Establishing a successful business is not easy. No matter how many resources you have or how well you have prepared, you will always face uncertainty in the business. Many startups begin their journey with leaps and bounds. But the report shows that almost 90% of startups in India fail within five years of inception. Risk is an inevitable part of any business. There are many types of risks involved in a business. A risk may be related to finance, law, natural calamity, and other unpredictable risks. You will always have to be ready to face any risks. If I had started my own business, I would try to learn about the possible risks of starting my own business.
Unfortunately, businesses confront more hazards than are mentioned in these publications, which prevents young entrepreneurs from getting a full picture of the dangers involved in beginning a small business. So that you can develop a more complete understanding of the challenges facing your small business and future growth, we’ve created a list of common hazards of beginning a business below.
Risks of Starting Own Business
Major businesses face the following risks while continuing their journey even though there are many records that due to a few of these risks, many successful businesses have failed after ruling over the market.
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Financial Risk
Financial risk is always involved when you start a business. The bigger the plan, the higher the risk becomes. Many businesses fail due to a lack of financial support. It has been reported that 77 % of venture capitalists do not want to provide funds because they believe a lack of unique business ideas can occupy the market.
Most businesses face financial crises even after becoming successful enterprises due to a lack of funds. According to the head of a market intelligence firm, 1,503 startups have failed due to the lack of funds since 2015 in India. The reason is that they copied the business model from the western countries, due to which investors did not show much interest in investing in these businesses. Let’s say, you start a petrol pump business, in order to start such a business, one should have enough financial backing.
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Risks Associated With Technology
Due to the new technological innovations, businesses must invest in new technological appliances. Sometimes, it becomes a compulsion to invest in new technological appliances to compete in the market. Especially, the new businesses are investing more in new technological systems to compete. It increases the financial risks of the business Organisation due to additional expenditure.
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Legal Risk
The rules and regulations keep on changing with time. The various laws provisions are also changed that are applicable in the businesses. There may be changes in government policy, tax rules, Labour laws, and many other aspects. A business enterprise faces five common legal risks. These are regulatory, compliance, contractual, reputation, and risk related to other disputes.
Sometimes some businesses have to face a legal battle for many reasons, including low quality of products, complaints from the customers or misappropriation of tax, etc. When a company enters into a legal battle, its reputation gets questioned. It causes serious harm to the company, which leads to losing the customers’ trust in the brand and its products. When the brand loses customers, investors are also not interested in investing in that brand.
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Economic Risk
When the economic condition of a country is not stable, some products get sold for a low amount. Especially luxury goods like cars, televisions, mobiles, and other luxury products related to beauty and cosmetics products get sold in low numbers. But when the country’s economic condition is stable, and money is distributed equally among the people of that country, almost all types of products get sold equally.
Therefore, sometimes the country’s economic condition seriously threatens some brands. Many businesses like agriculture business in India often face this struggle due to unstable economic conditions.
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Political Risk
Political risk is associated with a business when a country is going through some serious economic turmoil. For example, if a country is going through war or other political issues like the death of the leader of the country may affect the businesses of that country.
During these situations, many businesses suffer losses because the price of some of the products becomes high, which causes loss to the overall business.
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Natural Calamities
Many times businesses suffer a loss due to natural calamities. For example, when an earthquake or tsunami occurs in a country, the businesses of that country suffer a huge loss. In addition, sometimes many products get damaged, which causes loss to the overall business.
Since it is impossible to predict natural calamities, business organizations do not get time to be ready to face such situations. As a result, many successful businesses fail due to the tremendous loss in a natural calamity.
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Competitive Risk
Sometimes businesses have to face a struggle to compete in the market. Those businesses that can survive and defeat their competitors become successful businesses. Therefore, if you are going to establish your own business plan, like a boutique business plan, you should always be aware of the competitors.
One thing you should notice is that if there is no competitor, the product has no demand in the market. But, too many competitors in the market may create more competition and cause market saturation. On the other hand, when businesses come up with innovative ideas and establish a successful business venture, they should protect themselves from other new competitors with similar business ideas. One of the easiest ways to protect such competitors is to seek a patent.
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Risks Associated With Reputation
Half of the success of a business depends on the reputation it builds among customers. The more popular and reputed a business, the more profit it can earn. But, when the reputation of a business gets harmed, it loses half of its customers. When the business loses customers, investors are reluctant to invest in such a business.
A business may get defamed due to many reasons. One of the common reasons for getting its reputation being harmed is the poor quality of products or services it offers.
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Risk Related to Employee
Employees are the backbone of a business enterprise. A skillful employee contributes a lot to a business. The overall success of a business depends not only on the product or quality but also on the marketing and management of the business.
If the marketing team of a business is skillful, half of the job of the business is done. But, sometimes, some business ventures face challenges due to the employees. If the employees are dissatisfied with the organization, their daily activities get hampered, leading to loss. Therefore, the employees should be given preference if you want big success for your business.
Conclusion
You have to go through an arduous journey while establishing a successful business. A good strategy is a must to reduce the risks associated with the business. Although some risks are not predictable, a good strategy and planning can reduce the number of risks while establishing your own business.
You should imagine certain scenarios before starting your own business and prepare yourself accordingly to cope with such situations. You should prepare all the requirements to deal with any predictable circumstances with Vakilsearch.
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