Let’s be completely honest right off the bat: starting a business does come with risks. Taking the leap to go into business for yourself and not for someone else is both exhilarating and terrifying. You’re the one in control – exhilarating! But you are the only one in control… terrifying.
It might be your lifelong dream to be your own boss, and to fulfil that dream and become a business owner does require you to be a bit of a risk-taker. On the other hand, it’s hard work, and being a risk taker isn’t enough. You don’t want to get swept up in the dream and be completely unprepared for the reality.
Seth Godin said ““The only thing worse than starting something and failing is not starting something.” So how can you take Godin’s advice and get started, whilst minimising the risk of failure?
1. Be financially prepared
The most obvious starting point when we’re talking about the risks of starting a business is money, because lack of money is going to be your first hurdle.
Taking the jump to run your own show means also taking the jump away from a steady paycheck, so you’ll need to be prepared for that lack of stability.
One of the most advisable ways to predict whether your business idea is viable is to create a business plan.
In the financial section of your business plan you’ll need to factor in all the costs that’ll be associated with running your business. You’re going to want to think carefully about all you’re likely to incur, from the start-up costs to those you’ll face on a monthly basis:
- The legal side – choosing and trademarking a name, becoming a legal entity
- Business Insurance
- Startup materials, office space, workshop space, equipment, tools.
- Your regular operating costs – lighting, electricity, wifi
- Marketing costs
- Staffing or outsourcing costs
If you’re looking to secure a loan from the bank or from an investor, a detailed business plan is crucial. But it doesn’t all of a sudden stop being risky when you have a loan and the sales start coming in.
You’re going to want to make sure you’re remain on top of your finances to avoid any cash flow problems rearing their head. Here’s a few blogs we’ve written to help you minimise risk down the line:
2. Be prepared for personal sacrifice
If you haven’t been able to secure a business loan, and you’re not starting out with a big investment, you may end up sacrificing your own savings to the business
Some may be grateful for the cash they’ve managed to put aside for exactly this reason, but for others, losing the nest-egg may come as a blow to family plans and future investments.
Also, it’s important to remember that if you’re starting out as a sole trader, it’s easy to let business and personal money blend and become one. Just be wary if you’re using a lot of your own money to fund your business. If the business fails you will be personally liable for the debts it has incurred.
You don’t want to be trapped by your own business. If you’re not sure whether you should register as a sole trader or a limited company (or other) come and have a chat with us, so that we can help you understand and avoid this risk altogether.
3. Be sure that your offering is worth it
If you’re a planner and a cautious person, you may have thought about all of the above already.
If you’ve been dreaming for years, you’ve probably spent many long hours assessing whether you have the grit, the capacity and the finances to start your dream company. But have you thought about what you’re going to sell? It sounds like the most obvious question, doesn’t it.
One of the top reasons that businesses fail is because they don’t have a unique selling point, or they’re lost in an overcrowded and oversaturated market.
Have you thought about whether your offering is actually in demand? Whether you’re in the right location for that demand? How direct your competition is?
Having a product or service people want or need is just as important a factor as having the money to back it. Before you make any assumptions, do some research.
Doing your homework will pay off – either you’ll find you have a viable proposition, or you’ll realise you’ve got more thinking to do on your offering.
We work with businesses big and small with one objective in mind: to help them reach their business potential.
We created our blog as a resource to share our experience and advice on the typical challenges you face when running and growing a business – head over there to get more useful tips.