Every successful business venture starts with an idea, but all successful entrepreneurs know that it takes a lot more to make it work. To deal with all the financial, market and operational risks your start-up is likely to throw at you, you will need to predict and mitigate against them. Here’s how to avoid some of the most common pitfalls when launching a small business.
Know your customers…
To avoid market risk, you need to first make sure your idea has potential and that there will be enough consumer interest in it. Utilise resources like the library and online studies to obtain a base level of knowledge. You also can study competitors to work out their target customers and where you will fit in, but the best way to get specific results is to contact people directly and gather some primary research via focus groups and interviews.
…and your competition
Reducing competitive risk is another essential part of your start-up plan. Compile initial information by looking at web databases of data pulled from Companies House, then make a list of your immediate competitors, what their strategies are and what their profits are like. Then take a look at how they’re perceived in the public eye, using social media platforms. Competitive research isn’t something that’s only necessary at the beginning; throughout your business life, you should be analysing where your strengths and weaknesses lie compared with your rivals, in order to maintain the areas where you’re leading.
Take care of your finances
Financial risk is obviously one of the major obstacles in small business. Having enough start-up capital to succeed means not only having enough to buy supplies and rent premises, but having funds for a contingency plan if you lose money or key customers over the next few months. Cash-flow problems often plague start-ups in the fledgling stage and making a proper plan of expected costs and earnings can help you to avoid this. Once you’re up and running, continue to review your monthly budget and figure out where you could save more.
Search for appropriate insurance
Many risks associated with small businesses can be mitigated by taking out appropriate insurance. Don’t rely on generic business insurance, look into the details and figure out the specific risks that your business may encounter. For example, if your company will be dependent on certain staff members, you may need key-person insurance. Other areas which are useful include property insurance against theft or fire damage and liability insurance in case of defective products or injuries at work.
Naturally, there’s no way to prevent risk altogether, and unexpected changes in the economic climate or individual industries are always a possibility. But by identifying key risks and putting in the time and effort to tackle them, you can protect yourself from many of the common issues and produce a business that’s more likely to survive, whatever the future holds.