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A Business Risk Assessment Tool

November 11th, 2012

It’s amazing what one discovers in the process of cleaning out your study. I came across this tool that I had been working on that would give you an opportunity to start a conversation with your clients about the need to work on their business to reduce the degree of business risk.  That, of course, would give cause to accept a lower capitalization rate and therefore a higher business value for any given level of profit.

The model that I was working on addresses 7 aspects of a business that contribute in varying degrees to the level of business risk. I have assigned weights to each of these elements based on MY opinion of their relative contribution to risk. You may disagree with the weights I have used but what’s important is not the weights, it’s the conversation around the factors themselves and what your client can do to reduce their impact.

I have built a simple spreadsheet that you could use as a framework for a conversation with your clients.  All you need to do is input any character into the appropriate cell for each of the 9 questions and then discuss how you could help your client address the issue of business risk.  This would be a particularly good conversation to have after you had discussed the relationship between profit, earnings multiples and business value.

As you know, my favorite saying is …. it all starts with a conversation.  This is a conversation that could start something really significant for you and your clients.

This is what the Assessment Tool looks like. If you’d like to take a look at the tool let me know.

 

  1. January 7th, 2013 at 11:11 | #1

    Never one to pass up the opportunity to have 1 more tool in the tool kit, particularly one that is simple to use and easy to explain, would you kindly send me a copy too?

    Thanks Ric

  2. November 20th, 2012 at 10:03 | #2

    It’s on its way to you Jimmie.

  3. Jimmie
    November 18th, 2012 at 01:49 | #3

    Looks like a great tool to get Business Owners to open up on what they feel is a “Risk” and at same time show them that there are other areas that they might not have considered. Could it be easily modified? You know to one’s own ideal of subject matter. I, for one, would like to see this tool. Thanks

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