Finance

8 Startup Business Risks that should be Considered

by Faizul Haque

Every business faces uncertainty at the commencing. It is known to everyone that any size of business has minimum risk which is why survival of that business becomes harder. If we manage our businesses carefully taking steps to diversify the risks, it will be easier to survive which will result in high growth. This article will explain the startup risk factors that should be considered at the starting level. You can follow the 5 step of risk management process to assess and .

You can follow the 5 step of risk management process to assess and manage the risks associated with your business.

Why should you consider the risks at the beginning? Well, you may have a huge personal fund for investment, or you can borrow from somewhere else. Also, you may have a nice business strategy. But if you do not consider the risks associated with your business, everything will result in less return which could be the reasons to shutting down. You will be able to minimize the risks to be successful.

8 Startup Business Risks That Should Be Considered

1. Choosing The Right One: This is the  riskiest, but important decision for any business. Choosing the right one will give you huge opportunity at the commencing. As the business or sell of products/services and the pricing depends on the supply and demand, the right selection will be beneficial for the survival at the starting phase.

2. Lack Of Experience: success depends vastly on your experience on the field. If you already know what you are doing, and have huge experience on that field then it will be easier to conduct your business. Moreover, if you think from the point of the investors, investors will be interested in investing if they are convinced that you have real expertise on that field. So, you will be taking huge risk if you do not have expertise and experience on those field of your business.

3. Historical failure rate: Historical failure rate of startups is high. And for some specific sectors they are pretty high. For the internet, these are blogging, match-making, and social networking etc.

4. Changes in government regulations: This is another important factor you should be considering. Any changes in government policy can result in positivity as well as negativity. For example, if the government raises tax rate, it will decrease your net income.

5. Initial investment requirements: For some business startups, initial investment requirements are very high. For example, if you are going to start a business which needs huge technological advantages, will be risky for you if you didn’t know it earlier. While money is invested, a risk you are taking.

6. Poor Public Image: Some businesses have a bad public image. If you have one of those, it will be very tough to regain reputation.

7. Choosing the right product: Say you are manufacturing products. But you do not have the correct information about the demand and supply of those specific products. As a result, you do not know how much you need to produce. If you over produced, you may have to take a loss. Also, a wrong choice of product will be resulting in a loss.

8. Specifying the target market: Perhaps you started your business with a nice setup. You did everything right, also, you have employed a good investment. But if you are not familiar with your target market, your products and services will remain unsold as you do not know who need those products and services. Also, for marketing purpose you need to know for whom you are going to produce your product and services.

Other Risks Associated With Startup Businesses

Risk includes the uncertainty associated with business. The main goal of any business is related to the risk and the return. The more the risk, the more it makes the return. So, the profit you will make will be highly related to the risks you will take. There are many types of risks, some are common and some are really uncommon and therefore unknown. Keeping your small businesses away from common risks will help you to deal with the uncertainty and grow your business properly. There are some usual risks associated with small businesses which are easily avoidable. However, these uncertainty can be reduced by following risk management process.

Business risk can be classified into six main parts. the paragraph below will describe those.

  1. Strategic Risk: these are the risk that are associated with the industry in which your business is operated.
  2. Compliance risks: risks those are related with the need to comply with govt. regulations and laws.
  3. Financial risks: These are the common risk associated with all types of business. It is related to the financial operations like financial transactions with the customers or the suppliers.
  4. Operating Risk: these are the risks that are related to the operations of your business.
  5. Environmental risks: the risks that are related to the environment which is are related to nature. These include natural disaster like storms, cyclone etc.

Some risks are non-diversifiable, but can be mitigated. Also, there are some risks for which you can not do anything like the change in government laws.

Some examples of startup business risks are:

  • Theft of machinery, and breakdown.
  • Proper insurance policies
  • a sudden hike in labor prices
  • Declines in sales
  • Losing key staff members of unique skills
  • Security of official data
  • Sudden natural disaster
  • Competition among the companies in the industries
  • Changes in government laws and regulations and failure to comply with those
  • Price hike of raw materials
  • Accidents in the company like electricity failure

I would say these are the rules of thumb which you should see in depth while starting your business. For facing the uncertainty, you should be proactive. At the commencing point, you should calculate every possible risk of the business, measure it, and identify the solutions for it.

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