managing risks-successful-entrepreneurs-js for tsm 19may2014
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Managing Risks for
Successful
Entrepreneurship
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Speculative Risk
Most business decisions,
such as marketing a new
product, involvespeculative risk.
speculative risk risk
that is inherent to a
business, involving the
chance of either profit orloss
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Pure Risk
A natural disaster, such as
a flood, or an accident
involving a customer oran employee is a pure
riskfor a business owner.
pure risk the threat of
a loss to a business
without any possibility of
gain, such as robbery oremployee theft.The 3 categories of pure
risk are:
Crime
Natural disasters
Accidents
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Risk Management Strategies
Simple risk management, preventing or reducing
business loss, involves three stages:
1. Identify the risks.
2. Estimate potential losses.
3. Determine the best way to deal with each risk.
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Risk Management Strategies
Managing risk involves these strategies:
risk avoidancenot an entrepreneurs choicerisk reduction
risk transfer = insurance such as property and
workers insurance
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Risk Reduction Examples
Business owners should take these example
steps to reduce risk:
Design work areas to lower chance of
accidents or fire.
Communicate with and educate employees on
safety practices.
Check and service safety equipment.Test company products extensively.
Security measures e.g. CCTV, secure doors
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An individual who
undertakes the
riskassociatedwith creating,
organizing, and
owning abusiness.
What is an entrepreneur?
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Personal characteristics of
successful entrepreneurs
Persistent, Creative,
Responsible, Goal-
oriented, Independent,Self-confident, strong
leadership, and Risk
taker
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Skills needed by
successful entrepreneurs
Communication skills
Human relations skills
Math skills
Problem-solving and
Decision-making skills
Technical skills
Basic business skills
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Successful Business Planning
Identify business opportunities
Scan competition
Define your key services/ products
Meet peers, businessmen
Put together a sound business plan
Find out effective funding avenues
Assemble a Capable Team
Plan your finances
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Successful Customer Focus
Get comfortable asking advice and help.
Improve Listening Skills
Talk to your competitors.
Talk to established entrepreneurs and Professionals. Networking and Industry Association.
Meet your Prospective / customers.
Understand your differential advantage.
To sell many, sell one. Beta TestingCustomers.
Maximize customer satisfaction.
Maintain a diary and take notes.
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MANAGING 10 RISK FACTORS1. Team experience and depth risk.Both the experience and track record of the
founders in starting a business, as well as their experience and knowledge of thebusiness domain. See if it is a balanced team who has been there and done that.
2. Market and opportunity risk.There is always less risk with a well-defined
problem in a large and growing market. All the people in Indonesia is a large and
growing market, but all the people in a specific area/location is much more well-
defined. Its hard to make money in a shrinking market, or with a solution that is nice
to have versus painfully needed.3. Competitive risk.Think seriously about the number and power of your competitors.
Having none is a red flag (may mean no market), but having more than a couple of
large ones may mean this is a crowded space. Even in an open space, you need
intellectual property, like patents, to keep potential competitors from overrunning you.
4. Financial risk.Very few businesses can be started without money. You as the
founder will be expected to put your own skin in the game. The business plan shouldbe realistic about how much cash will be required to break-even, and how big the
return will be for investors in 5 years.
5. Market entry strategy risk.The selection of an inappropriate pricing, marketing, or
distribution strategy is a large potential risk. For example, many new social websites
proclaim that they will offer a free service, and live on ad revenues (not likely in the
first year without a huge marketing investment).
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MANAGING 10 RISK FACTORS6. Political and economic risk.Sometimes founders are just in the wrong place at the
wrong time. Recessions are a tough time to sell luxury goods. Under-developed
countries may have a strong need for your product, but are often unstable and
dangerous. Understand taxation aspects.
7. Technology risk.New technologies, especially those characterized as paradigm
shifts or disruptive may have long and costly acceptance cycles, or may run into
unpredictable performance or manufacturing problems. Medical technologies have
costly legal testing requirements, approval processes, and insurance validation.
8. Businesses with high attrition rate risk.Certain business sectors have historical
high failure rates and are routinely avoided by investors and many founders. These
include food service, retail, consulting, work at home, and telemarketing. On the
Internet, I would add new social networking sites, and new matchmaking sites.
9. Operational risk.Some businesses require huge support or administrativeinfrastructures. For example, vehicle fuel improvements require service stations and
maintenance shops nationwide, before they are viable. Even small operations can have
breakdowns of specialized equipment and complex support processes.
10. Environmental risk. Evaluate your business and location for sensitivity to floods,
typhoons, landslide and catastrophic pollution problems (like an oil spill).
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BUSINESS
STRUCTURE
MARKETING
PREMISES &
EQUIPMENT
SCOPE OF
PROFESSIONAL
PRACTICE
FINANCE
BUSINESS
PLAN
IMPLEMENT YOUR
BUSINESS ROUTE MAP
MAKING A
STARTFINAL
DESTINATION
Legal & Financial
Advice
Naming your
Practice
Practice
Arrangements
Trading
Arrangements
Who Needs to
Know?
Learn from Experience
of Others
Entrepreneurship
Pros & Cons
Mentor
Networking
Grow your
business
Good Luck References &
Acknowledgements
Useful
Contacts
The 7 Ps of
Marketing
Why you
need
MarketingWhat is
Marketing?
Practice Accreditation
Clinical
Standards
CPD
Regulatory &
Professional
Bodies
Raising
Finance
Managing
Finance
Financial
Forecasts
Insurance
-
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BUSINESS
STRUCTURE
MARKETING
PREMISES &
EQUIPMENT
SCOPE OF
PROFESSIONAL
PRACTICE
FINANCE
BUSINESS
PLAN
IMPLEMENT YOUR
BUSINESS ROUTE MAP
MAKING A
STARTFINAL
DESTINATION
Legal & Financial
Advice
Naming your
Practice
Practice
Arrangements
Trading
Arrangements
Who Needs to
Know?
Learn from Experience
of Others
Entrepreneurship
Pros & Cons
Mentor
Networking
Grow your
business
Good Luck References &
Acknowledgements
Useful
Contacts
The 7 Ps of
Marketing
Why you
need
MarketingWhat is
Marketing?
Practice Accreditation
Clinical
Standards
CPD
Regulatory &
Professional
Bodies
Raising
Finance
Managing
Finance
Financial
Forecasts
Insurance