Starting a business is exciting, mainly because the startup economy has limitless potential and opportunities. However, startups have their share of risks. Disaster may strike when you least expect.
You can beat the odds by having in place a disciplined risk assessment and management approach. Statistics reveal that more than half of all business startups fail before they hit the five-year mark. According to Small Business Trends, only about 44% of all businesses can survive for up to the fourth year after establishment. Most startup closures result from unforeseen circumstances.
If startups paid more attention to risk management, they would easily avoid or mitigate most disasters that strike new businesses. Investment risks go hand in hand with entrepreneurship – the more you risk, the more you gain. However, you should not allow risk to get the better of you. Great entrepreneurs achieve success by being aware of potential risks and managing risks accordingly; which can be broken down into 5 steps.
Disaster preparedness should be part of your startup risk assessment and management strategy. According to CNBC, over 40 percent of small businesses do not re-open their doors after a major natural disaster.
This is because most business owners don’t have a natural disaster plan in place. A recent poll conducted by BizBuySell revealed that only one in five business owners believe that natural disasters like climate change poses a threat to their companies.
In the face of disaster, your startup business may lose some crucial documents and other business information. For instance, in case of a hurricane or a fire, it may be devastating to lose your business paperwork and records.
As a small or medium business owner, you should store your business records in the cloud. This way, even when disaster strikes, you will be able to access your business records from anywhere in the world if you have an internet connection. You will not have to start all over again in case you lose your vital documents.
You may not be able to predict and identify all potential risks your startup business may experience in the first few years after establishment. However, you may recognize the common significant risks that startups experience.
It is vital to research and identify risk patterns. It is also equally important to familiarize yourself with the changing risk management approach. Identifying risks in advance helps you learn from the mistakes of prior business startups and avoid making similar risks.
There are several types of risks, but these may vary depending on the nature of your business. The common risks that face startups include financial risks, legal risks, operational risks, and strategic risks, among others.
Risk assessment is a prerequisite for risk management. Therefore, after carefully identifying and assessing the major risks that your startup may face, you must plan on how to mitigate and manage the risks if they occur.
Come up with strategies that may help you counter factors that may threaten the success and the survival of your business. Come up with a proper risk management plan. Examine the current world of business and learn how your competitors are dealing with risks. Learning how to manage risk will increase the chances of your success in the business world.
One universal characteristic of successful startups is their ability to collect and act on feedback. You can minimize the reputational risk of your startup by keeping your ears open and receiving client feedback, both positive and negative. In the current era of technological advancement, one small mistake may ruin your reputation and destroy your business.
According to Forbes, feedback can make or break your business. Customers are evolving, and with the use of social media, it’s easy to spread good or bad information about a company. When mapping your risk management strategy, you should never underestimate the importance of building and maintaining your reputation.
Entrepreneurship is not for the fainthearted as business startups come with many challenges. There is no defined blueprint for developing a successful business startup. Therefore, you must keep learning and improving.
Even in the face of challenges, be persistent. For instance, when a natural disaster strikes and destroys your business, be ready to start again without choosing the more comfortable option of giving up.
Most entrepreneurs believe that for their startups to become resilient and become successful, they only need customer desired products, good staff, and least CapEx expenditure. Unfortunately, even with all the right elements, startups still fail. To have a successful business, ensure that you have an effective risk management plan from day one.
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