Worksheet+6D

[|[i]] WORKSHEET 6D Risks

Instructions
q Meet with your venture team to discuss risks and uncertainties. q List in this worksheet those that seem most significant. _ 1. What risk will you face if sales are lower than anticipated? What would happen if sales were down 10 percent or even 25 percent from your projections?

- Will not be able to meet the fixed cost and variable costs that are accrued monthly. - Might need to meet the demands of the current buyer. - Might need to reduce purchase from supplier and find some other ones that might not be able to have the same quality produce as the ones currently used. - Might need to make a new project plan. - Might not be able to meet the financial payments to lenders.

If sales are down by 10% or 25% than projections, the venture might face a problem due the the little margin we have. The most difference from the projection that could occur is 5% and with that amount the venture would still be able to work. Anything more, the venture face a high risk of needing to find other financial support.

2. What is the risk that costs will be higher than expected? Consider both variable and fixed costs.

The fixed cost including salary, phone line, space rental, computer, furniture would not be affected too much with the higher cost in the short term. In the long term, some cost might change including salary, rental, phone line due to change in economies. The marketing tools would change anytime due to increase in cost for printing, advertisement space etc.

The variable might change anytime. The cost of materials would change based on the market rate and the economy. The dietician consultant might increase the amount charge, and the marketing cost might varies too depending on outside factor that is beyond our control.

3. What is the risk that prices you have assumed are too high, and that you’ll need to reduce your prices to attract customers and remain competitive?

There is always a risk that the prices are too high than expected. When that happens, we would need to make a market research to see what the consumer thinks about the venture. Sometimes, it is not the price that matters but more likely the services that is provided. However, if the venture needs to reduce price to maintain its competitiveness in the market, it would not a bad idea. It is better to gain more customers than to keep on going on something that is not making any income.

4. What are the risks if it proves difficult to attract suitable workers for this venture?

- Do not have the best people available to provide the mos suitable advise for the diet plan. - Need to provide extensive training for the cooks and dietician.

5. What other important risks and uncertainties can you anticipate? How serious are these risks?

- Change in the economy effects price of raw materials - high risk - High staff turnover - high risk - Lack of supplies - high risk

6. Among the risks indicated above, which are the most serious?

Increase in price of supplies and raw material would be the most serious because this is a cost that would effect the price most drastically. It will effect the venture's profit or loss.

7. If the venture’s financial results were significantly worse than projected, what would be done? What steps would be taken to reduce costs? At what point would the venture be shut down? How difficult (financially and otherwise) would that be for the organization?

If financial results is very bad, then we would need to review the fixed cost and variable cost immediately and make sound changes. This include getting advise from financial advisor. To reduce cost, we might need to reduce staff, outsource some duties or look for alternate supplier. There are no perspective as to when the venture would shut down and the decision on that would be decided at a latter date.

[|[i]] //Copyright 2002 Amherst H. Wilder Foundation Published by the Amherst H. Wilder Foundation, 919 Lafond Ave., St. Paul, MN 55104// May not be copied or altered except for use by organization or individual who purchased this book. May not be resold.