● Are you tired of 9 to 5 job?
●
Do you have a business idea?
●
Are you ready to become an entrepreneur?
●
Are you ready to launch your startup?
If
your answer to all the above questions is YES then you are at the right place.
As
an entrepreneur once said “Big rewards come with big risks” but how will you
feel if you can minimize those risks while keeping the rewards big?
As
we have discussed in our previous blogs that how entrepreneur and startups are
the backbone on any economy. Today in this blog, we are going to talk about the
risks associated with startups and how you can minimize those risks.
“Good
business leaders create a vision, articulate the vision, passionately own the
vision, and relentlessly drive it to completion” - Jack Welch
Starting a business has never been easy, there are always many risks associated with a
start-up. In the modern world, everyone wants to be an entrepreneur and start their
own business but as we know more than 50% of start-up businesses fail in their
initial phases. There are various reasons for the failure but a startup idea
has always been about risk and reward dilemma although being prepared with a
plan of risk assessment for startups is always better.
Business
risk assessment plays an important role in the success and planning of your
start-up business. Risks of starting a new business are high now during this
global pandemic but if your risk assessment business plan is good then you have
nothing to worry about. That is why an entrepreneur always needs to understand
the risks they are going to face.
The risks associated with startup businesses:
There
are various risk factors in a start-up business. Let’s discuss all, one by one.
Capability assessment risk
An
entrepreneur always thinks that the capability of their business is high; not
saying it’s a bad thing but sometimes the business does not reach the expected
capability extent of the entrepreneur and they start thinking that business is
not doing well while the business is, in fact, doing good to the extent it
should. Whereas in another scenario, if one thinks the capability of their
business is low then the startup will not be able to reach its capability on
time and at the levels it should.
Let’s
take an example of an online shop, on one hand, we consider an entrepreneur who
is an optimist and thinking the capability of the business is high and on the other
is an entrepreneur who is more pessimist and thinking the capability is low.
The optimist one will always want to make a thousand dollars every day from the
start but that’s not possible for a start-up and he will see the business as a
failure because it is not up to the mark he thought. Whereas the pessimist one
will see everything as a win and after sometime when the business will be ready
to scale up, he will just be happy about whatever he is earning while the
growth potential of the business will not be in his mind.
So,
the capability assessment is very important to properly scale of your business.
Design and development risk:
This
is one of the most important risks that need not be overlooked. The risk that
the product or service, a startup is offering is not up to the standard it is
required to be. The risk that the development of the product is taking more
time than anticipated or the cost of development of the product is high which
will eventually result in cost inflation or low-profit margins.
These
risks are capable of resulting in failure of any business. The following risk
can be easily de-risked by proper management of the product design and
manufacturing.
Funding risk:
The
most important risk associated with a startup business is the funding risk. It
is the core reason for the failure of many businesses. Many entrepreneurs
depend on other sources for investment in their start-up ideas whether they are
industrialists, banks, etc. but after some when the start-up is in the initial
phase, the investors tend to lose the vision of success which results in no
more funding from their side and at the end, the entrepreneur has to either
terminate the startup or look for any other sources; both results in a negative
impact on the business.
So,
an entrepreneur must always keep their funders interested in their business
idea and try to mitigate this risk.
Demand and supply risk:
The
risk when the demand for the product rises in the market but the capability of
supply and development of the product is not up to the mark which will lead to the
downfall of the product as the customers will move to other products and there
is a chance that customers will find something better and not come back to your
product ever again.
Vice
versa, if the supply of the product in the market is high and the demand is
decreasing then the product will be stocking up in the market and will
eventually result in the downfall of the business.
The
following risk can easily be de-risked with proper marketing and research
team whose sole purpose is to determine the supply and demand chain of the
product.
Management risk:
Next
is the management risk. It occurs when the management is not capable of
managing the business. When they lack the skill set required to administrate or
either grow the business. Sometimes the management lacks the experience
required as in a startup; everyone is a learner and new but it can lead to
devastating results.
So a startup always needs an expert for advice
or consultancy.
Product-life risk:
The
risk when the product estimated life is less than anticipated. Everything comes
with manufacturing and expiry date and when the date of the product expiry is
not according to the estimated expiry time then the risks of the product being
slashed off the market comes in and if it happens, then whatever the demand of
product was, it will not matter and the customers will never trust the product
again.
Economic risk:
Of
all the risks, this risk is inevitable; the economy of the market will always
govern the business. In the current times, when the market is down and economies
of many countries are downgrading, it is not possible for start-ups to sustain
in the market. Though there are some businesses that are blooming in the time
being but most businesses are affected negatively rather than positively.
Competitor risk:
The
risk when your competitor is selling the products or services better than you
or cheaper than you. If your competitor is selling something cheaper than you,
it will result in fewer sales even if your product/service is far greater than
the competitors. A business start-up has to fight for its place in the market
as there many competitors in any field. If the competitors are old-dated than
you then most certainly they have a firm hold on the market and know how to not
lose their customers to your new start-up.
Technology risk:
The
technology is always advancing in modern time and it is always a risk that
the technology, a business is providing or either using becomes outdated and
outsmarted by the competitors.
Operations risk:
The
risk when the cost of the operations is more than planned which will certainly
increase the price of the product. It is also the risk when any machinery
malfunctions and the operations are interrupted. The time delay will always
cost any business.
There
are many other risks that govern the success of any startup business but these
are the main risks that can never be ignored. An entrepreneur should always
assess these risks associated with startups before starting the business. If
the entrepreneur is not confident and fearful of any risks, then they should
always ask an expert for advice.
These
risks can be easily mitigated after proper assessment but always needed to be
considered and not avoided.
We
hope you liked our blog, please let us know with your valuable suggestions and
feedback. If you don’t want to miss on any latest blogs, do subscribe to our
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