Challenges and risks of starting a business
Starting a business can be very challenging and risky, and there needs to be a degree of awareness by potential small businesses of these challenges as well as risks involved. Knowing what they are, will allow for a degree of planning in order to mitigate as many as possible.
- Developing the business idea and the vision – this is normally the first challenge faced by an entrepreneur and it requires some creativity and the ability to identify challenges that require innovative solutions your business could offer.
- Raising capital for your start-up – potential small businesses must be able to convince potential investor(s) about his/her own business idea. This is very challenging because you are trying to sell to your potential investor(s) something which does not exist yet.
- Finding the right business location – you will need to find a location that will meet the requirements for business operation which is also located near markets and suppliers.
- Sourcing required human resources – the business will have to consider what it’s skills requirements are and link it to a good recruitment strategy.
- Threats from competition – competition is a necessary challenge as it will always keep you predicting what competition in the market looks like in order to be more creative gaining competitive advantage.
- Unforeseen disasters – despite all the planning in the beginning there will always be unforeseen events and circumstances including bad debts, government red tape, unexpected lawsuits, and resignation of employees.
- Insufficient funds – many financial institutions and entities may be reluctant to lend money to a business that lacks a proven track record of experience.
- Utilising your own capital – some entrepreneurs are not privileged enough to get the start-up funding from investors and therefore they are forced to fund themselves which is a big risk if the business fails.
- Reliance on human resources – when starting a business you will need to rely on the performance and abilities of employees, particularly when they are managing the business in your absence.
- Illness – in the case of a sole trader, starting a business is risky because the operation of your business is wholly dependent on you.
If you have considered the challenges and risks and are keen as ever to start a business then you next need to assess your business idea.