Key Things and Risks to Consider Before You Start a Business

Last Updated: 

February 29, 2024

It is not easy to start a business. You will have to take some risks and be open-minded. It can be easy to ignore risks and remain optimistic, but you must know what to do if one occurs.

Risk is the potential for harm or damage to yourself or your business. You can develop a management plan when you identify the risks. Identifying risks and developing a management plan are crucial steps in navigating the unpredictable terrain of potential harm or damage to yourself or your business.

When starting a new business, risks can take many forms. Some risks are less obvious than the danger of fire or flooding. Risks come in different forms. Some risks will have a large impact, while others may only have a moderate one. You can use a scale to determine which areas you should focus on. The ultimate startup statistic is that 90% fail. To navigate these risks effectively and improve your chances of success, it's essential to consider partnering with a reputable web design company. Their expertise can help you create a strong online presence, which is often a critical factor in the success of modern businesses.

Key Takeaways on Starting a Business

  1. Understanding Risks: Starting a business involves taking risks, and it's essential to be aware of potential challenges and pitfalls.
  2. Risk Management: Identifying risks and developing a management plan is crucial for mitigating potential harm to your business.
  3. Legal Risks: Legal considerations, including business structure and well-drafted contracts, can impact your business's foundation and risk exposure.
  4. Financial Risks: Cash flow management and budgeting are key factors in ensuring the financial health of your startup. Consider funding sources carefully.
  5. Burnout: Early-stage startups can lead to burnout due to overwork. It's important to maintain a healthy work-life balance.
  6. Growth Strategies: Balancing growth is vital. Scaling too quickly or slowly can lead to problems, and it's important to set realistic goals based on early indicators.
  7. Operational Efficiency: Small businesses should focus on efficiency to compete effectively. Automation and modern solutions can help streamline operations.
  8. Sales and Marketing: Pay attention to your sales funnel and continually work on strategies to increase conversion rates. Simplify the buying process for customers.
  9. Competitive Landscape: Small businesses should consider how they differentiate themselves from larger competitors and clearly communicate their unique value.
  10. Insurance: The importance of business insurance cannot be overstated. Choose the right coverage based on your specific business activities and risk profile.
Get Your FREE Signed Copy of Take Your Shot

Legal Risks

Recent lawsuits have increased against small businesses, particularly against startups where a large amount of capital is invested. Legal risks can be very diverse.

1. Business Structure

Your startup's business structure will impact your funding, your tax obligations and your personal liability. You can always change your business structure later, but if you want to give your startup the best foundation possible from the start, it is important to set up the right business structure at the outset.

2. Contracts

It is easy to make oral agreements, but they can cause problems in the future. All agreements with customers, suppliers and any other third parties who provide goods or services should be documented in well-drafted contracts.

Online businesses need to develop clear Terms and Conditions. These Terms and Conditions act as a contractual agreement between you and your users, defining your rights and acceptable usage of your website or app. Your business is exposed to risks and disputes if you don't have clearly defined contracts.

Finances and funding

Cash flow is a major risk for any business, whether it's a startup, a small retailer or restaurant. Bootstrapping is a common way for small businesses to get seed funding. This can come from family members, friends and business loans. You have to be extremely careful and exact about the money you spend as a new company.

This can be solved by having a clear financial forecast, budgeting efficiently and getting the most out of your resources. It would be ideal to have a bookkeeper on staff to manage your finances. This way, you can focus on running your business.


Early-stage startup teams are often small and consist of people who are required to wear many hats. Typically, seed-stage startups tend to burn out due to being overworked.

It is particularly true for founders who feel that everything will crumble if they even take a day off. Even if they take vacations they rarely fully unwind.

Growing too quickly or slowly

Every startup (and every investor) wants to see rapid growth, but it can be risky if you don't have the right timing. A startup which grows too fast could lose money because of staffing costs and a lack of market demand. Likewise, if you grow too slowly, your competitors will gain an edge in terms of momentum. You will also become less attractive to venture-capital firms.

To create a successful startup growth plan, you must pay attention to your metrics and follow the data. Do not set unrealistic financial or growth goals. Instead, make realistic predictions based on early growth indicators.

Cash flow management

Cash flow management poses a particular risk to a small business. Cash flow management is a problem that can be caused by two factors: failure to raise money when needed (either through debt/equity funding or increasing sales revenue) or failure to reduce excess expenditure.

Cash flow management is crucial for small businesses, as they need to be able to direct capital quickly and easily in order to meet their unexpected business needs. Businesses quickly become insolvent without cash to support advertising campaigns and inventory turnover. Speak to your accountant and ask about investing strategies.

Operational challenges

Operational challenges are a constant issue for small business owners, just like cash flow management. Operational Management is concerned with how you run your company: whether you are efficient and if you spend time within your organisation efficiently. Small businesses that are just starting out risk losing business to their peers in the industry and losing time on tasks which, today, could be automated.

Small business owners are understandably concerned about this modernity.

E-commerce companies have many options to increase efficiency and reduce costs. These systems include inventory software that automates orders and predicts optimal stock levels, automated emails to customers for abandoned carts, and relationships with fulfilment centres to alleviate logistical stress.

Sales funnels that are ineffective

You need to continue generating sales even after you have captured the attention of your customers and they understand your value. Small businesses that are just starting out risk complacency. You're not the only one who finds that your conversation rate has been low:

E-commerce companies don't benefit from a well-trained staff who can customise sales strategies for each customer. Content marketing and website design are the only ways that e-commerce companies can entice their customers to make a purchase. Incorporating a white label e-commerce solution can offer an additional advantage, providing a seamless, customisable platform that enhances user experience and supports the unique branding needs of the business.

can be dramatically increased by seemingly small factors such as the number of steps involved in a transaction, or how delivery information is communicated to the customer. If you notice a lot of traffic to your website or lots of product views, but few sales, simplify your process or explain what customers can expect.

Tough competition

Small businesses are also at risk from fierce competition. This is especially true if they're competing with larger companies that have more resources.

It's not sufficient to consider only how your customers will understand your value when determining and demonstrating the niche of your business. Small businesses must also explain why they are more valuable than the competition. Your marketing strategy should include this nuance so that customers better understand their choices and can identify you as the best.

Lack of business insurance

It can be a thrilling experience to be involved in a new startup. It often starts with an idea or, in some cases, there isn't even a real idea. Just the desire to launch a new business. Many startup founders forget the importance of business insurance. Your business practices will determine the type of risk you are exposed to. Consequently, certain startups have a higher liability and a different risk management plan. As an example, the liability of architects is different from that of businesses providing financial services. BizCover can help you find the best coverage for your business with a quick online quote.

People Also Like to Read...