Entrepreneurs understand that there are inherent risks involved with what they do. However, entrepreneurs also know that, as with any investment, where there is risk, there is opportunity for success. Understanding the kinds of risk that await entrepreneurs as well as how to best prepare to face them can help make the process of starting and maintaining a business more successful.
Financial Risk
Acquiring funding can be difficult for entrepreneurs, and there is always a risk that entrepreneurs will lose money with their businesses. One advantage for modern entrepreneurs is that they have online tools to help them gain money. Crowdfunding is an online way to get money from those who believe in your idea. Friends and family as well as angel investors can be sources for the lifeblood of your business. There is the risk you may not pay back this money if your business does not excel. A successful business plan prepared, executed, and followed can inspire your investors to continue supporting your endeavors.
Market Risk
Minimizing market risk can occur when an entrepreneur knows his/her customer and why he/she is/will buy your products/offerings. This includes analyzing your budget constraints, market entry timing, and identification of market routes for your product.
Execution Risk
An entrepreneur can become involved in the details of running the business and lose sight of the big picture. Entrepreneurs must be a jack of all trades and must keep sight of the overall strategy but stay aware of crucial details which could cause problems. The entrepreneur must keep a balance between micromanaging and seeing the overall picture. How an entrepreneur executes the business side of their venture can directly impact the success of their business.
Product Risk
Explaining your product, what problems it solves, and why the product is worth the investment must be your top priorities when starting your business. You need to understand your product and how it can solve problems for the customer. Does the product cover a large enough market and is it the right time to discuss an opportunity within the market? It is important you can articulate how your product or business will help this market.
Team Risk
It is important for entrepreneurs to have a good team available. The wealth of knowledge an effective team can provide is invaluable for helping an entrepreneur prepare for upcoming challenges. A talented team is good as a sounding board for ideas such as building a product, marketing this product, and growing this product. Team building is risky, however because different personalities interact in different, sometimes explosive, ways and can become counterproductive. Taking the time to properly assess and vet prospective team members can help reduce the risk of negative interactions later on.