Managing risk is not an easy feat in any company. One big decision can make or break an entire business' success. When considering entrepreneurship especially, you run the risk of overlooking key priorities that could leave a mess you don't want to deal with.
Familiarize yourself with the following start-up killers. Manage risk early and often!
1. Market Risks
Is there a demand for what your business has to offer? No matter how sleek your product seems, there is no way for you or anyone to determine how the market is going to receive what you are selling.
One way to manage your market risk is to throw any concept of perfection out the car window and watch it fly away in the wind. Always improve your product and never think of it as “finished.” Keep updating and challenging whatever model of your product you are using.
2. Competitive Risks
Competitors will play rough. Expect it. From your business-model to your best players on the team, there will be big plays from your opponents to compromise those and everything inbetween.
Prepare for this by continuously asking yourself and your trusted advisors what others might do to try to beat you. Always protect your main objective and have enough room to move forward with new ideas, and advances before your opponent.
With that in mind, figure out what you do better than your competitors and focus on maintaining that leadership.
3. Legal Risks
Many start-ups forget about the risks of putting legal and regulatory on the bottom of their to-do lists. Disputes arising from poorly structured agreements, lawsuits filed by a competitor alleging misappropriation of trade secrets, or general tax complications are all possibilities. Those, and more.
First, educate yourself. You decrease your risk of ending up in trouble if you take the time to learn about the legal and regulatory risks that could face your business.
Next, HIRE ATTORNEYS. There are so many ways to manage online contracts and digital legal, affordably, that it almost leaves no excuse to slack in this category.
Hire the right attorneys, keep them informed, and address potential problems before they have a chance to get out of control.
4. Technology & Operational Risks
Make sure you’re executing. A lot of technology and operational risks in start-ups have to do with getting the job done:
- Will the product work?
- Are there reliable vendors?
- Do you know your product in and out?
- Do you have funding to support your product’s development?
- Your team’s development?
- Do you have a backup plan when an accident destroys key equipment for creating your product?
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5. Financial Risks
No money? No business. It is as simple as that. The biggest financial risk in a start-up is not having a backup plan when it comes to funding. What happens when an investor takes too long to say yes? You have to have something to support the business when this challenge comes into play.
Once your business is up and running, has a few loyal customers, and is beginning to turn even a tiny profit, raising funds isn’t over. Financial risks continue more and more depending on the cost of your raw materials, paying your employees, and growing your product as your business matures.
Raise money before you need it. This is a must.
6. People Risks
You need people to run a business. They are the most vital and most unpredictable variable in the success of a start-up. When building your team, take it seriously. Each person you bring on board is an investment.
Start-ups have to be able to spend 40-80 hours a week together depending on what stage you’re in. A company is only as strong as its weakest link.
Someone causing unnecessary conflict or clouding the company vision? Fix it before it becomes toxic and slows your roll.
7. Systematic Risks
These are the scariest. Entrepreneurs need be wary of the systematic risks: the risks that threaten the entire market. Unexpected market changes, lawsuits, holes in products, and any crazy crisis you can think of that might destroy several aspects of your market are systematic risks.
Don't forget: doing business is risky. Being an entrepreneur is even riskier. Most start-ups are fashioned from a great idea and a willingness to improve a current mode of daily life.
Identifying the start-up killers and managing risk early on, however, can make a huge difference!
"Desire is the key to motivation, but it’s determination and commitment to an unrelenting pursuit of your goal — a commitment to excellence — that will enable you to attain the success you seek". — Mario Andretti
Read the full article that inspired this post here.