Part 1

There are, obviously, many advantages to being a brand name, but it is not easy to achieve. First, it is usually

expensive. You must spend a great deal of money on marketing and advertising simply to get your name well-

known. And, although it seems like some brand names develop overnight, building a brand is hard to achieve

quickly.

Build in g a tr u ly str o ng b ra n d is m ore th an ju st a m atte r o f n am e re co gnitio n. A re al b ra n d g iv es c u sto m ers tr u st in y our

pro ducts a n d s e rv ic es b ecau se y ou a re c o nsis te n t in q uality , p ric e, s e rv ic e, o r c o nven ie n ce — o ver tim e. T his d oesn ’t m ean y ou

hav e to p ro m is e th e h ig hest q uality o r th e lo w est p ric e — it o nly m ean s b ein g c o nsis te n t, s o th e c u sto m er c an d ep en d o n w hat

th ey ’ll g et f ro m th at b ra n d. M cD onald ’s d oesn ’t h av e to p ro m is e g ourm et f o od to b e a r e lia b le b ra n d. I t b uilt its b ra n d b y g iv in g

cu sto m ers t h e s a m e e x perie n ce, t h e s a m e t y pe a n d q uality o f f o od, t h e s a m e c le an lin ess, a t e v ery o ne o f i ts r e sta u ra n ts .

If y o ur g oal i s t o b uild a b ra n d n am e, y ou h av e t o l o ok a t t h ose f a cto rs t h at y ou a re a b le t o o ff e r a n d d eliv er t o y our c u sto m ers

c o nsis te n tly a n d r e p eate d ly o ver t im e, m ak in g c erta in y ou p ut s u ffi cie n t c o m pan y r e so urc es i n to s u pportin g t h ose f a cto rs .

R is k

Every b usin ess in volv es ris k . O nly th e m ost n aiv e a n d in ex perie n ced e n tr e p re n eu rs b elie v e th eir b usin ess “ ju st c an ’t fa il.” U se

th is s e ctio n t o s it d ow n a n d t h in k t h ro ugh t h e v ario us r is k s f a cin g y our n ew e n deav or.

T his ta sk m ig ht s e em d au ntin g. S o w hy s h ak e y our e n th usia sm ? B ecau se r is k a sse ssm en t h elp s y ou p re p are f o r a n d p re v en t

th re ats to y our s u ccess. If, fo r in sta n ce, y ou id en tif y a m ajo r ris k a s th e p ossib ility th at a w ell- fu nded c o m petito r w ill e n te r th e

m ark et, y ou w ill w an t t o t a k e s te p s t o q uic k ly s e cu re k ey c u sto m er c o ntr a cts o r l in e u p s ig nifi can t f u ndin g y ours e lf .

“ W hen I s ta rte d o u t, t h ere w ere o n ly t h re e b ro ad ca st n etw ork s, a n d I t h ou gh t, t h at c a n ’t b e a ll. I t h ou gh t, I ’ll s ta rt

m y o w n n etw ork ! I h ave t o fi gu re o u t h ow t o d o t h is . I l ik e b ein g o n t h e e d ge; I ’m a r is k t a k er.”

K ay K oplo vitz

C hair , K ate S pade

E valu atin g y o ur r is k s i s n ’t m ean t t o b e a n e x erc is e i n f e ar ( a lth ough i f y ou a re i n tim id ate d b y t h e r is k s i n volv ed , t h en p erh ap s

you a re n ot y et r e ad y to s ta rt y our b usin ess). M an y e n tr e p re n eu rs th in k th at if th ey d esc rib e th e r is k s th ey ’re lik ely to e n co unte r,

th ey ’ll s c are o ff p ote n tia l in vesto rs . Q uite th e c o ntr a ry is tr u e. F or a ll b ut th e le ast s o phis tic ate d in vesto rs , a n e v alu atio n o f r is k s

sh ow s t h em y ou’re w illin g t o t a k e a c o ol, h ard l o ok a t t h e s itu atio n f a cin g y ou, a n d y ou u nders ta n d t h e s c o pe o f t h e t h re ats t o y our

su ccess. I t r e assu re s in vesto rs th at, b ecau se y o u u nders ta n d th e r is k s in volv ed , y ou’re m ore li k ely to ta k e s te p s to c o unte r th ose

th re ats .

W hat K in ds o f R is k ?

It’ s n o t ju st a m atte r o f h ig h ris k o r lo w ris k . It’ s a ls o w hat k in ds o f ris k . S om e ris k s a re m ore to le ra b le o r m ore im porta n t to

d if f e re n t i n vesto rs — a n d t o y ou. T he k ey t y pes o f r is k f a cin g c o m pan ie s i n clu de:

■    M ark et R is k : th at th e m ark et w ill n o t r e sp ond to y our p ro ducts o r s e rv ic es, b ecau se e ith er th ere is n o r e al m ark et n eed o r th e

m ark et i s n ’t y et r e ad y. M ark et r is k s a re v ery d if fi cu lt t o o verc o m e.

■    C om petit iv e R is k : th at th e c o m petitiv e s itu atio n w ill c h an ge d ra m atic ally , a n d n ew c o m petito rs w ill e n te r th e m ark et a n d/o r

esta b lis h ed c o m petito rs w ill r e p ositio n th eir p ro ducts o r s e rv ic es to m ore e ff e ctiv ely ta k e y ou o n. Y ou s h ould c are fu lly th in k

th ro ugh h ow o th er c o m petito rs m ig ht re sp ond to y our e n te rin g th e m ark et a n d n ot a ssu m e th at th e c o m petitiv e e n vir o nm en t

w ill r e m ain t h e s a m e.

■    T ech nolo gy R is k : th at th e te ch nolo gy o r p ro duct d esig n a n d e n gin eerin g w on’t w ork , o r w on’t w ork a s w ell a s y ou e n vis io n.

T his m ay b e c ritic ally i m porta n t t o y our c o m pan y’s s u ccess, o r i t m ay b e t o ta lly u nim porta n t, d ep en din g o n t h e n atu re o f y our

co m pan y, i ts p ro ducts /s e rv ic es, c u sto m ers , a n d t h e l ik e. I f y our b usin ess f a ces s u bsta n tia l t e ch n olo gy r is k s, w hat i s y our a b ility

to q uic k ly a n d e ff e ctiv ely i m pro ve t h e t e ch nolo gy?

“ T he a p pare l b usin ess i s a t o u gh o p era tio n al b u sin ess. M an ufa ctu rin g, s h ip pin g, d eliv erin g, m ak in g s u re e v ery th in g’s

o n t im e. T here ’s a t r e m en dou s a m ou nt o f c o m petit io n , a n d t h in gs g et h ot a n d t h en g et c o ol.”

K ay K oplo vitz

C hair , K ate S pade

P ro d uct R is k : t h at t h e p ro d uct w on’t m ate ria liz e, w on’t b e fi nis h ed i n t im e, o r w on’t w ork a s p ro m is e d . T his i s v ery s im ila r t o ■    t h e a b ove, o nly w ith n onte ch nolo gy p ro ducts o r s e rv ic es.

■    E xecu tio n R is k : th at y ou w on’t b e a b le to e ff e ctiv ely m an ag e th e r o ll- o ut a n d g ro w th o f th e c o m pan y b ecau se m an ag em en t

is n ’t s u ffi cie n tly c ap ab le , th e tim e a llo w ed is n ’t a d eq uate , o pera tio ns a re n ’t in p la ce, a n d o th er r e aso ns. Y ou s h ould b e a b le to

d em onstr a te s p ecifi c s te p s y ou a re t a k in g t o r e d u ce o r e lim in ate s u ch r is k s.

■    C ap it a liz a tio n R is k : th at y ou’v e b ad ly u ndere stim ate d c o sts o r o ver- e stim ate d in co m e, a n d y ou w ill r u n o ut o f m oney. T he

best w ay to a v oid th is r is k is to b udget r e alis tic ally a n d g et e n ough f u ndin g s o y ou d o n ot r u n o ut o f c ash p re m atu re ly . L ook

fo r i n vesto rs w ho h av e t h e a b ility a n d i n clin atio n t o o ff e r a d ditio nal f u nds a s y our c o m pan y p ro gre ss e s.

■    G lo b al R is k : th at, w hen d oin g b usin ess in te rn atio nally , y ou m ay e n co unte r u nan tic ip ate d s itu atio ns th at w ill in te rr u pt o r s to p

your a b ility t o d o b usin ess, r e ach y our m ark et, o r r e ceiv e s u pplie s.

U se th e R is k E va lu atio n w ork sh eets on pages 151–152 to asse ss th e ris k s yo u r bu sin ess fa ces dom estic a lly an d

in te rn atio n ally .

B ala n cin g R is k s & O ppo rtu nitie s

Once y ou’v e o utlin ed y our r is k s, y ou m ay f e el o verw helm ed . B ut w hile t h ere a re m an y r is k s, t h ere a re a ls o s u bsta n tia l r e w ard s —

o th erw is e w hy a re y ou b oth erin g t o s ta rt t h is e n deav or?

A ty pic al m eth od to illu str a te th e b ala n ce b etw een ris k s a n d o pportu nitie s is to d ev elo p a “ S W OT” c h art, d elin eatin g y our

co m pan y’s s tr e n gth s, w eak nesse s, o pportu nitie s, a n d th re ats ( th us “ S .W .O .T .” ) T his is a g ood e x erc is e f o r q uic k ly s iz in g u p y our

co m pan y’s p ositio n.

C om ple te th e “ S W OT” g rid o n p age 1 53. B e s u re to in clu de b oth in te rn al a n d e x te rn al fa cto rs a s w ell a s c u rr e n t a n d

pote n tia l o n es.