Setting Up A Business Involves Taking A Risk
Whenever you decide to set up your new business, there is risk involved. Unfortunately, there is no instant fix for this, no solution that will see every risk eliminated and you ready to proceed with your business. You just have to find the confidence to start building your enterprise.
You can, however, manage many of the risks associated with starting a business. By taking the time to identify the most common risks of entrepreneurship and which of those risks your new business will face, you can mitigate their effects and maximise your chances of success.
Read on to find out more about some of the risks that new businesses face, and understand these obstacles that are standing in the way of you and a successful home business. You can then apply a little preparation and common sense to keep these risks controlled.
Financial Risks For New Businesses
The first thing that most of us think of when somebody says ‚Äėnew business risk‚Äô is money. More specifically, a lack of it.
Some businesses take a long time to become profitable. According to business owner Dean Soto, his first year of trading ended with revenue in five figures, but no profit. Many companies don‚Äôt see a profit for as long as five years.
Of course, this depends on the nature of the business you run and the kind of expenses that you have. If you need to buy stock or invest in labour, achieving a profit is not a quick process.
The best way to overcome this risk is to prepare yourself with a professional business plan which calculates realistic sales estimates and the related expenses. You can read our useful guide to writing a business plan here.
Money also presents risk in terms of personal liability. If you face litigation from a member of the public, you need to make sure that you are protected. Registering as a limited company, which limits the liability you can face, is the simple solution to this problem. In short, if your company fails or loses money, this has no impact on your personal standing.
Identifying Your Business Risks
Although financial issues dominate the risks associated with a new business, there are many more risks that are out of your control.
- What if you do not get any customers?
- What if you can‚Äôt get the stock that you require?
- What if you do not have time to run every part of your business?
- What if your family and loved-ones feel less important than they should?
These are not the kind of risks that you can manage very effectively. They depend on the behaviours of other people, including business partners and the people around you.
So what can you do to keep these risks under control?
See Risks, Eliminate Risks
Cordia Harrington is a businesswoman who decided to buy a McDonald‚Äôs franchise and set it up in rural Illinois. With very few passers-by, her biggest risk was that she would not get enough customers and fail to earn a profit.
Shortly after opening, Harrington partnered with a Greyhound bus franchise that ran next to her McDonald‚Äôs. With coach-loads of people stopping just outside, customers came flocking in and the branch continues to remain profitable.
Harrington couldn‚Äôt do anything about this risk. However, by being aware of it, she was open to any opportunity to increase customer numbers. When she saw a chance, she took it.
You will not be able to effectively eliminate every risk that comes with starting a new business, but you should be able to identify them.
INC.com provides a great guide to identifying the risks that your business may face.
By compiling a detailed list of risks, you can give yourself the best chance of success ‚Äď not by eliminating risks altogether, but by preparing yourself to defend against them.