Despite all the glitz and glamour attached to the word “Entrepreneurship”, it is somewhat synonymous with risks. And people are barely starting out more often than not talk about common entrepreneurship risks.
According to a study by Statistic Brain, Startup Business Failure Rate by Industry, over ۵۰% of all businesses fail after five years in the United States, and over ۷۰ percent after 10 years.
This is a hefty number!
And I am sure this has alarm bell ringing in your mind.
However, if you want to excel, some common entrepreneur challenges should not scare you away because, in the end, it will be all worth it.
So what are these common entrepreneur risks that I talk about? Read on to find out some common entrepreneur risks that most entrepreneurs face in their business endeavor.
۱٫ Lack Of Steady Paycheque
Entrepreneurs make an obscene amount of money – True. But no one becomes a Steve Jobs in one day or even in a couple of months. The path is long, not to say very uncertain and full of risks.
Cash flow is essential to small business survival, yet many entrepreneurs struggle to pay the bills (let alone themselves) while they’re waiting for checks to arrive. Part of the problem stems from delayed invoicing, which is common in the entrepreneurial world.
How to Keep a Steady Paycheck while Starting a Business?
Step ۱—Start with a Full-time job/Part-time business arrangement
Step ۲—Business income grows—reduce job to less than full time
Step ۳—Business income reaches the level of a “living wage”–almost
Solution: Keep a cash reserve
Let’s give you a reality check. When you just start off with your business, the chances are that you will not get any customers for at least 4-6 initial months. That’s why it is a good idea to keep at least the budget for these months in reserve. Make sure that you have enough money in your bank to keep your business afloat.
۲٫ Technological Risk
Thanks to the changing times every business has to face technological risk. This includes change in technology that are taking place at a rapid pace. What’s in today goes obsolete tomorrow. It is difficult for entrepreneurs to be able to gauge the future properly.
Solution: Run a proper analysis
You can emerge out of such risks only if you run a proper analysis of your industry. You should discern the potential disruptions that might affect you in the future so that when the time comes you are prepared for such challenges.
I’d suggest you run a SWOT analysis: a study undertaken by an organization to identify its internal strengths and weaknesses, as well as its external opportunities and threats. Also, don’t wait for other startups to come out and offer something new. Stay ahead of time and keep on introducing new technology regularly.
۳٫ Political and Legal Risk
Globalization is rampant today, there’s no doubt about it. And every entrepreneur is very astutely trying to tap into the overseas market by increasing their outreach.
But this scenario paves the way for one of the most common entrepreneurship risks, that is the uncertain fluctuations in currency. If this fluctuation somehow ends up working against your favor, then you would have to worry about rising exchange rate losses.
Look at the chart below that shows a glaring scenario of how US companies dealing overseas suffered tremendously due to strong dollar fluctuations:
It works both ways, whether you are supplying overseas or you are getting supplies from the global market.
This entrepreneurial challenge has no surefire solution as it is somewhat difficult to predict them beforehand. The best entrepreneurs are those who keep a close look at these future risks and have a way to keep their profits intact after taking this into account.
۴٫ Cyber Security Risks
One of the most common entrepreneurship risks, especially in today’s world is cybersecurity risks.
Everyone knows the drastic effect it would have on your company if your confidential information leaks out. No one without proper authority should be able to access important and confidential employee and company data.
We recently saw the repercussions of Cambridge Analytica scandal and how biggies like Facebook were engulfed in the data breach scandal. This was followed by public indignity for Facebook as well as their CEO Mark Zuckerberg. And this wasn’t the end of it.
According to a survey, Facebook users’ confidence in the company has plunged by 66 percent as a result of revelations that data analysis firm Cambridge Analytica.
And Facebook is not the first company that came under fire due to the data breach. Have a look at one of the biggest data breaches occurred in significant companies:
The cybersecurity risks not only lead to trust issues but also amount to millions and billions of losses. Every entrepreneur should be geared to face such risks in the future of their business.
Solution: Identify the threat and use two-factor authentication
First, you have to identify prospective cybersecurity risks and see what are the things that can be secured. After all, the first step to solving a problem is to identify what needs to be solved. Once you are through with that, make sure that you use a two-factor authentication system.
Two-factor authentication method requires you to enter a password along with a code (which you will receive in your smartphone) something that only you have access to.
While you are at it, don’t forget to encourage your employees to do the same.
۵٫ Employee Risk
The human capital is one of the most important things for a business to be successful. It is the duty of the entrepreneurs to build an impressive team of managers who can lead the employees in the right direction. No company can attain its goals without the support of its employees that act as the backbone.
There is always the risk of a key employee deciding to switch or not reporting to work on an important day. Some of the risk factors related to the employees can be controlled, such as many employees may be convinced from jumping ship by motivating them in several ways including a pay raise. However, certain problems such as a low output employee cannot be solved easily.