Risk and reward is a fundamental law of nature, and it applies to the world of business perfectly. The more risks you take upfront, the greater the potential rewards down the line. Alternatively, you could end up with nothing – or worse.
Starting a business is among the riskier endeavors a person can pursue, but for those that weather the storm, fortune and freedom await. Here are the top risks of starting a business, as explained by risk-ready entrepreneurs themselves. Although, there are many companies using global employer of record solutions to reduce this risks.
Money on the Mind
Shrewd financial management is necessary to avoid the biggest risk of all – bankruptcy. You’ve got to use your money wisely from the outset if you want to make strides and stay out of the red.
“Small businesses operate with limited cash flows,” said Shahzil Amin, Managing Partner at Karlani Capital, Founder of Emagineer and WellBefore. “And when the interest rate soars, small business owners need to set aside more money to pay the rent on their office or retail space or make payments on any loans they may have. This extra money comes out of their profits and reduces the owner’s income. Less cash on hand also means less money is going into growing the business. Therefore, it’s vital to understand how high-interest rates can affect your business operations and plan for them.”
There are many ways to obtain funding, but only strong business fundamentals will help you earn revenue and pay it all back. visit the site f95zone
Roller Coaster Ride
Entrepreneurship is full of ups and downs. Be ready for moments of joy and exaltation, followed by some serious downturns. You can’t get discouraged, however – quitting isn’t an option!
“It’s a trial-and-error process in the beauty industry,” said Kaz Amor, Founder of VoCe Haircare. “I’ve spent hours figuring out the best formulas and ingredients to create products that best represent me and my brand. Frustration and doubt will set in, but you’ve got to push through it and rely on the people around you. Your team is a major asset and they’re there to support you.”
Don’t forget that the risk of embarrassment or disappointment is nothing compared to the feeling of victory when you hit that first big benchmark.
Risk of Mediocrity
Many entrepreneurs found themselves fed up with living average lives and knew they were destined for more. The real risk wasn’t starting a business – it was never even trying.
“There are many risks to starting a business – it goes beyond finances in many ways,” said Darren Litt, Chairman and Co-Founder of MarketerHire. “But remember that there are risks to any career path, whether it’s a 9-to-5 office job or even working shifts in retail or restaurants. A risk-free life isn’t a life at all, and in many ways, owning a business is more secure.”
If you don’t want to leap headfirst into a business quite yet, you can always plan ahead and be more strategic with your exit.
We all know that credit scores and loan management is complicated stuff, but you’ll need to learn it all from top to bottom if you want to minimize risk when starting a business.
“Running a business on your own dime can take a toll on your personal finance,” said Tyler Forte, Founder and CEO of Felix Homes. “And when you’re worried about finances, you can quickly become consumed with work, leaving little time for family. Paying your bills on time is key to keep your credit strong. Because when your bank account starts to get low, you can rely on your excellent credit rating to help you secure a bit more financing and keep your business going.”
Give yourself peace of mind and assurance that you’ll stay on top of finances, no matter how complex they get over time.
Know Your Niche
You will face certain challenges and risks depending on the type of business you start and what industry in which you choose to compete. Put in the research upfront and know every corner of the market when picking a niche.
“There is always a degree of risk when creating a product and kickstarting a business venture,” said Jing Gao, CEO of Fly By Jing. “I was willing to take that risk even though it was scary at times. If it doesn’t pay off, it doesn’t pay off. But in the chance it does, you’ll never look back.”
The better you understand your industry and the variables at play, the less risks and roadblocks you’ll encounter when getting to work.
Protect the Mainframe
Despite an ever-growing cybersecurity industry, attacks are still prevalent and can compromise your business in a flash. Protect yourself and customers when dealing with online payment systems and personal information.
“Cyber attacks are on the rise worldwide,” said Dr. Zachary Okhah, Founder and Chief Surgeon of PH-1 Miami. “And so is the possibility of hackers gaining access to patients’ private medical records. Consulting a cybersecurity expert to ensure your information systems are up-to-date and secure will go a long way in protecting your data and your patients’ privacy.”
Unless you’re a cybersecurity pro, it’s probably best to hire some experts who can cover all bases for you and keep risk to a minimum.
To be completely honest, the risks of attempting a business venture and failing are less than you might imagine. There may be some time and money lost, but you’ll survive and get back on your feet.
Overcome the mental blocks getting in your way, and go for what you want!
“If you push through that first feeling of fear, that feeling of risk, amazing things can happen,” said Marissa Mayer, Former CEO of Yahoo.
First of Many
In the early stages of business growth, you’ll hit some exciting benchmarks along the way. There will also be a lot of pressure to perform, so keep a cool head and simply do your best.
Also, be careful who you choose to work with, since first impressions are key.
“A big risk when starting your business is taking on your first client,” said Chris Gadek, Head of Growth at AdQuick. “This client needs to be a good one and one that will recommend you to other businesses. If you take on the wrong client at the start and they leave you a bad reputation, this will hinder your business’s growth moving forward.”
Expect some beginner mistakes early on, but be ready to bounce back unphased.
Some risks will be totally unexpected, resulting from world events far beyond your control. Still, many companies were able to launch successfully in 2020 – it doesn’t get tougher than that!
“There was plenty of risk starting a business for us,” said Olamide Olowe, CEO of Topicals. “Our launch was hampered by the onset of the pandemic in March of 2020. We had to postpone production due to logistics issues. Just a few months later, we needed to put things on hold to support the Black Lives Matter Movement. Finally, fundraising during an economic downturn is always difficult because no one knows when things will turn around for the better.”
If your business can launch and grow in a year like the one that just passed, consider yourself well-prepared for the future.
Unless you’ve got a tech background, it can be hard to grasp the volume and scope of the IT resources required to power a business. Even a small operation needs extensive infrastructure and planning to get up and running.
“An expensive risk when starting your own business is determining if you are going to outsource your IT needs or keep it in-house,” said Jason Butcher, CEO of CoinPayments. “IT can be a large capital investment if you chose to keep it in house and outsourcing this might be best for when you are starting out. Outsourcing allows you to move it to an operational expense and can put you in a better position to invest resources and money elsewhere in the business.”
With countless outsourcing options, we’re living in a golden age of IT. Weigh all your options and related costs before committing to a plan.
We’ve all been here before: you map out a perfect plan in your mind, only to be thrown off by unexpected issues with logistics or scheduling. Before you set to work on your big project, take some extra time to hammer out all those details.
“For artists, keeping track of financing, marketing, sales, and distribution can be overwhelming and time-consuming,” said Joshua Tatum, Co-Founder of Canvas Cultures. “As a result, less time focused on making art can lead to a creative block, stalling work, and keeping the artist out of the limelight. So before beginning a piece, be sure to lay out a timeline that includes day-to-day business operations and project milestones and allows the time needed to keep those creative juices flowing.”
If you need to follow a pre-established blueprint or get some extra help making your business come to life, so be it. What matters is getting the wheels in motion ASAP.
Not So Fast
When you’ve launched your business and celebrated accordingly, it’s only natural to think about what’s next. Do you stay on course with the current plan, or try to level up and grow your business as fast as possible?
“A huge risk when starting a business is trying to grow too fast too quickly,” said Lauren Picasso, CEO of Cure Hydration. “This can suck up resources and hinder your company’s long-term growth. Growing organically and naturally is the best way to grow your business when you are first starting out.”
The lesson here is to take it slow at first, even if you’re eager to grow. That will all come in time if your fundamentals are strong.
Many companies come up against the laws of nature when building a business, whether it’s sourcing ingredients for food products or dealing with shipping delays across the globe.
“When your business relies on ecological resources, making sure those wildly harvested ingredients are sustainable is critical,” said Jared Pobre, CEO and Co-Founder of Caldera + Lab. “Climate change is an increasing risk. And severe changes in growing frequency and weather patterns can cause damage to your raw materials, disruptions to production, and delays in shipping. These effects can bring your business to a halt. So diversifying your supply chain to include organic farms can expand your resources and help you keep production going.”
We’ve come very far in terms of technology and tenacity, but we’re still subject to nature’s ways at the end of the day.
Keeping the Trust
When mapping out business risks, you don’t typically think about the people around you. Are they 100% on board with your vision, or is there anyone who might hold you back from achieving your dreams?
“One of the biggest risks, for me, was building up a team that I completely trusted,” said Chris Vaughn, CEO of Saucey. “When you are bringing an idea to life, it feels so personal to you that trusting other people to execute it sometimes feels impossible. However, it’s part of starting a business. The best teammates will share your vision for a product or service, but aren’t afraid to criticize you or tell you when changes need to be made.”
Don’t be overly suspicious of your teammates or immediately clean house. Just know what you’re getting into when it comes to partnerships and team dynamics.
The risk of being the same as everyone else – that should light a fire under you to stand out from the crowd! Confidently build your personal identity and brand, and let no one tell you otherwise.
“If you want to grow, you need to do something original, instead of what the majority of people do,” said Lakshmi Mittal, CEO of ArcelorMittal.
Stepping outside the norm is always a bit scary, but it’s necessary on the journey of business and life.
There comes a time when your core team is completely burnt out and overburdened. When making your first few hires, be extremely careful – this is where many small businesses go wrong and suffer the consequences later.
“A risk when starting your business is making your first hires,” said Craig Carter, CEO of Jack Mason. “These hires can be huge assets to your company, but if you hire the wrong people you will be doomed for failure. Hiring someone is a huge risk and a big financial burden to your business when you are first starting out. Perform due diligence and check multiple references before making your first hires.”
Take plenty of time to screen each candidate and don’t rush your decision. Most of all, make sure these people have personalities to match your mission and the vibe of the company.
Missing the Boat
For every business that succeeds in the internet age, there are thousands that never came to be.
This isn’t through any fault of the founders, other than their failure to step up and seize the moment when it was available.
“A common risk is waiting too long to start your project or business, then missing out on valuable time to grow and make strides in your industry,” said Raul Porto, Owner and President of Porto’s Bakery. “The time to start is now, so don’t delay.”
If you’ve got that fire burning within, don’t wait another day. Now is the time to get moving.
Manage Risk Wisely
We’ve covered countless business risks so far, and there are always more around the corner. Can you manage risk in an organized, centralized way? This should be a core part of your business plan from the start.
“There will be risks in any business venture, but what matters most is how you assess and manage these risks in a smart way,” said Jordan Nathan, Founder and CEO of Caraway. “You want to protect your money, your time, and your reputation. Practice risk management while still pushing yourself to perform and grow your business early on.”
Risk management can be a bit tedious if you’re not familiar with the processes, but it’s one of those mandatory to-do’s when starting a company.
In addition to risk management work, you will benefit from doing a broader analysis of your competition, market opportunities, customers, partners, and more.
You might find that more risks emerge as your analysis proceeds. Leave no stone unturned and be ready to pivot if plan A is derailed.
“You never want to enter a market without doing extensive research and market analysis,” said Bing Howenstein, Founder of All33. “It might seem like you’re saving time, but it’s really quite risky to dive headfirst into a business without knowing the lay of the land and the competition you face. Put in the work early to avoid future catastrophes.”
There’s simply no avoiding risk in this wild world, and that’s especially true in the entrepreneurial arena. Consider every risk – as well as every possible angle for success – if you want to take your business to the top.
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