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Risks when launching a start-up

Start-up firms take up the entrepreneur’s time, energy and money. As long as they don’t consume all of the businessman’s enthusiasm for the project, starting up a new venture is one of the most exciting activities you can experience in business. But what are the risks associated with launching a start-up?
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Prudence

Being prudent is a basic rule of business. The concept of due-diligence is based on this principle. Before you get too involved with the concept and the idea of running this new venture, you need to look at product risk. Deciding what you’re selling seems like the easiest thing in the world but the ability to explain how your product solves a problem and why it’s worth investing is far harder than it seems. If you’re an inventor of something, you might have the sort of technical knowledge of the product and the problem but without the ability to put that into simple language that an investor can understand, you’ll struggle.

Market risk

You need to know your customers and the wider market. Knowing the why, how and where of their purchases in your market is essential if you’re to understand where your start-up business will enter the market. Without this knowledge you’re taking the risk that there is no space of you within the market.

Financial risk

With tools like Kickstarter around, first-timers are very fortunate as there’s always an opportunity to get the sort of capital needed to get their business off the ground. That doesn’t mean that there’s no financial risk. The ultimate point of this venture is to make it profitable. No business can survive without profit, no matter how honourable a need it fulfil so make sure you look after the bottom line.

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