What comes to mind when you hear the word startup? Some of you may imagine a grungy place right in the heart of Silicon Valley. Some of you may connect the concept of a ‘startup’ with such things as ‘a great idea’ or ‘success’. And just a few will relate this term with… the risk.
When it comes to startups, the reality is harsh—137,000 businesses are born every day, while 123,300 fail the same day. It means that 90% of businesses fail… and yeah, it does sound a bit scary.
Business and risk always go hand in hand. The very act of having a business involves various risks such as insufficient cash, low market need, fierce competition, and other challenges. However, most entrepreneurs acknowledge these challenges but keep building their business anyway.
The good news is that entrepreneurs can significantly mitigate risks related to launching a business by identifying potential risks and taking reasonable actions. Here are some things to consider in order to ensure your venture will survive in a hypercompetitive and dynamically changing world.
1. Make sure you’re delivering value
The primary thing to consider is whether your product or service adds value to your customers’ lives. If your business isn’t providing value, it can quickly perish as people are ready to pay those businesses that solve their current problems and fix certain pain points.
So, instead of building another not-sure-why feature or doing whatever you think makes your product look good, work on extracting value that makes your product good enough to bring benefits to customers.
Identify a viable marketing channel (social media, email, etc.) that works best for your audience to deliver the message.
2. Avoid unnecessary expenses
Businesses are supposed to make money, not spend it on inessential things. So why do small-business owners keep wasting money on things they don’t need? Perhaps, some business owners cannot even tell which expenses are necessary and which ones aren’t. Let’s break it down. Necessary expenses either help your business make money or differentiate your company from the competition. For instance, if you pay a lot for some marketing automated tools, but your company has a consistent flow of leads thanks to it, that’s not an unnecessary expense. But If you spend tons of money on an automated service that’s rarely used, that’s obviously an expense to cut. Here are examples of the most common ways startups waste money:
- Too many full-time employees
One big mistake that business owners often make is hiring too many full-time employees instead of cooperating with part-time employees and subcontractors who can fulfill the same needs as full-time employees.
- Fancy perks
As an early-stage startup, you shouldn’t aim to provide the same perks or compensation as a Fortune 100 company does. Instead, try to attract employees who believe in your mission and are willing to work hard with you and other team members to get the best results.
- Office space
Operating remotely is an option that many business owners do not even consider as office space is often considered as something necessary while it’s not. So, ask yourself — do you really need an office? Operating remotely has a lot of benefits including a more productive workforce, a broader labor pool, and lower expenses.
- Fine-tuning products
Some businesses are spending a lot of time fine-tuning their products before even going live. That’s a waste of time and money. What they should do instead is create an MVP (minimum viable product), launch it to market, analyze customer reactions towards your offering, and then fine-tune it according to customer feedback. In this case, startups could save tons of time and money on things no one actually needs.
3. Get insurance
Many early-stage startups regard insurance as a luxury or something that they’ll spend money on at much later stages. However, insurance can help businesses grow from the first phases of the product life cycle. In fact, having business insurance helps your company’s growth in three ways:
- Attracting investors: Having the right insurance policy makes your company look more trustworthy for investors and will improve the chances of landing reliable financing partners.
- Attracting talented employees: Offering employees proper health insurance will help your company stand out from competitors and attract the most talented candidates.
- Building customer relationships: Building trust between your business and its customers is crucial, especially for startups working in the B2B space. Once customers request proof of insurance prior to signing a contract, you’ll have an advantage.
4. Limit loans
There’s nothing wrong with loans in general. On the contrary, finding the right type of financing can be a great opportunity for businesses to keep operating and growing. Just keep in mind that if you have to take a business loan, make it as low as you can comfortably manage in case of emergencies or unexpected obstacles. That may sound pretty vague, but the amount you may borrow depends on your business model, unique financial situation, industry, etc.
To determine the correct business loan amount, calculate carefully how much money your business needs, how manyof these needs your business can cover now, and how much you should take as a loan. When calculating, do not forget about loan costs. Make sure you know what closing costs are, what your interest rate is, what the total amount is. Knowing all these costs will help understand what type and amount of financing you should pursue.
5. Protect your data
Protecting your company’s data can save you a lot of money. It can also protect your company’s reputation by making your consumer’s data as invulnerable to cyberattacks as possible.
What exactly can you do to protect your company’s data?
First of all, limit employee access to data and private information. Employees should only have access to those systems and specific pieces of information that they need to do their jobs. If an employee leaves the company, delete passwords and accounts from the systems and collect ID badges, entry keys as soon as possible.
Update your operating systems (OS) and software regularly. If you don’t update your OS regularly, you leave your company’s data vulnerable to losing the information or compromising access to key accounts.
And finally, to protect your company’s computers, tablets, and smartphones, use full-disk encryption. Make sure you save a copy of your encryption password or key in a secure location.