When starting your own business, facing certain risks is inevitable. Trial, error, and plenty of testing along the way are needed for creating a polished and effective product or service. From insufficient funding to unexpectedly tough competition, the risk of failure is always present. But most business leaders believe that the risk is worth the reward if it means reaching success. And while some risks can’t necessarily be controlled, others can thankfully be mitigated simply by taking a few wise and intentional steps. To that end, here are some simple yet efficient ways any entrepreneur can reduce common risks during the early stages of their business venture:
Line up your skills and products
As an entrepreneur, you might be enticed by shiny new ideas with great potential for growth. But more often than not, these ideas require new skills and additional expertise. Compare your current knowledge and experience with the idea you have. If the idea is suitable for your area of expertise, the only resource you will have to invest is your time. And even though time certainly is valuable, it is also one variable you can easily control. If you don’t have the necessary skills and experience, on the other hand, you will have to invest both money and time into your business idea. That can drastically increase risk, especially in this uncertain climate.
Minimize unnecessary expenses
Naturally, business risks can’t be minimized and success reached without reducing unnecessary expenses early on. These often include an office space that’s too large, hiring a team too early, investing too much money in product development, or even borrowing money. Instead, consider a coworking space in the beginning, which will allow you to share costs, minimize overhead expenses, and possibly even build valuable partnerships. But mainly, aim to build one aspect at a time. Avoid diversifying your business strategy as you would your investments, as focusing on too many projects at once can only hamper your performance and make money management a more difficult process.
Choose your insurance carefully
Investing in insurance is one of the most important steps you can take when starting a business, as it helps to protect both you and your company. However, it’s worth remembering that not all insurance policies are the same. For instance, many providers have been selling unnecessary junk insurance to consumers along with credit cards and loans, often using deceptive and unethical sales practices. And while a refund can be claimed on junk insurance, many other policies will come with misleading terms and conditions. To reduce early-stage risk, make sure to read the fine print carefully before deciding on the right insurance policy for your business.
Maintain an income stream
If you utilize your existing skills to quickly deliver a profitable product or service, you won’t need to keep your day job for too long. Meanwhile, it might be wise to consider your stable job as insurance. Leaving it will take some planning, so start by defining a revenue sum that will give you the security you need to devote yourself to your business full-time. Then, multiply this sum by at least three months in order to test out the stability of your model and make a better, more informed decision. You could also run your company on the side if that solution suits you better in the beginning. Make sure to implement customer retention strategies as early as possible.
Aim to deliver value for cash
While many entrepreneurs might aim to expand their knowledge as much as possible or launch a website as soon as they can when building a business, the truth is very simple. People will want to pay you for resolving their problems from the very beginning. Personal education, product development, and web presence are all important, but they can also be accomplished while serving customers. Try to be the product yourself, and focus on creating value and doing things that scale. This will help you to gain traction and build recognition through pre-sales even without a product, thus minimizing the financial risks of product development and other large expenses.
Find a great business mentor
Many business leaders are often skeptical about mentorships or unsure of how to approach these relationships. However, other people in the industry have a lifetime of experience, and have likely gone through the exact same obstacles as you are experiencing now. Great mentors can help you to avoid common mistakes, choose the best professional path, and accelerate the road to achieving your goals and reaching success. What’s more, entrepreneurs led by mentors are more likely to survive and experience higher revenue as well. Doing it all alone, however, can prove to be quite costly when it comes to both time and money.
Starting your own company will always come with a certain amount of risk. But by paying attention to the crucial areas mentioned above, you can minimize the most common early-stage risks and speed up your journey towards success.