Simple Risk Analysis

It is impossible that improbable will never happen.

-Emil Gumbel, Mathematician

Risk is part of every 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 risk analysis in business 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 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. 

The Risk Analysis Process

During 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.

From the above 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!

Michael James Smyth

Sales Planning Process

Planning is about the journey not necessarily the battle. The planning journey prepares the army, by allowing the army to anticipate hurdles, allocate resources and reduce risk.

Michael James Smyth

Without a sales plan, we are adrift in the market, hoping to succeed. The sales planning process forces us to analyze our environment, determine the resources and support required, and points us in a direction toward our goals. In a previous article, I discussed strategic planning basics; this article will focus on the sales plan.

One of the most enjoyable jobs I had was working for a semiconductor distributor. Our sales manager developed a sales goal for the division based upon past sales, corporate desires and sales team input. Once the goal was determined, everyone developed his or her sales plan to meet the goal. Our plans were simple and were base upon some “science,” we planned how often we’d meet with our customers, how many demos we’d accomplish, we analyzed our market and then submitted our plans.From my military planning experience, there are two parts of plans, conceptual and detailed. I think of a conceptual plan as a business plan and detailed plans as the plans that make up a business plan such as a sales plan or a project plan. A plan should be continual assessed and updated, things change, assumptions are wrong, the plan must change with the ever-changing environment.

A sales plan is a detailed plan because it explains how the sales goal is to be met. Detailed planning works out the scheduling, coordination, technical issues involved with sales channels, regions, administering and sales force.

A sales plan should be simple and flexible… yes, detailed but also simple and flexible. The sales plan will help you: set your goals, choose a sales strategy, identify sales tactics, execute the plan and motivate your team, budget and review/assess the plan.

Sales Plan Checklist:

1. Identify your sales goals.
   • What are your revenue targets?
   • Determine contributions by direct and channel sales.
   • Identify resources to meet your goals.
   • Understand your sales model.
2. Analyze your competitive position.
• Create a SWOT analysis
  • Learn about SWOT analysis.
  • Download our free SWOT template.
• Describe your ideal customer.
• What is your Unique Selling Proposition (USP)?
• Understand your sales cycle.
3. Develop your sales objectives.
• Break goals down into achievable objectives.
• Establish direct and channel sales quotas to meet your goals.
• Create commission plans consistent with objectives.
4. Define the tactics to meet your sales plan.
5. Execute the plan.
6. Monitor and adjust the plan, as planning is a continuous process.

For additional information, here are related planning and strategy resources.

• Guide to SWOT analysis
• Free SWOT template
• Strategic planning basics
• Aligning Marketing and Sales plans

Strategic Planning Basics

“A goal without a plan is just a wish.”

-Antoine de Saint-Exupery

How do I achieve my goals?  Where will we be in a year?  If my sales goal is two million dollars, how do I reach that number?  How do I allocate resources?  Planning is the answer.

As a consultant, I have visited struggling organizations only to find that they struggled because they had no direction and absolutely no plan.  I have seen other organizations that have forgotten the basics of a plan.  A goal and a plan to achieve the goal are a must!

I also spent some time in the military where developing a plan for an operation might take weeks or months.  Despite all of this planning, “No battle plan survives contact with the enemy,” as Prussian Army Field Marshal Helmuth von Moltkof said in the 1800s.  The plan changes with the first contact with the enemy because the plan is based upon assumptions and expectations on how the enemy will react to the action.  Planning is about the journey not necessarily the battle. The planning journey prepares the army, by allowing the army to anticipate hurdles, allocate resources and reduce risk.

Most for-profit organizations do not have months or weeks to devote to planning, especially if the plan only survives the first contact with the “customers.”  That’s okay but the planning process is essential because it allows you to determine obstacles you will encounter; pinpoint the help you’ll need from other departments; set a timeline; and, most importantly, define the goal.  A plan should not be blindly followed nor should it be put on a shelf when complete: Planning is a continuous process, so the plan should be altered and updated based on feedback and assessments.

The US ArmyField Manual 5.0 defines planning as follows:

Planning is the art and science of understanding a situation, envisioning a desired future and laying out effective ways of bringing that future about. Planning is both conceptual and detailed.  Conceptual planning includes developing an understanding of the operational environment, framing the problem, defining a desired end state, and developing an operational approach to achieve the desired end state. In contrast, detailed planning translates the broad concept into a complete and practical plan.  Detailed planning generally corresponds to the science of operations and detailed planning works out the scheduling, coordination or technical issues involved with moving, sustaining, administering, and directing forces.

The military planning process is scalable, from the soldier in the field using his or her planning skills all the way up to headquarters and its large planning department.  At your business, someone should be responsible for championing the plan and senior leadership should support the planning process.  To develop the plan, time will need to be set aside for the plan.

Remember the fundamentals of a plan:

·         Define a goal

·         Planning is a continuous process

·         Plans are time-sensitive

·         Keep plans simple

·         Keep them flexible

·         Be bold!

  

“By failing to prepare, you are preparing to fail.”

-Benjamin Franklin

Let’s plan!  Planning is an art and science so you need to convert your ideas into an actionable plan. 

The conceptual planning or the art of planning is where experience and knowledge of your environment are combined to develop solutions, objectives and assumptions.  Understanding the competitive environment, the capabilities of your team and maintaining relationships with customers and partners will help you plan to achieve your goals.

The science of planning involves using measurements and analysis.  How long does it take to build your product?  How long does shipping take?  What are your organization’s procedures and policies?  This data will provide you with limitations and help you build your schedule based on measured performance. 

I will focus on a blend of conceptual and detailed planning. The following are my steps for strategic planning:

1.   Define your goals.  This is the first and the most important step.  What are you trying to accomplish?  What is your company’s goal?  Clearly define your goals.  If your goal has been assigned to you or to your department, ensure that you completely understand the goal.

2.   Analyze the environment.  What will it take to accomplish your goals?  What are your barriers to success--both internal and external to your organization? Who are the stakeholders?  Who will you collaborate with? Determine the interdependencies that you will rely on to accomplish the goal.What resources might be required?  Have you done a SWOT analysis?  If so, how will you react to threats and opportunities? Maximize your strengths and minimize your weaknesses? Finally, uncover all of the assumptions about your environment that your planning is based on and make sure they’re valid. 

3.   Develop objectives.  What are your long-term objectives?  What are your short-term objectives?  Do you have milestones?  Deliverables? What resources are required?  As you develop your objectives, create small executable steps, so progress can be easily measured and those executing the objectives are not overwhelmed by the enormity of the task.

4.   Create road maps, general strategies.  This is where the plan comes together; here we create the map or schedule to be followed.How do we accomplish our objectives?  Who accomplishes them?  When will they be complete?  What are the risks associated with the schedule?  Explain the strategy here.

5.    Execute the plan.  Finally, time to execute! You've gone through all of that effort to create the plan-- now use it.  The planning process should have prepared you and your team to meet your goals. 

6.    Review, fix the plan if broken.  What worked in the plan?  What objectives were not met?  Planning is both a continuous and a cyclical activity of the operations process.  Regular reviews of your plan should be established and assessments of the plan accomplished. 

During the planning process, be careful not to forecast events too far into the future.  Too much detail or using too formal of a planning method will delay the plan and complicate the process—and itwon’t improve the end results since planning can never exactly predict future results.  The most important aspect about the planning process is what you learn about yourself while you’re planning. Planning helps anticipate future action and will help you adapt to changes.

Michael James Smyth