Time and time again you will see new entrepreneurs make the same mistakes which can lead to business failure and sometimes worse than this. Being aware of the common risks that new entrepreneurs face should help a business owner to avoid these pitfalls and go on to find success.
1. Fraud/Improper Conduct
Fraud/improper conduct is highly common for new entrepreneurs which is usually down to a case of being new to the world of business and being unfamiliar with laws and regulatory compliance. Risk advisory specialists like RSM can help new entrepreneurs to protect their company from the wide range of threats today and help with any allegations of fraud.
2. Relying on Cash Flow
Securing steady cash flow is vital for success and managing outgoings but this can be extremely challenging especially when first starting out. It is for this reason why you should have emergency funds, stick to a strict budget and find ways to reduce business costs.
3. Cybercrime
Cybercrime is an enormous and growing problem that affects businesses of all sizes and in all industries. It is a big problem for new entrepreneurs because 58% of cyber attack victims were small businesses in 2018 – this is because cybercriminals think that a small business is less likely to have adequate protection in place. This means that you need to protect your business and educate yourself and staff on how to stay safe.
4. Operational Risk
Every new entrepreneur imagines that they will have a smooth and successful business operation but setting this up is a huge challenge. You often see a new entrepreneur struggle with administrative procedures which can slow down the business, lead to costly mistakes and lead to poor business decisions. You can reduce operational risk by finding ways to streamline the operation and by running continuous checks and communicating regularly with staff.
5. Burnout
When you launch your first business it is easy to pour your heart and soul into it. While it is important to work hard, it is also vital that you do not overwork as this can lead to burnout which can impact your health and the business. This means that you need to find time for relaxing, looking after your health and socialising.
6. Personal Income
Starting a new business is always a huge risk and no amount of research will guarantee success. This means that every new entrepreneur risks their personal income and lifestyle during this challenging time. You can reduce this risk with careful planning, by building an emergency fund and developing a backup plan.
These are the main risks that new entrepreneurs face when starting a business. However, risks are integral parts of the business. It is you who have to find out ways to reduce and manage these risks which could help a business to survive during the challenging early days.
