business-risk-analysis

Simple But Effective Business Risk Analysis!

It is impossible that improbable will never happen.

Emil GumbelMathematician

Risk is part of every business endeavor. By analyzing your situation, you can determine the risks associated with a course of action and then reduce the risk to improve your chance of success.

I have spent a lot of time in risky situations and I have found that understanding the associated risks will improve your chance for success. As a military pilot, I accomplished an Operational Risk Management (ORM) evaluation before each mission. ORM allows you to quantify the risk you face and determine if a mission is worth the risk. I have used business risk analysis to determine if a startup business was worth the investment. I have also used risk analysis as an emergency manager and as an emergency management instructor; risk analysis allows the emergency manager to determine what mitigation steps should be taken or how to prepare for a possible disaster. I have diverse experience and I have found risk analysis improves the chance of success, saves lives, saves property and improves profitability.

What is risk? From Merriam-Webster: 1- possibility of loss or injury, 2- someone or something that creates a hazard. I have a simple definition; risk is the likelihood a hazard will occur. A hazard to a business is the loss of a large customer; a hazard to a combat mission is flying against an enemy with an SA-14 surface-to-air missile; and when a dam begins to crumble, that’s obviously a hazard for the emergency manager, or for anyone in the vicinity for that matter! What is the likelihood a hazard will cause damage? That tells you the risk.

In business risk analysis, we measure the likelihood of a hazard impacting your endeavor and the consequences it causes. There are complex risk analysis tools available and risk analysis consultants to evaluate your risks but I will present a simple method to capture your risks and rank them.

A Business Risk Analysis Example

During Business Risk Analysis, identify the hazards that directly impact your business, endeavor or operations’ processes. Obviously, there are many hazards in the world but we’re examining only those that directly affect you For example, a storm could affect the delivery of your products. The hazard to you is not the storm but the failure of your logistics operation to deliver products as scheduled.

  1. Brainstorm hazards: Which hazards affect your business?
  2. Determine the likelihood a hazard will affect you and assign a numerical value to the hazard: 1- low probability of a hazard will occur 5- a high likelihood that a hazard will occur.
  3. What is the consequence of a hazard’s impact on your business? Rank according to the problems associated with a hazard: 1- low to no effect on the business to 5- business operations may fail.
  4. Multiply likelihood by consequence to come up with a numeric representation of the risk to your business.
  5. Rank the hazards based on the risk value; highest risk rank highest.
  6. Consider methods to avoid, mitigate or prepare for the risk.

business-risk-analysis-example

From the above business risk analysis example, you can see that losing your top sales person has a highest risk. The good news is that this risk can be mitigated, perhaps by paying the salesperson more or assigning a backup salesperson early on.

Preparedness is always your fallback position. First, avoid risk if you can still accomplish your goals while doing so. Second, mitigate risk if the costs are affordable. Finally, be prepared to respond if the risk affects your operation.

What do you think? Will disaster strike? Lightning doesn’t strike twice?
Be prepared!

sales process

But We Have A Sales Process…

A couple of weeks ago, I was on a panel with a number of peers. A couple of the panelists suggested the majority of companies they worked with had no sales process in place. I have a slightly different point of view, one that is perhaps worse news. Most of the organizations I work with have a sales process in place.

At least that’s what they say. They’ll even pull out a piece of paper, a flow chart, or show me their CRM system to prove they have a sales process. I’m always curious, so I ask a lot of questions and generally I find a couple of things at play:

  1. While a company may have a sales process, it has not been updated to fit current market realities and priorities.
  2. The managers and sales people just aren’t using the sales process.

It’s actually pretty easy to see this. Just sit in a pipeline review and listen to the conversations managers and sales people have in reviewing their deals. As they discuss the deal, look at the activities they have defined in their sales process. Ask a few questions about the deal, using the activities as a guideline for your questioning. See if the responses are aligned with the sales process. For example, the other day I was sitting through a review with a new client. They had two key activities in the discovery phase of their sales process: Understand the customer decision making process and who is involved. Also, understand the criteria by which the customer will evaluate the investment in the solutions and justify it internally. Great criteria! However, we were reviewing a number of deals that were in either the proposing or closing stages of their sales process. I started asking some questions, “How does our solution look based on their justification criteria?” “Who is involved in the decision making process, who’s the real decision maker?”

If these deals were truly in the proposal and closing phases of the sales process, the sales people would have had very clear responses to those questions. They didn’t–they mouthed some nominal responses, but really didn’t answer the questions—–then they went on to talk about what they were doing to win their deals. Hmmmmmm, what’s up here? Clearly they aren’t using the sales process. A few more questions and you can determine whether the sales process is out of date or just not being used.

The only reason to have a sales process is to help sales people manage opportunities from qualification through closure as effectively and efficiently as possible. The activities identified in the sales process are a result of analyzing both how customers buy, and the activities critical sales must undertake in facilitating the customer’s buying process. If sales people aren’t using the process (and it’s an appropriate process), then they aren’t performing at the highest levels possible. Additionally, since the pipeline is an aggregation of all the deals sales people are working on, the integrity of the pipeline and its accuracy for forecasting are immediately suspect.

Sales people not using the process are not performing as they should. Managers not assuring their sales people are using the sales process are being irresponsible–both to the sales people and to their organizations. Deal reviews are most effective if they are initiated by talking about where we are in the process—that means using the process to inspect the deal, using the process to provide a road map on next steps, using the process to assure you are competitive, and using the process to make sure you are creating value for the customer. Everything else is a drill down into the details of the activities.

As I mentioned, one of the reasons sales people and managers don’t use the process is because it has become irrelevant. Over time, the way your customers buy changes. Markets, competition, and your solutions change. What may have been a great sales process 5 years ago, is probably irrelevant today. If your sales people aren’t following the sales process, but consistently winning business–reassess and update your sales process. The only thing worse than not using an irrelevant sales process is using an irrelevant sales process–but you will see that with plummeting win rates, long cycles and loss of competitiveness. Make sure you review and update your sales process periodically. If there are major changes in market conditions, if there are major changes in your target markets, if there are major changes in your solutions–you probably need to update your sales process.

Organizations that don’t have a sales process need to have one. Organizations that have a sales process but are not using it are fooling themselves.

If you want to drive the highest levels of sales performance, make sure managers and sales people are using it. Make certain your process reflects current best practices for winning business. Everything else is a waste of time.

Reprinted by permission. View the original post here.

Center for Business Modeling Launches Free SWOT Analysis Template

CBM Offers First of Many Free Resources Designed to Help Business Planners Clarify Strategy and Drive Better Decision Making

COLORADO SPRINGS, Colo. – (August 14, 2014) – The Center for Business Modeling (CBM) announced today the launch of a free resource for business planners who are trying to optimize their strategy through competitive analysis – a free, downloadable SWOT (strengths, weaknesses, opportunities and threats) template. A SWOT analysis is a subjective assessment of internal (strengths and weaknesses) and external (opportunities and threats) factors that helps drive strategic clarity and better decision-making.

Using CBM’s free resource, business strategy leaders can:

  • Gain a better understanding of their competition
  • Ask tough questions internally that reveal strategic blind spots
  • Set the stage for positive change and impact

“The CBM SWOT template is a no-nonsense way for leaders to have honest conversations with each other about how well they can compete—and organize the findings to improve,” said Michael James Smyth, CBM’s Chief Operating Officer. “This is one of many free resources CBM will offer to help executives and entrepreneurs plot a clear path to success with intuitive planning tools.”

Several more free offerings will be available to those who register on the CBM home page. Future offerings from CBM will include cloud-based planning tools and a business modeling community, where users can share best practices and help themselves mitigate planning risk, measure against industry baselines and build defensible, realistic plans that are easy to develop and present.

About The Center for Business Modeling

The Center for Business Modeling was founded by a team of seasoned business professionals whose experience encompasses all aspects of business creation, operations and finance. Our team has experience ranging from small entrepreneurial ventures to multi-billion dollar international corporations. CBM principals have been responsible for launching ventures, fundraising, marketing, sales and running large successful organizations. Over the years, CBM professionals have seen businesses repeat the same mistakes including failure to capitalize on their core competencies and failure to plan correctly. Our team is now dedicated to helping companies reach their maximum potential through effective business modeling. Find out more at www.centerforbusinessmodeling.com.

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For more information please contact:
Nate Warren
720.244.4734
nwarren@fusionmarketingpartners.com

Customer-Centric Sales Planning

Sales plans centered on customers create the most value for your organization. Sales Productivity Architects’ paper, Elements of a Successful Sales Plan tells you how:

  • To ask the right questions and target the right customers
  • To find out where in the sales cycle you should make your move
  • To make your sales spend pay off for the highest-value customers

Easy-to-use checklists in a question-and-answer format will give you more than food for thought—they’ll give you a sustaining model for changing to a customer-centric sales model and power up your success. Download your copy here.