I want to start my own business, what are the risks?
“It's not too late to start! Start right now anyway. Set goals and take action. Have courage to fall, fail and suffer. Don't quit. Persist with courage. Success will achieve anyway and be yours 100% guaranteed.” ― Lord Robin
Most business owners take risks naturally or, at the very least, are calculated visionaries with a clear plan of action to introduce a new good or service to fill a void in the market. Many business owners take significant personal risks by quitting secure jobs to devote their time (and occasionally their own money) to starting their own companies.
Even with meticulous planning and preparation, starting a business is a gamble. Actually, it's a number of different bets. Will you be able to make a profit with your money long enough? Do you have competent employees? Compete in the market, if you can. Risk can be reduced, but it cannot be completely eliminated.
The startup world is tough. To keep their startup afloat, founders are expected to forgo certain luxuries and take drastic pay cuts. Entrepreneurs believe that in order to advance and ultimately succeed, one must risk everything. Although money is limited and needs to be used wisely, there are times when taking a chance is necessary to launch a project.
The Financial risks of starting your own business:
To start a business, an entrepreneur will need money, which can come from family, personal savings, or loans from investors. The founder will need to have personal investment. Any new company should have a financial plan that is part of the overall business plan that includes income projections, the amount of cash needed to break even, and the anticipated return on investment over the first five years. If an entrepreneur doesn't carefully plan, they run the risk of going bankrupt, which would leave investors with nothing.
Cut back on outside funding. Many new businesses concentrate on raising money from outside investors like venture capitalists, but you might want to think about reaching for your wallet before you look for an investor. To get the money you need to launch your business, delve a little deeper into your retirement and savings accounts. It sounds extremely risky, but if you don't invest some of your own money first, it will be difficult to find an investor who will put money into your startup.
Consult a tax expert (We can help). Nobody enjoys filing taxes, but worrying about whether you're keeping up with your monthly tax obligations while running a business is the last thing you need. Your business will have to file a number of taxes as soon as revenue starts coming in. Despite the additional cost, hiring a tax advisor will guarantee that your startup is adhering to all applicable tax laws and regulations. In the grand scheme of things, it only represents a small upfront expense.
Pay your workers. Although at first it may seem like a great way to cut costs to hire unpaid interns or recruit family members, keep in mind that your long-term objective is to create a successful business. If you're serious about expanding your business and keeping the talent you already have, you'll need to find space in your budget to pay your employees. It's not enough to ask employees to forgo pay in exchange for equity.
Bring in-house your developers. It goes without saying that developing costs are high. It will cost a lot of money to find the best developers who are dedicated to your business if you're building an online or mobile application. However, without it, long-term growth is essentially impossible. Although it can be beneficial in the short term, outsourcing development requirements is not a practical solution as your business grows. You need team members who are committed to your goals and share your convictions.
Guidelines for Reducing Risks
Don't let the possible risks stop you from pursuing your dreams. Do your best to foresee potential risks and have fallback plans in place to handle them if necessary to maintain the dream. Consider how you'll handle the situation if a client takes too long to pay. Can you find different vendors if prices rise? Have you purchased enough insurance to safeguard you from some of the potential disasters? Entrepreneurs who are successful understand that despite the risks, they must move forward if they hope to succeed.