It is amazing when I help entrepreneurs plan their businesses how many of them tell me the market is a 100 billion dollars, no competition and no risk. I try not to laugh, but I can never hold back the smile. The truth is there are risks in every business and the greater the opportunity, often the greater the risk. When preparing a business plan you will need a risk statement.

Below is a sample of a “Risk Considerations” statement for a Business Plan. This example comes from a Business Plan for a Product in the oral hygiene market. This product is real and was invented by Charles Shooster in the 1990′s, look closely at how this sample “rough draft” risk statement is formed:

Risk Considerations

We see many risk considerations, the biggest one is selling too many orders and getting behind the cash flow curve with too many receivables too early on. This does not mean we will have to quit business, because in essence our company will have little costs to run. It may however slow us down and prevent us from taking huge future orders until we are paid on our receivables, thus we realize that we must be careful in accepting credit terms and strict on payment policies.

Another risk, which we will shore up is that of a single source manufacturer, because if they go out of business or quit for any reason, even a natural disaster, we will be dead in the water. We plan on having triple redundancy on vendors and use this as leverage in controlling our costs through use of the competitive free markets.

Copycats are the norm and we assume that some unscrupulous company will try to come into our markets to compete with us stealing our “first use” concept, however, in reality we expect this and intend to keep our price low, thus an alternative to the higher priced item. Additionally, if a competing company is advertising quite a bit, then it will get consumers more use to using the product and we plan on being the most available, at the best price.

One problem in today’s world is being labeled a polluter or bad for the environment. We intend to shore up this problem in advance by using readily biodegradable packaging, products and making sure those who produce our materials or do the thermo-plastic welding are not harming the environment. All wrappers must be non-toxic to organic life.

Working with MLM companies might cheapen the brand and some MLM companies are somewhat sleezy, thus we must worry about brand name recognition and who we work with. The MLM market will therefore be a secondary market

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Remember that no business, whether a product or service is without risk considerations, failure to state this will raise eyebrows with your potential investors, so be honest with yourself and your investors and leave no stone unturned when it comes to risk. I hope this sample serves its purpose as you prepare your own business plan and continued success. Sincerely, Lance.

It might be the best time to make your very own business plan to place things in order to be able to reach your business goals and objectives. There are ten different sections of a business plan and I will discuss briefly each of this to serve as a guide.

One of the very important things that you will have to include in your business plan is the Executive Summary. Although this section goes at the last part of your plan, it is very important not to miss this one since this summarizes all the key elements of your entire business plan and will give the reader a clearer picture of your business’ structure.

The next key element is the Company Analysis. This will help investors know a bit of your company’s past performance and this will serve as a portfolio of your company’s achievements and success. Include all your big accomplishments in this section and boast your company’s advantage compared to its competitors.

The next section of your business plan is the Industry Analysis. In this section, you will have to clearly identify which sector your business is currently playing in or plans to be part of. Show, in this section, how well you know your industry and give details as much as possible. You can also include a summary of how you picture your company’s place in the industry.

Next is the Market Analysis, also called the Customer Analysis. This section will show your target market for your products and services. Identify your customers and show that you understand your customers well. Show credible data if necessary to support your claims.

Another section of your business plan is the Competitive Analysis. Show in this section how well you know your competition. Include a summary of companies that offer similar services and products to yours. Alternatives of your products should also be included and show your advantages over your competition.

Management Analysis is also an important section of your business plan. This identifies your business’s legal structure and management. You can introduce your board of directors here. Important people that are in the management that have an impressive history should be mentioned here.

Another section to be included is your Operations Plan. This will show how you are currently running your business at the moment. Show a detailed plan of your next product release and how you will sell it, future hiring of additional employees and specific timelines for different actions. Show to your investors the possibility of a higher profit and raise their confidence of investing in your business.

Next important section is the Marketing Plan. This is where you will show how you intend to price, sell and promote your products. Show details of your products and services and how you plan to market it including advertising and promotional activities that are open to you.

To make your investors believe in the current state of your company, you will have to provide them with a financial report of your company. Financial statements and funding requirements for future projects should be delivered including a financial statement analysis. All of this will be included in the Financial Plan section of your business plan.

The rest of the data that needs to be presented and other materials that are not included in the above sections will be place in the Appendices and Exhibits sections of your business plan. All other information that will raise the credibility of your company, including legal document, studies and images shall be included here.

There is no shortage of advice on writing business plans out there. Much of the advice on business plans is too detailed. The following is a list of the essential elements of a business plan.

But first a couple of thoughts. First, if you enter a business plan competition as part of a school, keep in mind that you are entering a competition within an academic environment. Some things you learn in school might not be applicable in the real world. For one, you might learn in class that you should include five-year financial projections. In the real world, however, predicting financial performance over five years, especially for a startup, is practically impossible. Second, if you are an entrepreneur with dreams of getting VC funding, a business plan might not be the best use of your time or effort. More on this later.

The Market Opportunity Is there a market need for your product or service? What is your estimate of the size of the potential market? What part of this market can be addressed with your product or service? Has the need been validated with potential customers? The best possible validation of your idea is a paying customer. If your product is in development, the next best would be a customer who has signed a contract to purchase your product or service when it is complete. After that, the next best validation would be some comments from potential customers that praise your product or service as being a solution to their needs.

After you demonstrate a market need, think about customer segmentation. You cannot target all customers initially.

Segmentation naturally leads to a discussion about a go-to-market strategy. This section should spell out, at least generally, how you plan to get your first customers. Be creative here. Imagine you wanted to sell industrial equipment. You could demonstrate a way to get your first customers by including a list of people at various companies who are in a position to purchase industrial equipment (or at least need buy-in before such purchases are made). This list could include the names of the people, their position, company name, and contact information. Someone reading this would think-rightly so-that you know what you’re doing to sell your product.

Finally, give some thought to the business model. What are your potential revenue streams? What is your pricing strategy? What is the planned distribution strategy?

The Broader Context Give your audience the broader “macro” context of the industry. What are the legal and regulatory risks involved? What might make this opportunity an attractive investment right now? What might make it a risky investment? For example, government-mandated regulation easily creates demand for any products or services that will help companies comply with new rules.

The Founders and Management Team Use this section to show that you have a solid, experienced management team that can effectively work together to get a product or service to market.

Conclusion If you are going for venture capital funding, keep in mind that many venture capitalists (VCs) do not read business plans. They are simply just too busy. Still, it might still be a good exercise to at least critically think about the above because any pitch you make would probably need to touch on these. If not, you can be sure the VCs will ask you about them. And if you can’t address the above broad areas in sufficient detail, then perhaps you might not be ready to seek funding.