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.
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 money.
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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.
3. Financial risk
First-time entrepreneurs these days are fortunate because crowdfunding is already becoming a popular concept. In addition, friends and family, angel investors, and traditional venture capital firms are all fertile sources of this necessary life blood.
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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% influence in the decision-making process. Participate, evaluate the risks, and don’t be afraid to pivot.
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This article originally appeared on Entrepreneur.com. Minor edits have been done by the Entrepreneur.com.ph editor.