Starting and running a business always comes with a certain amount of risks. Your company is likely aiming to create an effective solution that fills a unique need, and that’s nearly impossible to achieve without some trial and error. However, most entrepreneurs believe that this gamble pays off in the long run, especially if they make an effort to remove some common obstacles within their control. The early stages of building a business are ideal for these important actions, so here are some ways you can mitigate risks and ensure long-term success:
Building a founding team
In the beginning, the success of a business venture mostly relies on the skills and talents of its founding team. Here, common risks include disagreements amongst co-founders, unskilled partners, and the exit of talented founders. To reduce these risks, try to only select the people you know well and fully trust as your partners. Make sure each co-founder’s competencies complement yours perfectly to minimize any knowledge gaps. Drafting a founders’ agreement is also recommended for reducing the chances of any responsibility or ownership disputes occurring in the future. A strong team will be key to growth and prosperity.
Hiring the first employees
As your company grows and you decide to delegate some responsibilities to employees, your success will partly depend on them as well. And the sooner you hire someone, the more important they will be for growth. Make an effort to hire the right person each time and reduce the risk of unskilled labor. This can be done by consulting co-founders, developing a detailed recruitment strategy, being creative with your offerings, providing attractive benefits, and only considering the most knowledgeable and experienced candidates. Remember that your employees are an investment in your future – make the right choice.
Ensuring legal compliance
Mistakes and setbacks are common when building a business. But if those errors get you on the wrong side of the law, you can expect to pay staggering fines or even face prosecution. Avoid this issue by ensuring your company complies with all the necessary laws and regulations that pertain to your business. This includes business licenses, tax compliance, corporate governance, and employment laws, as well as any specific rules that affect your industry or jurisdiction. Working with legal and financial experts can be of great help in ensuring compliance, even though they might be a larger investment.
Your company could also run the risk of legal liability and financial loss due to human error, fraud, inefficient internal processes, and other human factors. Mitigate these risks by establishing a list of clear, strict, and standardized operating processes. Consider including control steps throughout the procedure workflow, where appropriate. In addition, you may also want to think about getting professional liability protection that will safeguard both you and your company from any claims of negligent actions or inadequate work that could be made by clients.
Ensuring workplace safety
Workplace safety is another legal (as well as moral) obligation you have to ensure. Implement safety protocols from the beginning, devise suitable contingency plans for emergencies, train your employees well, keep your premises clean and clear, provide your staff with the right tools and equipment, invest in warning labels and signage, and take all the necessary precautions to make sure your workplace is safe and secure. This will aid in protecting the health and well-being of your employees, while also protecting your business and yourself from any legal liability in the future.
Reducing financial risks
Running out of cash is one of the largest financial risks for all businesses, which is why most decide to protect themselves from the very beginning with solutions such as insurance. However, that doesn’t come without its own risks either. In fact, even trusted insurance companies can sell unnecessary products such as junk insurance using unethical practices, forcing you to lose thousands of dollars each year. Fortunately, you can demand a refund junk insurance and get your money back, as long as you work with experienced specialists. This is an easy way to safeguard your business against running out of money.
Protecting intellectual property
When starting a business, many entrepreneurs overlook the importance of their intellectual property, mostly focusing on the physical aspects of their company. However, unprotected intellectual property can turn out to be quite detrimental to your venture. In case your competitors ever steal your innovations, ownership of ideas will be challenging to prove without protection. That is why it might be wise to think about investing in trademarks, copyrights, and patents. In many instances, the potential costs of litigation will justify the intellectual property protection expenses.
Avoiding client concentration
It’s not uncommon for small businesses to financially depend on only a couple of large clients. While that might make sense in the early stages, this could also be quite detrimental to your company. If any of your critical clients run into difficulties or important contracts fall apart, this truly has the potential to ruin you financially. To minimize this risk, you should make an effort to diversify your income streams from the very beginning. Develop more products, upsell your services, and never allow the majority of your revenue to come from a small number of clients.
Diversifying marketing channels
Just like clients, concentrating your marketing channels has a similarly damaging effect. In case one of your vital marketing channels falter, your influx of new customers could suddenly stop, thus presenting a large issue for your revenue and overall success. To prevent this from happening, consider diversifying your marketing channels as well. Invest in conventional marketing tactics, strengthen your online presence, collect important data from your marketing campaigns, and use this information to adjust your strategies to your target audience in an effort to increase your chances of reaching success.
Preparing for political risks
In case you live in an area experiencing political uncertainty, high corruption rates, stifling bureaucracy, weak judicial systems, or even high taxes, all of these factors can make building and growing a company that much more challenging. Entrepreneurs in similar situations often spend most of their time handling these inefficient processes, leaving them with no room to focus on delivering genuine value for their company. If you don’t want to fall prey to this bureaucracy, think about setting up your venture in a more business-friendly area that provides a rule of law, political stability, no corruption, and lower taxes, if at all possible.
Assessing all possible risks
No matter the industry or the type of venture, starting a business will always be risky. Along with the aspects mentioned above, you could also run the risk of consumers not liking your products or services, not knowing how to price your offerings accordingly, not streamlining logistics when expanding to new markets, etc. Since completely eliminating risks is highly improbable, every business owner has to decide where they stand before growing their company. Consider how much and what kind of risk you are actually prepared to take, depending on your specific situation. Knowing the answer to this conundrum is what separates good from great entrepreneurs.
It goes without saying that a number of risks in business are truly inevitable. To protect your company and reach success, you must accept what you can’t change and mitigate the risks that can be managed.