When Launching Your Startup, Consider These 5 Risks

By Sreekanth Ravi, entrepreneur.com, 21-05-2014

Starting a business has never been more exciting. The startup economy is rich with opportunity, innovation and potential. But at the same time, it is also fraught with high-stakes risks. And while it may be scary to take that leap of faith, jumping into the deep end of the startup pool is significantly less intimidating once you understand and assess these risks.

In my experience as a serial entrepreneur (having sold one company and taking another public), I have found there are five key risks in starting any business. Fortunately, if you are able to identify these risks early on and determine how to approach them, you will up your chance for success.

1. Product risk. Decide what you are selling. It seems like an easy thing to determine -- especially for an entrepreneur. But the ability to explain what your product is, the problem(s) it solves, and why it’s worth investing in is much harder than it seems -- and it must be your top priority when starting a business. If you can’t do that, you can’t expect people to pay attention, let alone part with their investment dollars.

This is a controllable risk: You need to ensure the product addresses a big enough market, and the right opportunity within that market, at the right time. It is imperative to do the research, know the landscape, and be able to clearly articulate how your business fits within the context of this landscape.

2. Market risk. Knowing your customer and why, how and where they buy related products is arguably the most important risk factor to assess before launching your product. Research this thoroughly. Identifying these routes to market, and whether you can build them effectively, in a timely fashion and within your budget, could easily determine the success of your business. If the market risk falls in your favor and you get into your market early enough, there’s no reason why your business can’t succeed.

3. Financial risk. First-time entrepreneurs are fortunate to have tools such as Kickstarter and Indiegogo that enable crowdfunding to get money in the bank. In addition, friends and family, angel investors and traditional VCs are all fertile sources of this necessary life blood.

Make sure to identify key business milestones and schedules that clearly identify the points in time when equity or debt investments are necessary to reach the next major milestone. If you can articulate your business plan, growth path and reach each milestone successfully, this builds the confidence in your potential investors to write the next check.

4. Team risk. There is no way that one person can vanquish every risk.  That’s why it’s important to have a great team and a personal sounding board -- a mentor, confidante or even a startup incubator to help prepare for each challenge. Your team is also great for bouncing around ideas to build a product, bring it to market and maintain successful growth.

Think through your role as an entrepreneur and allow the team to do what it does best. Invest in people who believe in your product and instill a sense of confidence that they can help get your company across the finish line.

5. Execution risk. Many entrepreneurs can become so mired in the details that they completely lose sight of the overall company trajectory and strategy. Alternatively, some company founders remain at a high level and overlook crucial details that result in major problems. What I discovered early on is that a dichotomous approach of assessing the details, at least in the early stages, while maintaining a keen focus on overall business execution, will ensure the highest likelihood of long-term success in building a great company It is essential to strike a balance between being the micro-manager and the 30,000-foot-view strategist.

Some risks you can control, and others you can’t. To be a successful entrepreneur, you need to take counsel from others on how to mitigate risks. But never allow one person to have 100 percent influence in the decision-making process. Participate, evaluate the risks and don’t be afraid to pivot.

Source: http://www.entrepreneur.com/article/234094