As in any business venture, SI Co acknowledges that there are risks involved in founding, owning and operating a business. These risks could potentially affect the shareholders and stakeholders of this business. They involve the financial risks taken on by Susan and Brendon Trip and their investors in the event that SI Co becomes insolvent as well as other risks including the successful operation of day-to-day business and standard risks that affect electrical contractors in general.
Potential Management Risks
A potential risk to this business is its ability to operate successfully. Susan Trip’s (owner) duties will involve managing the day-to-day business and operations. This will involve an understanding and knowledge of basic accounting practices and business organization. She will also be responsible for managing any accounts receivable and accounts payable as well as billing customers if necessary. An understating of how an electrical contractor operates business is necessary.
SI Co understands that although a solid business operations background is preferred, the resources and experience that SI Co has access to will help to mitigate this risk. SI Co is currently receiving advisement from the Small Business Development Center. This resource can offer advice on business operations. Further lessening the impact of this risk is the workplace experience of Brendon Trip. In having over fifteen years of experience in the field, Brendon has an intimate knowledge of workings of an electrical contractor. Furthermore, Brendon’s connections and relationships with other operating electrical contractors, other union electricians and the electrician’s union hall, offer SI Co access to any needed advice on operations.
Another potential risk to management could be the classification of SI Co as a woman-owned business (also called a “Woman Business Enterprise”). There are criteria that have to be met in order to be certified as a “women business enterprise” and receive any benefits reserved for disadvantaged businesses. There may be legal concerns if SI Co would apply for or receive any benefits that are set aside for minority/women owned business. Please see appendix 7 for the complete criterion needed to qualify as a “women business enterprise” (Women's Business Development Center, Certify as a Women Owned Business).
If the necessary criteria are met, the benefits of having a women business enterprise may be an avenue for a wider range of potential customers (Women’s Business Development Center, Corporate Partners). A list of corporate partners of the Women’s Business Development Center has been provided (see appendix 8). These partners have expressed an interest in doing business with women owned businesses (Women’s Business Development Center, Corporate Partners). Also, local, state and federal government entities may have provisions included that mandate the use of minority or women owned businesses wherever possible. SI Co could possibly pursue government agencies/entities and larger corporate entities as potential customers if necessary.
Potential Operating Risks
There are inherent risks involved in any contracting type of business and SI Co will be no different. To limit any liability and risk in business operations, insurance is necessary. The expected cost of insurance for SI Co is estimated to be $6000 per year. This expense is considered to be a necessity and part of the cost of operation. Top risks for a contracting type of business that this insurance will cover include:
1- Product Liability, which includes all materials used during the installation as well as the service (Allied Insurance). This means that our business may be at risk for expenses that relate to faulty or defective materials as well as the faulty installation of these materials (Allied Insurance). SI Co’s ability to source high quality, guaranteed products that carry warranties against defective construction combined with the hiring of top-level employees is a priority to help mitigate this risk.
2- Crime and/or Theft of materials are a common problem with any type of contractor (Allied Insurance). An insurance policy must be able to cover costs of any stolen tools, equipment, supplies, etc (Allied Insurance). SI Co’s experience in the field lends them the knowledge of how to ensure theft is kept to a minimum (Allied Insurance). The years of experience that SI Co brings will greatly reduce the chances of crime and/or theft (Allied Insurance).
3- Professional liability comes from any recommendations, consultation, or teaching that SI Co may provide (Allied Insurance). SI Co will reduce this risk by relying on their professional knowledge and expertise. SI Co’s years in the field also has created a network of professionals to provide additional advice.
Other job related risks include:
- Risk of fire (Allied Insurance)
- Equipment failure (Allied Insurance)
These risks will also be managed by SI Co’s past experience and professional knowledge.
Other Potential Risks
SI Co recognizes that the current economy is in a recession. Most importantly, housing starts, “As of September 2008, Standard & Poor’s was projecting that housing starts would fall 30% in 2008, on top of a 26% decline in 2007, before rebounding 6% in 2009” (Scharf, 2008). This will have an impact on the number of possible customers in our target market in the area. However, SI Co is a first mover in this industry, which will allow them access to customers that already exist. This will mitigate the risk of relying on new housing starts as the sole source of potential customers.
Operations Plan Pro Formas