Being an entrepreneur means being a hustler! Indeed, with the amount of competition in the startup world today, every startup is subject to a lot of risks.
Right from the moment a business plan is thought of to the time you receive funding, every inch of a startup's journey is full of risks and the sole idea of an entrepreneur is to minimize these risks. In fact, many investors talk about reducing their risks all the time. And this will continue until the company starts generating revenues, and beyond.
So what are some of the things a successful startup would do when it comes to reducing risks. I take a look at some of these aspects which could help minimize risks for your startup and make the business more successful.
One of the most important factors of reducing risks for your startup is to invest in the right team and ensuring that they stick with you for a long time. I mean, it's one thing to acquire good talent, but it's another to retain them. Staff attrition hurts startups more than you think. Just being a great leader isn't enough, having greater leaders to manage your team is even more crucial.
Analyze competitive risk
Another important aspect is to realize how much competition you have and what are your chances in emerging against such competition.
Try to analyze in detail how the competition is going about realizing the same opportunity you are pursuing. Does it have an untapped potential that is not explored? How can you be better than your competition? That's something you may want to focus on and promote accordingly. This way, you'll have a better chance at tapping the same customer base but providing them something more relevant and well, just that little something more.
Analyze market risk
Analyze the market you are playing in and what would serve it best. There is always little risk when the problem is a well defined one and, if there are enough people with the same kind of a problem. After all, the more people wanting the problem solved, the better the chances of your product being used.
Even if it's a niche market, you'll certainly have people who will buy or download your product or service if the problem's well defined. Take for instance the mIndicator application. Very few offerings were available to Mumbai's commuters to get information of schedules for train and bus arrivals, movies, etc. This application was very well suited for the problems affecting a specific audience, as it provided the information people were asking for and thus minimized its risk of failing.
Furthermore, if you're looking to get outside funding, there are certain verticals that investors would shun given their high risk and failure rates. So do your homework when it comes to assessing the risk factors associated with the market your product is targeting. Of course, one might say food service, retail, social networking, e-commerce, etc, may have high failure rates or not. You will have to evaluate the risks according to your plan and market research.
Get your pricing right
Nothing works best than traction. Getting traction also means getting the pricing of your products right. Of course, when you start off, the freemium model works best. Giving away product trials for free is certainly a good idea to get more traction in terms of growing one's user base.
However, you would eventually need to create a revenue model that involves pricing to help you build revenue streams. Ensuring the service your product provides helps solve a problem and is genuinely helpful is not enough. People will be picky, especially in markets such as India. So you need to do a little analysis, take a few surveys if need be, and try to get the right pricing.
Realistic goals and business plan
One of the things you need to analyze as an entrepreneur is how your business is going to materialize. It's important you realize its sustainability will depend on ensuring the business goals are realistic and the way one goes about investing resources to achieve those goals.
When sketching up a business plan, ensure you go one step at a time and try to be as realistic as possible. While it's a good idea to draw a three-year business plan, you should know the market conditions in today's economy are always dynamic and uncertain. Take a cue from Amazon's Jeff Bezos, who says he doesn't have long term goals. Try to keep it one step at a time and develop short-term business plans with realistic goals. This should help you focus better.
Being cash conscious is always a good thing
Cash flow management is always the most spoken about risk when it comes to small businesses and startups. This is something that always goes awry for failed startups. A lot of times, higher risk comes from poor cash flow management issues and the pressure is even more intense where there is venture capital funding involved.
Juggling cash and resources thus becomes a very crucial aspect of managing a startup, especially during the early stages. Avoid those problems by creating a backup plan and keeping aside at least six months of operating costs in reserve. Try to figure out where and which expenses you can cut: what are the most important things and what can be categorized as secondary needs.
Also, ensure you don't just depend on one key customer when it comes to generating revenues.
Manage IT effectively
This is something a lot of tech startups, especially those providing IT solutions, will not have to struggle with. Most of such startup founders are attuned to the risks technology can bring and are also aware of how these risks can be minimized by adopting tools which don't cost much and yet get the job done.
Of course, we have all heard of utilizing open source, cloud computing and various such cost-effective and efficient technologies. So while you can, try and utilize these options to your advantage.
These were just some points that I think could help entrepreneurs minimize the risks to their startups and help build the business successfully. It is certainly not an exhaustive list, and I'm sure there are plenty other aspects which could lead to a company's failure but can be avoided with thoughtful management.
I wuld love to hear from you and find out what other aspects you think can be added to the points above. Let me know what you think.