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Most chefs say their biggest fear is someone dying or getting sick from their food. But there are other risks chefs must pay attention to that are equally as important. In the first of this two-part blog we looked at the importance and value in questioning worst-case scenarios. That’s just a simple way of saying: Get in the habit of asking what could go wrong. Developing this habit teaches you to adjust, anticipate, avoid, or minimize unnecessary impacts to you, your team, and your business. And that’s a good thing. This practice has a formal name. It’s called developing a risk management plan for your small business.
What is risk management and why is it so great for personal chef business?
In part one we talked about the glass half-empty and things going wrong. But it also applies to the glass half-full. You see, risk management isn’t just about bad news. It can be really good, too. Let’s first define risk management for personal chefs in business.
For chefs, risk management involves looking at all the possible events or circumstances that can affect what you do.
This is great for personal and private chefs because risks can be positive or negative.
A positive risk results from taking a risk and receiving a positive outcome. For example, following up with potential clients leads to more booked gigs. Conversely, a negative risk results in a negative outcome. Failing to sanitize countertops in a client’s home before begin work can result in foodborne illness. See what I mean?
Risk management isn’t a scary term when you think of it in terms of actions and consequences. When you incorporate risk management thinking into your personal or private chef business its power is inestimable. Understanding potential risks clearly helps you move forward confidently and make informed decisions.
Before we look at real life examples it will help to know a little more about the process of thinking like a risk manager.
What are the parts of a risk management plan for a personal chef business or private chef business?
Risk management is about your “what if” and “back up” plans in good and bad times. Here are the major parts of a risk management plan.
Identify the risk.
As an independent chef you have equipment, supplies, technology, vendors, and customers. The “what if” question exposes negative scenarios.
- What’s your back up plan if equipment breaks on a job?
- Who will you call if a vendor runs out of a product you always use?
It also exposes positive consequences.
- How will I handle more business if my competitor gets sick and refers their best clients to me?
As you can see, identifying risks helps highlight where you can take action to thwart off bad consequences or capitalize on golden opportunities. When you have a risk management plan for your business, your business is more successful.
Evaluate the impact versus the likelihood of risks.
For some scenarios, the chances they’ll occur are remote, like a volcano erupting in your city, but their impact would be devastating. Other scenarios are highly likely to occur, but their impact isn’t cataclysmic. These scenarios still matter, e.g. a rainstorm during the outdoor barbecue you’re cooking for Tom’s 60th birthday celebration.
Here are a couple scenarios.
- Negative/Not so common/Catastrophic: A worldwide virus shuts down and cripples business cash flow. (Few could have predicted this popular sci-fi script would play itself out in 2020 as the coronavirus.)
- Negative/Very common/Financial Consequence: You forget to ask about party ice and incorrectly assume the host will have ice on hand. Everyone at the party drinks warm beer and you have to discount your invoice because the customer is dissatisfied.
- Positive/Very common/Beneficial: The price of fuel drops resulting in lower costs for your favorite fruits and vegetables and bigger profits in your business.
- Positive/Not so common/Huge Opportunity: COVID-19 changes consumer purchasing and dining habits. This change increases the demand for more independent chefs. Your business rapidly expands!
The list is long. What’s important is focusing on those events that are the most likely to occur and fall within the scope of your control to manage or reduce them.
Determine your risk tolerance.
Not all things are within your control. Some things are. This is where you get to determine what your tolerance is for the risks you face.
Here are some examples:
- Scenarious A. You can get an excellent lease rate on a commercial kitchen because it’s located at the base of a volcano. An eruption isn’t likely but would be catastrophic. Can you tolerate that risk?
- Scenarious B. A client with life-threatening food allergies wants in-home private chef services but requires strict adherence to extreme safety protocols. This requires careful, professional attention because death is truly on the line. This is not a “get in, knock it out, get paid” kind of event. It pays well, but do you have the confidence and skill to handle their specific requirements?
- Scenarious C. Clients reserve your services, but you don’t require a deposit or have a contract with a clear cancellation policy. Can you tolerate the risk of doing business this way?
Once you identify your risks and your tolerance for them you can make a plan.
Create a risk management plan.
Depending on your tolerance for a particular risk you can avoid, transfer, mitigate, or accept the risk.
- Avoid the situation
- Some chefs in the early stages of their business would wisely avoid Scenarious B. This year we took this on with great care and it went well. However, HeyChef! still turns down requests for preparation of food according to orthodox Jewish tradition.
- Transfer the risk
- The most common example of risk transfer is insurance!
- Remember the scenario about a great kitchen next to a volcano? The best plan is great insurance and an evacuation plan.
- Mitigate the risk
- Mitigating involves reducing the impact of a potential risk.
- Scenarious C can be mitigated by having a contract between you and your clients.
- Accept the risk
- The key here is to knowingly accept a risk rather than blindly doing so. Accepting risk allows you to create a contingency plan wherever it’s reasonable and feasible to do so.
- Plenty of private chefs choose to accept the risks inherent in serving sushi. They take great care when buying, transporting, preparing, serving, and storing food that can cause foodborne illness.
Not blame. Responsibility. This means identifying a situation and assigning someone to be responsible for the plan you’ve outlined to address the risks.
Remember the party that had no ice, so guests drank warm beer? You could manage this risk by developing a checklist of the items to discuss with every client. By doing this,
- You can take responsibility for supplying the ice, or
- You can tell the client it is their responsibility to supply the ice.
Either way, assign the responsibility and the problem is solved. The guests may still grumble about drinking warm beer if it’s the client’s responsibility and they forget to buy ice. But you won’t have to reduce your bill!
How do I know if my cooking business needs a risk management plan?
Independent chefs who are in business for themselves worry about the paperwork that’s involved in creating detailed, written safety plans. Thankfully, in the beginning, you’ll likely work in a client’s residential kitchen where these plans aren’t generally required. I still recommend checking with local requirements, especially if you’re cooking in your own kitchen under cottage industry guidelines. This doesn’t mean you should think about the WCS and manage potential risks.
Written risk management plans come into play as your business grows and you begin to work out of commercial kitchens.
Wherever you are in your business, every chef needs to think like a risk manager and make decisions consistent with risk management principles.
How can I make my risk management plan super simple?
- Make risk management planning a part of your regular thinking.
- Always ask “what if?” and “what’s the worst-case scenario?”
- Create back-up plans as responses to those questions.
- Build good risk management practices and decisions into your business as it grows.
- Communication and standard operating procedures are two of the natural outcomes of a chef who practices good risk management.
- It is always better to be prepared than surprised.
As your business grows, risk management will become second nature. Think it through, make a plan, follow through with your plan, adjust, and repeat it as necessary.
With a little practice risk management is as natural to your business as cooking .
Risk management will become a natural part of doing business. You’ll learn to avoid volcanos, require deposits from your clients, and make the best out of unanticipated changes. Use the glass half-empty vs half-full perspectives to your advantage. It’s about addressing the big stuff and stopping the little things from falling through the cracks. Risk management best practices allows you to expand your business with confidence while spending more time cooking. Afterall, you’re in the business of making people happy with the food you cook.