Business Threats


The operating plan of your business plan should include a component called Business Threats.  A threat is an external factor (outside the business) that may effect the performance of your business. The most obvious effect would be a reduction in corporate sales. Often a business faces many threats, other then competition, when operating its affairs.

For example, the tobacco industry has experienced and is expected to continue to experience many threats.  Moreover, the American and Canadian medical associations have conducted many experiments that suggests smoking leads to many illnesses and deaths. This threat certainly reduced the number of North American smokers and thus the tobacco industry undoubtedly experienced revenue reductions. Other major threats to the tobacco industry would be the ban of smoking in federal buildings and on commercial airlines. These threats do not, necessarily reduce the number of North American smokers, rather they reduces the number of tobacco products being consumed during working hours and flying time, for instance.

Examples of the most common business threats are as follows:

Government Regulations Changing Customer Patterns
Economic Environment Product Liability
The Weather Technological Changes

Government Regulations as a Business Threat:

Governments at all levels regularly impose regulation and restrictions on businesses. For example, federal governments usually regulate major environmental issues, state/provincial governments regulate sales tax regulations, while local governments regulate signage and building permits. Many of the regulations passed by governments can pose as major threat to businesses operating in a regulated industry. If your business is "controlled" or anticipated to be "controlled" in the future, be sure to discuss such matters in your business plan. If your unsure or unaware of any government regulations for your particular business, be sure to contact all levels of government.

Economic Environment as a Business Threat:
The economic environment may pose a threat to many businesses. For instance, many products and services do not sell well during economic downturns, such as a recession. Moreover, consumers tend to decrease their spending while retail operators tend to reduce their capital investments, for example. Other products and services, however, sell extremely well during recessionary periods. If your proposed business will excel, falter, or remain unscaved during economic down-turns, it should be discussed under the operation section of your business plan.

The Weather as a Business Threat:
Many businesses rely on sunny clear days, others rely on rainy days or nights, while other businesses require snow in order to generate sales. For example, a Canadian golf course owner would generate "few" sales during the cold Canadian winter months. Similarly, he would see few customers during wet weather. Therefore, "poor" weather poses a major threat to golf course owners. If the weather poses a threat to your business, be sure to discuss the issue in detail. Will you have a backup plan for those days where the weather is not cooperating in your favor? Also, assess how changes in the climate will affect your business. Use historical temperatures and weather reports in your discussion.

Changing Customer Patterns as a Business Threat:
Will consumes continue to purchase your product or service as years pass? Will consumer's attitude, interest, desire toward your product change as your business progresses or as more competitors enter the marketplace? Will their buying behaviors change in terms of usage, loyalty, benefit sought, and occasion? As consumer life styles change, will their buying patterns change as well? In other words, how will your target market change as time passes? And how will your business change to accommodate changing customer buying behaviors? Will changing customer patterns pose a major threat to your business or will you change as the market changes? These are some of the issues you should address under the threats section of your operations plan.

Product Liability as a Business Threat:
Is your product required to meet certain safety measures? Is your product or service in a high risk group for potential lawsuits? If so, your first step is to acquire the necessary insurance coverage. Remember a large award against an uninsured company usually results in financial disaster.  The next step is to assess the likelihood of any possible lawsuits. And the third step is to determine how you will deal with any possible lawsuit if it arises. The rule of thumb, however, is to create a product or service that passes and goes beyond all safety measures. If product liability poses a threat to you and your business, be sure to provide all necessary details, including the effects on your company's future existence.

Technological Changes as a Business Threat:
The use of technology plays a major role in many industries. The computer industry, for instance, spends a great deal of time and money searching for more effective and cost efficient ways to bridge the gap between humans and computers. Computer companies that create a "better" and easier approach to computing will undoubtedly experience success. For businesses within an industry where technology is a key success factor, it's crucial to continuously search for ways to become more technologically advanced?

The operating plan of your business plan should have a heading entitled Business Threats.  The objective is to provide the business plan reader with information on all existing threats, the harm each threat may cause, and how you plan to "deal" with each existing and potential business threat.

For more information relating to the Components of the Operating Plan, refer to Operating Plan.

Categories: Operations