Risks that every entrepreneur should consider while running a business
The Kenyan startup scene is rich with opportunity, innovation, and potential. But at the same time, the stakes have never been higher, while it may be scary to take that leap of faith, jumping into the deep end of the startup pool is significantly less intimidating once you understand and assess the risks involved while starting and running your business.
Nailab spoke to James Opembe, a business analyst who runs a company that conducts research on businesses and offers business risk management solutions to startup founders so they can make more informed decisions in their business.
“I started my own company in business information reporting. This has been a passion of mine for over 10 years. I enjoy looking at businesses, talking to entrepreneurs, and understanding the mindset of an entrepreneur. The driving force behind a business is always the entrepreneur, how they think, and their attitude. In my experience as a business owner and analyst, I have found there are five key risks that startup founders are likely to face while running their businesses. Fortunately, if you can identify these risks early on and determine how to approach them, you will increase your chances of success.
- Starting a business in an area that you do not have domain expertise in. The first question you should ask yourself before starting a business is whether you have the skills to run a business in the sector that you are getting into. If you are getting into business, domain expertise is paramount. Passion is great but if you do not know how to run that type of business my advice would be you need to partner with someone who has the experience and the knowledge.
- Product risk. Be clear on the problem/pain that your product will solve for your potential customer. If your product solves a problem, your solution sells itself. If your product or service doesn’t uniquely solve any problem (either actual problem or opportunity cost) at all, you may need to rethink your business.
- Market risk. Knowing your customer and why, how, and where they buy related products is arguably the most important risk factor to assess before launching your product. Research this thoroughly. Identifying these routes to market, and whether you can build them effectively, in a timely fashion, and within your budget, could easily determine the success of your business. If the market risk falls in your favour and you get into your market early enough, there’s no reason why your business can’t succeed.
- Financial risk. Most entrepreneurs don’t just take their own money and use it to cover all of their startup costs. They have to look for alternative sources of funding, such as small business loans from financial institutions. Taking out loans requires taking on a certain amount of financial risk, even for those who are confident that their startups will eventually prove competitive within their markets.
Mitigating financial risks requires maintaining positive relationships with lenders or investors. This is especially important for startups that utilise investment capital to get off the ground. Make sure to identify and articulate major milestones for the company and define a clear path toward business growth. This will help to instil confidence in investors and encourage them to continue writing checks to support the business as it gets off the ground.
For those who have taken out traditional personal or small business loans, mitigating financial risks can be more of a challenge since there will be less leeway regarding ongoing funding and debt repayment.
- Team risk. At the end of the day, you can not do it all by yourself. That’s why it’s important to have a great team, a mentor, confidante, or even a startup incubator to help you prepare for each challenge. Your team is also great for bouncing around ideas to build a product, bring it to market and maintain successful growth.
Think through your role as an entrepreneur and allow the team to do what it does best. Invest in people who believe in your product and instil a sense of confidence that they can help get your company across the finish line.”
