Setting Up a Business Plan – How to Determine Risks

This website is a great source for articles related to business. The various posts and entries that you will find here will surely give you important information about the world of business and finance. Some of the things that you will find here aside from the usual business news articles are features about websites that offer companies house name check, credit loans and more. Make sure to visit here regularly to know about the latest financial news and updates.

THE INVESTMENT RISK TYPES

It is very important to know and understand the various types of risks involved with investing in securities. So let’s look at some real life examples of these types of risks. First, let’s review risk in general, which is the chance that an investment’s actual return will be different than the expected return. Investors are mainly concerned with losing money when they think of risk. Now let’s look at some of the different types of risk present in investing.

There is MARKET risk. Market risk is the day-to-day potential for an investor to experience losses from fluctuations in securities prices. This risk cannot be diversified away. It is referred to as systemic risk. An example is what we went through recently. All the markets were weak because the whole system was weak; everything was losing value because the entire system was in peril. Just about everything lost value, stocks, corporate bonds, currencies, etc. So even a well diversified portfolio lost value due to overall market weakness.

Next, there is UN SYSTEMIC risk. UN systemic risk is also known as specific risk or classifiable risk. Think of it as Industry risk or Sector risk. A real life example is if you owned 20 stocks but they were all technology stocks. You might think you are diversified because you own 20 stocks, but you are not diversified sector wise. You are diversified in the tech sector but if the tech sector suffers a downturn in spending and profits, then more times than not, all your tech stocks will go down in value, not just a few. You could reduce, or diversify away, this industry specific risk by investing in stocks outside the technology sector.

Next there is COMPANY specific risk. This is one is a little easier to understand. Specific company risk is where you place too much of your investment in one specific company, and when that company does poorly then its stock will go down in value, even if the market is strong or if the sector is strong. A recent real life example would be in the financial services industry. This industry, or sector, was hit extremely hard, and the industry risk turned out to be great, but the company risk was even greater!

For instance, if you had invested all your money in the stock of Lehman Brothers, there is nothing left! But if you had diversified your investments between Lehman Brothers, JP Morgan, Goldman Sachs and Bank of America, you would not have lost everything. You would have lost money for sure due to sector risk, but you would not have lost all your money, due spreading the risk to various companies, not just one. You would have diversified away the company risk but not the sector or industry risk.

There is POLITICAL risk. Political risk is the risk that an investment’s returns could suffer as a result of political changes. The instability affecting investment returns could stem from a change in government, legislative bodies, other foreign policy makers, or military control. Political risk is also known as geopolitical risk.

Lastly, there is REINVESTMENT risk. This is the risk that future proceeds from an investment (for example, interest and dividends) will have to be reinvested at a lower interest rate. This risk is usually seen in the context of Bonds and/or CD’s. Reinvestment risk is especially evident during periods of falling interest rates where the coupon payments are reinvested at less than the yield to maturity of the current investment. This risk is particularly important to investors and retirees who are living off their current investments interest and dividends, only to see them be reduced over time due to those same reinvested proceeds producing lower future returns.

Hey Small Business Owner, What’s Your Job?

When I first started doing freelance work as a graphic designer, life was pretty simple. My daily routine consisted of finding clients who needed graphic design jobs and then producing the design work that I had gotten from my clients. As my business grew, I found my role as graphic designer decreasing and quickly transforming into the role of a manger and owner of a small advertising agency. It was a scary time for me. I was 24 years old and way outside of my comfort zone. Growth brings a unique set of challenges to an inexperienced small business owner. Especially one as ill prepared as I was. I had never had a class on running a small business, had little preparation in accounting, and had never even heard of strategic planning. During this time of rapid growth and business expansion, I would get frustrated because I was often unclear of the role I needed to fill. I had gotten into business because I was a highly skilled technician, not because I was a great manager. Everyday there were important decisions that had to be made about the business. I was sure that I was not making proper decisions and I worried about the future ramifications of those decisions. One day I sat down very frustrated and said to myself: I have to figure out what my job is.

What do I do on a daily basis as the owner of this small business?

The following is the result of that first strategic planning session in my head. I scrawled the following 3 job functions on a note pad.

1. Ensure Profitability

2. Strengthen Relationships (Clients & Vendors)

3. Market Effectively

It was a simple start. I later added 5 additional functions:

4. Direct Creative

5. Control Quality

6. Communicate

7. Vision

8. Bring in Business

Finally, I crossed out Vision and brought it under #6 so it now read: Communicate the Vision.

I had a simplified set of job functions for myself as a small business owner. This piece of paper served to remind me not to get so caught up in the daily tasks at the business that I was not working on my business in the area, which I had outlined. I carried this piece of paper with me for several years. Today, It still serves as a reminder for me to pay attention to the most important job functions I have to manage in order to grow a successful small business.

How to Successfully Brand Your Small Business

Do you have a brand that you fully believe in, but are having trouble getting others to believe the same? Perhaps it is not what you are producing that is not catching on, but instead how you are going about promoting your brand. Promoting a brand is one of the quintessential pieces to any business. It not only allows you to spread your brand’s message, but it also allows you to create a voice that you can choose to manipulate in however way you see fit.

With that in mind, it is important that you examine a few key factors before you try and promote. Below are some tips for you to review before you go about creating and developing a voice for your business.

First, look to brands that always get your attention. Do you see a brand that you always take note of when it appears on the television or radio? For some, it might be the McDonalds commercial or the Apple commercials. Notice what they do it order to get your attention and examine the voice and positioning they use for each product. This will help in not only giving you guidance, but will also help in deciding what you do and do not want to use.

Second, try and see that you what is most important to you. Do you pride yourself on the quality first, and then price, or price first and then quality. Although both are equally important, if you have a low price point as compared to your competition, you are more likely to play up your pricing. If your rates noticeably higher, then one should hope that it is because you’re offering a service of higher value. As a result, position each accordingly. Speak more about the quality if that’s what you value, and more about the price if you know you’re rates are the lowest.

Third, look at the vehicles in which you want to use in order to effectively communicate your brand. Would you like to use postcards, billboards, television commercials, social media, online banner buys, etc. An ideal marketing plan would include all of these, but more money will be assessed to certain things dependent on the business. For example, an online company will put more money toward online, buys as opposed to offline and vice versa. Make sure what you choose is appropriate to your brand.

Finally, sit down and come up with the answers to these questions:

- What will you do for me?

- How will you do it?

- Why should I believe you?

Answering these questions will not only help in understanding more about your voice, but will also help in differentiating yourself from the competition. Once these are all answered, use the answers for these in all marketing and PR related activities. That way, you have a clear, unified voice that stands above the rest and is relevant to your company.

Melanie Turner is a Business student at Columbia University. She is also a Researcher at Deloitte Consulting where she works with expert marketing teams on Fortune 500 clients. As a growing expert in the field of marketing, Melanie aims to provide insights and resources to Small Businesses.