CapitalPitch Blog

Risks Every Entrepreneur Faces When Starting a New Business

[fa icon="calendar"] 18/10/2017 10:00:00 AM / by Guest Blog Submission

By Matthew Kingsford 

In an increasingly populated ecosystem, entrepreneurs still face many challenges when starting a new business, some of which can cause loss of profit, and even bankruptcy. With any new business venture, there is an element of risk involved and a lot of thought needs to be given to the type of business you plan to start. Why will people part with their money for the service you prodive? What's your target demographic, and do you have a unique sellig point (USP)? This will put you ahead of the competition. 

While there is bound to be risk involved, fortunately, if business owners are able to identify the types of risks early on and proactively create risk management strategies with help of business consulting firms, then it will enable them to succeed.

 

Market Risk

The ups and downs and of the economy and new market trends pose a risk to new businesses. Also, businesses get affected depending on the nature and location of the business, prospective competition and product pricing. A market that is saturated with the same products and services can be detrimental to a new business’s ability to gain significant market share.

Market risk can be effectively managed by performing a market analysis. Knowing your customers and why, where and how they buy related products, could easily determine the success of your business.

 

Risks Every Entrepreneur Face While Starting a New Business startup 2017

 

Strategic Risk

In order for a business to be successful, it needs a comprehensive and well thought out business plan. However, in a dynamic and fast-paced world, even the best-laid plan can come undone and look outdated very quickly! This is a huge strategic risk. Here, your company's strategy becomes less effective, and as a result, struggles to reach its goals and KPIs. 

This could occur due to technological changes, a shift in customer demand, new competitiors entering the market, spikes in costs of raw material, or any other large scale changes. However, it can be easily managed by reviewing and updating your business plan periodically; as well as your Pitch Deck and any Data Room resources your investors may wish to see!

 

Financial Risk

The financial standing of a business can make or break the company’s ability to succeed. Start ups face significant financial risks because they fail to plan financial projections or create wrong budgets.

It is imperative for new businesses to determine if their products or services are strong enough to support the financial obligations of the business. Lack of funds also poses a considerable threat to new businesses and also having a lot of debt increases your financial risk particularly if it is short term due in near future.

However, if business owners identify key milestones and schedules that clearly identify the points in time when equity or debt investments are necessary then this builds the confidence in the potential investors to invest in your company.

 

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Reputational Risk

No matter what kind of business or industry you are in, your reputation is everything. If your reputation is damaged, there will be an immediate loss of revenue, customers become wary of doing business with you, your employees may get demoralised and even decide to leave.

But there are other effects too, it is hard to find a good replacement, suppliers may start to offer you less favourable terms, advertisers, sponsors and other partners may decide to no longer do business with you.

Reputational risk can be managed by having a controlled, authoritative, clear priorities and optimal stakeholder communication. Above all, your business should make all relevant information available and don’t conceal knowledge.


These are some of the challenges a new business owner may face and some risks you can control and others you can’t. To be a successful entrepreneur, you need to take counsel from business consultants on how to mitigate risks. 

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About the author:

Matthew Kingsford is a business consultant and marketing advisor with over 8 years of
experience serving wide range of industries be it health, banking and finance,
telecommunication, transport and logistics, mining and energy and government. He works for
TR Consulting, a full range of professional business consultancy services provider in Melbourne.

Topics: Startup, Fundraising, Equity, Entrepreneur, Finance