Entrepreneurs, many of them are people who do not mind taking risks, as it’s all in their nature.
Entrepreneurs at least have a vision of their plan of action is when it comes to launching products or services, is not yet available in the market.
Risks Entrepreneurs Face
The truth is entrepreneurs at every level, including a personal one, take big risks, as they leave stable jobs and put everything they have, whether it’s time or money, to launch a business.
Entrepreneurs have no guarantee or assurance that they will get a stable monthly income or success and put all their personal relations in a challenge to take time out and spend with them, especially at the beginning of a business.
Below are the most common risks that entrepreneurs or investors have to face. Therefore, they should evaluate and reduce them before launching a business.
Financial Risk
Funds, no business can start or launch without getting funds. Entrepreneurs can get funds from different loans from banks, investors, family, or friends, or use the savings they have.
You might have heard, ‘ founders have to put their skin in the game.’
A business, whether new or old, should have a financial plan set within its whole business plan. The financial plan should show how the cash will get used, how much will get needed to become even, the expected returns for the investors in the next five years or so.
If a financial plan does not get written out properly, the entrepreneur can risk facing bankruptcy, and the investors will lose a lot with you and get nothing.
Many risks are in the way of entrepreneurs, and they should take the right measures to ensure that they do not get affected by the risks.
Strategic Risk
Investors will get impressed by your business plan and ideas.
However, the world in which we live in, it’s moving at a rapid pace, and strategies become outdated really fast, which means the markets and business environments are always changing.
If your strategy does not get updated with the changes happening or the wrong strategies can make a business suffer in reaching its goals and Key Performance Indicators (KPIs).
Technological Risk
As it is the era of the Fourth Industrial Revolution, technologies are emerging and developing at a rapid rate.
Many of these changes can get identified as ‘paradigm shifts’ or ‘disruptive technologies.
New businesses have to ensure they use new systems and processes to stay competitive.
Staying updated in technology means you find cheaper ways to work with new technologies, giving you more revenue.
Market Risk
The product or service market can get affected by many things.
The uncertainty of the economy and the emerging market trends presents a great risk to new businesses, meaning a product popular this year might not be popular next year.
For example, if the economy drops, people will not buy high-priced items or things that are nonessentials.
Moreover, if competitors launch a similar product to the one you have but at a lower price, then the market share, a lot of it will get stolen by the competitor.
The market should get analyzed comprehensively by the entrepreneurs, to see which product or service is in demand and the behavior of the customers in that market.
Competitive Risk
An entrepreneur should keep an eye out and be aware of its competitors.
If a product or service has no competitors, that means the product is not in demand.
If there are some competitors, this will mean that the product market might be saturated, or a new company for the same product may struggle to keep in the competition.
Moreover, entrepreneurs who want to enter a market with a new idea or innovation should get it protected by getting a patent to protect their business from their competitors.
Reputational Risk
The reputation of a business decided its future and whether it will survive or not.
When a business gets launched and gets the trust of the customers, it’s already onto a good start.
Similarly, if at any point-especially the beginning- consumers get disappointed by the business, then it will bring down the reputation and never regain it.
The fact is a business’s reputation nowadays depends a lot on social media and word-of-mouth marketing from various consumers through social media.
A negative post or tweet from an unhappy customer, especially a popular one, can lead the business to a huge loss in its finances.
To ensure the reputation of a company does not get affected, the business should have a strong communication strategy regarding product information and have strong relationships built with customers and stakeholders.
Political, Economical & Environmental Risk
There are some risks that entrepreneurs cannot control, even with a good business plan or with the right insurance.
Various things like earthquakes, hurricanes, flooding, tornadoes, wars, and recessions are risks that any new startup or business can face.
At times, under-developed countries have a strong market for a product or service, but such countries are not stable, safe and trading can be difficult because of the logistics, tax rates, or tariffs.
Furthermore, some business sectors have a high failure rate, which has gotten seen, making it hard for entrepreneurs to find investors. Such sectors consist of consulting, retail, and food services.
Conclusion
Entrepreneurs face many risks from bankruptcy, reputational, economic, environmental, and many more.
Did you know that according to the U.S. Bureau of Labor Statistics, a new business that started in 2018, only 79.4% made it to their second year, and 68.2% made it to their third year? Entrepreneurs should be ready for any risks, mistakes, or failures that might come their way. Entrepreneurs should plan before handing thinking about all the risks to get a better possibility of succeeding.