6 Potential Risks You Should Know About When Starting a Small Business

by ​Alexis Walker, Guest Contributor

Running a small business sounds like an exciting idea until you take a minute to look at the statistics and realize that about 9 out of 10 businesses never make it past the first five years in the business world. When taken into consideration the odds that they’re facing, this hardly comes as a surprise. You see, there are so many risks that small businesses face upon entering their preferred industry and knowing what these risks are might just be the first step towards avoiding it.
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With that in mind and without further ado, here are six potential risks that you should be aware of when starting a small business.

No market need
The first thing you need to understand is the fact that just because an idea sounds plausible it doesn’t mean that it’s actually lucrative. You see, about 42 per cent of all startups fail because there’s no market need for what they’re selling. The problem lies in the fact that they either skip their research (prior to launching) or do it all wrong. First of all, they ask the wrong questions. Instead of asking whether they feel the need for their product/service, what they should ask is how much would they be willing to pay for them (if at all). 

Running out of money
The next major problem is one of finances. It’s not that uncommon for a first-time entrepreneur to underestimate the amount of money that they’ll need in order to make success in the business world. While it is true that the majority of people make accurate estimates on how much money they’ll need to launch, what they miscalculate is the break-even point, as well as the magnitude of their operational expenses. This creates a scenario in which you end your fundraising project short of funds that you’ll actually need to make it through.

Overestimating yourself
Overestimating your skills and abilities is one of the pitfalls that a lot of entrepreneurs fall into. First of all, just being able to launch your own business is a huge accomplishment, which makes these young entrepreneurs feel invincible. Unfortunately, this also makes them undertake tasks that they’re not skilled enough to tackle. For instance, when it comes to legal issues, it would be far better for an NSW based enterprise to look for small business lawyers from Sydney and outsource this skilled task, than to handle it themselves.

Overworking yourself
For a first-time entrepreneur, it’s really quite hard to show restraint when it comes to the amount of work that you’re able to take on. This results in one always pushing themselves harder than they can take. This results in two major problems. First of all, by having to do everything on your own, you’ll quickly overwork yourself, thus putting yourself in an even worse position than you were originally in. Second, by micro-managing everything, you will limit your team’s potential for growth, as well as discourage them from ever taking any initiative. Therefore, the division of labour and delegation of tasks are your only way forward.

Setting unrealistic goals
The easiest way to get disappointed is to set unrealistic expectations for yourself and your enterprise. By setting unrealistic expectations, you’ll persuade yourself that you’re performing worse than you actually are or that you’re on the wrong track even when everything is going the way it’s supposed to. In turn, you’ll start making adjustments that are unnecessary and make your enterprise pivot when it’s unnecessary. Being indecisive is probably the worst mistake that your enterprise could possibly make, yet, it’s the exact error that you’ll be making if you set unrealistic goals.

Hiring wrong people
When it comes to the idea of a bad hire, the majority of people immediately think about employees who are not efficient at their job. However, not being able to meet work norms is a minor problem when compared to all other forms of difficulties that can come from hiring the wrong people. Employee theft, workplace negligence or practices that diminish the productivity of others are far worse. Therefore, it’s important that you, as a potential entrepreneur, get acquainted with types of people who can ruin your business and avoid hiring them at all costs.

In conclusion
In the end, knowing which risks you’re facing is pivotal in order to properly manage it. You see, identifying potential risk, conducting a risk analysis and identifying warning signs are just some of the problems that you’re facing. Being prepared ahead of time to introduce preventive measures, assign responsibility or even avert the crisis altogether are just some of the things that a great preparation process will enable you to do. With that in mind, knowing the above-listed risk types can greatly aid you on this quest.

About the author:

Alexis is a Sydney-based part-time writer and a full-time mom of two. Her words carry the richness of her travelling and parenting adventures, offer advice and inspiration to those who desire to improve their lives. Outside of the office, she takes pleasure in spending precious time with her youngsters and absorbing the happiness they constantly radiate.

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