates, inflation, long credit periods, short-term assets built using long-term liabilities, and investors backing out are all examples of factors that should be considered in creating mitigation strategies to reduce business risk to the financial health of the company.
l Market
What is a business without its consumers? Its fiction. Women entrepreneurs should focus on changes in consumer behavior, market sentiment, macroeconomics, competitors, or any factor that can impact their consumers' buying decisions and/or purchasing power.
How to create a risk mitigation plan?
After identification, the next step is planning. Let's see what questions you should ask to reduce business risk.
· What factors can I control from the list?
Try to eliminate risks where possible, reduce risks wherever possible, and prepare for factors outside your control.
· How are other successful businesses controlling similar risks?
It is always a good idea to check how other successful women entrepreneurs reduce business risks. Always focus on early failures and how they managed to correct their steps.
· Who can guide me to mitigate business plan risks and make good mitigation strategies?
A mentor is a person who has done what you are trying to do or knows how to do it. They can be other women entrepreneurs or experts in their respective fields.
· Are there existing tools that can do this work for me better?
Just like we use technology to enhance our lifestyle, we should use it to ease doing business. Women entrepreneurs are often strapped for time, something that can be solved using the right tools. Technology can help create a better product, effective manufacturing process, faster reporting, consumer insights, marketing, etc. A smart entrepreneur makes technology work for them. Technological innovation can help reduce business risks.
· If I cannot control it, can I insure my risk?
Yes, there are many companies like Future Generali that offer commercial insurance with a wide variety of risk coverage. There are also women-centric coverage plans with HEALTH POWHER that will not only give you financial support for business risks, but also health and wellness. You can simply call 1800 220 233 to understand how to insure your business risks.
A useful piece of advice
To put it in a nutshell, women entrepreneurs can achieve everything with planning. Risk is unavoidable, so face it with conviction and preparation. Focus on how to mitigate risk, not avoid it. But you can always have a safety net with insurance.
