Undertaking Investment Risk With Entrepreneurship

Thoughts of running your own company might seem glamorous, but according to those who are in the know, the word entrepreneurship is synonymous with risk. The statistics support this claim, as data from a study conducted by Statistic Brain reveals the 50% of new businesses fail after just five years and increase to a rate of 70% after reaching 10 years. While these numbers might dissuade your dreams, successful venture capitalists like Mark Stevens have the insight, the experience, and the financial resources to help your new venture succeed. It is said that the best defense is a strong offense, and if you are aware of these common risks in entrepreneurship, you will be prepared to address them before they get the best of you.

Unstable Income

The most successful entrepreneurs (think names like Steve Jobs or Bill Gates) have been able to bring in millions, but the rise to financial prosperity didn’t happen overnight or over the course of a few months. True income potential is a long, hard road that is uncertain, to say the least. Before you can even get going in the right direction, you have to give up your current employment situation or career, leaving financial stability behind. Though the plan is to secure an income through your new business venture, there is no guarantee as to the amount of money you will make and when you will make it. The precarious financial situation is the most serious of entrepreneurial risk. Many newcomers to the scene will need to work a part-time job in order to provide a safety net, but you should always start your venture with at least six months of operating costs in the bank. This cash reserve can keep your business going while you build up your consumer base.

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Underestimated Competition

Your idea or product be a winner to you, but check out your competition before you decide to lay it all on the line. Many entrepreneurs look at their direct competition and don’t account for the disruptions that emerging trends or developments could bring to the industry. You can’t effectively stomp out competition or disruptions, but you can strategize and plan for the risks they bring and hope to ride out the storm.  Even if you plan on opening your business in a small market, conduct a SWOT analysis to identify the details of your operating environment. You should also stay ahead of the competition by introducing or integrating new technologies and products that follow consumer interests and purchasing trends.

Investment Financing

Though you may have been prepared to address the initial start-up costs for your business, access to funds for future needs can come from a variety of sources. While the most common thought is to secure a small business loan, traditional lenders often deny applicants that have limited operating history and zero commercial credit established. Non-traditional opportunities present themselves online, though crowdfunding sources or less restrictive lenders. Venture capital petitions can yield financial backing if the idea or business strategy is well laid out and shows high growth potential. Cryptocurrency is offering a new wave of financial backing, as more tech-savvy start-ups utilize Initial Coin Offering (IOC) to investors. The many options for financing have their own pros and cons, and partnering with any of the above opportunities needs to be evaluated for potential risks.

Cybersecurity Threats

Cybersecurity risks are affecting businesses across all industries, as more and more companies rely on internet connectivity and digitization for operations. The media and industry fallout from a hack or security breach is concern enough, but the liabilities and loss that occur when sensitive and confidential information is leaked can be irreparable. Security protocols need to be in place for employees, vendors, partners, and consumers since each area of operation potentially holds access to desirable data.  Implement a two-factor authentication system, and use encryption software for financial transactions. Companies that are in start-up mode should consider outsourcing the cyber and IT risk needs, as network and storage protections require a significant level of expertise if they are to be effective. In addition to managing and mitigating the risks in this area, consider adding a cybersecurity insurance policy to your arsenal of coverage. These policies can help with the financial costs of dealing with a breach or other cyber-attack.

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Stalled Markets

The inability to produce new leads and generate client loyalty will undermine your business potential and sabotage longevity. Follow consumer demands in marketing approaches, and have a strong digital presence. Create an unbeatable customer experience to generate word of mouth referrals. After your business reaches success, consider tapping into new locations or products to increase sales and avoid having your company’s growth stalled in the market.

Entrepreneurship is a risky but worthwhile investment. The ability to be your own boss and present the market with a new idea or revolutionary product is a rewarding and fulfilling venture.

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