Risk management is an art
As technology advances and young talent become more enterprising, startups are becoming the face of the future.
Starting a business isn’t easy and sustaining it is even harder. There are many risk factors associated with startup ventures and key guidelines that need to be followed in order to enjoy a profitable and successful business.
If you analyse and understand the risks involved and the mistakes which are likely to be commonly done, it would be rather easy for you to drive a secure and successful business.
Major reasons why startups tend to fail
Lack of demand in the market
While an innovative idea may seem interesting or fruitful to a business owner, it isn’t the case from the business perspective. The demand for that business may not be that high in the market, meaning that the startup would most likely experience a lacklustre performance.
There are chances of the business existing in abundance already or not needed at all. In either of this case, there will be no market for that business and causes the startup to fare poorly.
Misuse of funds
In a bid to prove that their startup idea is worth it, business owners tend to mismanage their funds, not looking at the after effects.
Every business owner has finances but what they need is a smart and cautious management of their finances. This is one area which becomes a root cause for failed startups. Only having money isn’t enough, putting it to its best use is important.
Managing a diverse team structure
Startups will need a multi-faceted team structure, possessing skills in diverse technologies and project management areas.
Generally, it is noted that startup business owners do not have that in-depth vision of building a collaborative team right from the beginning that is self-sufficient in terms of skills, technological knowledge and project management methods.
Even fundamental technical expertise is needed for owners to better judge the entire business scenario in the best possible way.
Offering equity to too many team members
When the startup is new, business owners tend to involve many equity shareholders in order to make the venture cash rich.
Although it might sound right at that time, it tends to get unmanageable and becomes one of the prime reasons for startup failure. Even having too many team members could lead to haphazard business functioning.
Feeble marketing strategies
After all, marketing is the key to reach out to widespread audiences. Startups need to have their marketing policies in place well in advance else they are bound to bear the brunt of it.
In this fiercely competitive world, without enough and well-planned marketing plans, there are fewer chances of business expanding far and wide.
Risk areas startup entrepreneurs faces
1. No startup offers a stable income right from the start. Entrepreneurs must be well prepared for an uneven way of income for the first few months. What is important is to sustain your business amidst throat cut competition rather than wanting a steady income.
2. Startup ventures need to be careful about competition and disruption both. Though both are inevitable and play a significant risk role in the success of any startup business, what entrepreneurs must do is keep aware of these from the beginning, to avoid its negative impact.
3. Undefined variations in the global currency could lead to a huge risk. With globalisation as the latest jargon today, entrepreneurs need to be careful while engaging in any kind of financial exchange either as a supplier or as a receiver.
4. Leaking your confidential information is yet another risk area that could create hassles. Cybersecurity is a prime area of concern for startup business owners. There is so much private information (company and self) involved that its security plays a very important role. Compromising on security could lead to disastrous results in terms of productivity, profitability and customer satisfaction.
5. Shelling out your own private finance for your startup to start off, is yet another big risk area. At the start, entrepreneurs may need to do that but what is required is enough thought to the point that if that finance is used up in business, there is nothing to fall back, on our personal front.
Key approaches for a successful startup
Have a complete focus on designing and developing the product
While indulging in any startup venture, the prime factor is the startup product itself. There should be a complete undivided focus on that, by the business owners and their teams. Thinking about other important areas like marketing, sales, finance, etc. should be done later so that there is no compromise of quality in the product build. This ensures utmost quality and standardisation, offering more chances to a successful venture.
Start off with a small base and large vision
What startups usually do is have a large end focus and planning right from the beginning. They tend to forget that they are in the startup phase. What should be done is that business owners should take small and steady steps in the start towards building a small stable and secure startup. Once that is established, there are ample of opportunities for building it big with fewer risks and more fundamental stability involved.
Perform in-depth analysis from information available
Be it risk assessment, predictive analytics, trend forecasting, etc., there are many areas that can be scrutinized in detail for better futuristic moves. There are many advanced tools available to help extract the best of information from the huge chunks of data, in your desired format. Make the most of BI and Big Data for the same.
Be a wise trend follower and grab foreseeable opportunities
As opportunities knock the door, it is very important for startup authorities to keep a close eye on them and grab them as soon as they are encountered. Of course, with a full proof thought to its repercussions, these opportunities could change the face of the business for the better. To grab these chances, startups should devote a sector of time and energy in observing and following trends in the market and understand the prevailing market scenario. They should also study the predictive future analytics to perceive what could come next.
Keep replicating success factors as the startup flourishes and grows
When a startup venture succeeds, there are certainly promising and basic success factors attached to it, that lead to its success. Once the startup is grounded and in place, business owners should purposefully try to replicate these success factors for a business to come and thereby stay grounded to the fundamental vision of the business. This set of success criteria should always be remembered and deployed in upcoming actions to be taken.
Embrace automation wherever you can
The year has seen many advancements in automation and the coming year will show many more. To stay abreast with today’s business norms, automation, wherever possible is a must. Startups need to evaluate, analyze and adapt to automation processes in whichever areas it can. This will not only increase efficiency, profitability but also ensure a cutting-edge business involvement.
Spend more time, money and energy into skilled expertise
After all, the crux of success for any startup venture is the quality that it delivers. This is possible only if there is a skilled and proficient team available to deliver the same. Good quality resources will garner successful business and will keep continuing to give good fruits as compared to efforts put.
Calculated risks are a must
As such, risk management is an art. No business can kick off without taking any risks, startups are no exception. But, yes, risks taken must be ascertained, calculated and analyzed before plunging into them. Risks would help individuals come up with innovative ideas, enhance creativity, increase productivity and thereby augment RoI for the startup venture.
Understand your client portfolio in advance
While building your startup venture, it is important to understand the client’s needs, perception, and aspiration. This forms a pillar of success for the business.
Until the customer requirements are understood in depth, it is not possible to build a solution that works as per their needs.
Create the right balance between time, money and effort
Among the three major parameters that are important for any business, it is critical to strike a balance between time, money and efforts, in order to come up with the best of results. Any of them, going haywire in proportion, will lead to an imbalance in the charted project plan.
A parting note
Here you go, with the startup industry’s key risk areas, best practices and reasons for failure. Owning your own business is always an exciting, challenging and tough task. With multiple types of startups cropping up every year, the parameters to be ascertained also change year by year.
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