7 Risks of Starting a New Business

7 Risks of Starting a New Business

August 31, 2021 0

We live in a world where everything we do, including starting a new business, has some levels of risk. Often, things happen that are beyond our control. If you are looking to start a new business in Africa, you must learn to expect the unexpected.

As an aspiring business owner, identifying risks is the easiest way to minimizing them. It does more than preparing your mind for the uncertainty that may surface in the nearest future. Identifying risks allows you to either avoid them or minimize the impact they have on your new business.

We will discuss 7 risks that you will most likely face when starting a new business in this post. Before then, let’s take a quick look at what the word “risk” means.

What is a Risk?

A risk can be defined as an unpredictable event or circumstance. It has to do with outcomes that we would have loved to avoid. Another word that would help explain the concept of risk is “uncertainty.” The only way to live a risk-free life or business is to possess the ability to predict every future event. Since this is impossible, everything, including starting a new business, has some level of risks in them.

7 Risks of Starting a New Business
Starting a new business comes with several risks

We are constantly surrounded by several risk factors such as frozen credit markets, plummeting home and office values, etc. The risk we face and the way we approach them can vary. Hence, the risks that an entrepreneur faces can be different from that of a realtor.

Having said that, let’s take a quick look at the risks you are most likely to face when starting a new business.

Top 7 Risks of Starting a New Business

Every business is risky. However, the good aspect about some risks is that they challenge us to push out our potentials. These potentials end up being a form of reward that our businesses enjoy. With great risks come great rewards.

Here are 7 risks of starting a new business:

Product or Service Risk

A tough task that you would face when starting a new business is identifying what you want to sell. Choosing a product or service to sell may sound simple at first. The challenge lies in explaining what you sell, the problem it solves, and how it meets customers’ needs. Not solving any real problem with your service or product can crash your business before it gets started.

Unlike some risks, product or service risk is typically controllable. All you need to do is ensure that your product or service caters to the needs of the market. With proper research, you will easily identify if there’s a huge demand for the product you intend to sell.

Market Risk

One of the risks you will face early when starting a new business is knowing your potential customers. This goes along with finding out where they buy the product you intend to sell. Conducting proper research will give you an idea of the quality of the products they are buying. It will also let you know why they enjoy buying from your competitor.

Team Risk

Effectively handling the challenges of starting a new business alone is impossible. This is where having the right team comes in. You will need more than just building a team. Your team must consist of smart minds and exceptional hands. This way, you are sure that your business will always have great product and marketing ideas necessary for growth.

Financial Risk

Businesses need adequate funding to launch properly and sustain growth. Hence, starting a new business requires funds. There are several ways to raise funds for your new business ranging from loans to angel investors.

You have to develop an effective financial plan that will highlight your income projections and how you plan to break even. Typically, the life of a business often hinges on its ability to sustain cash inflow and outflow. Hence, the reason why running out of cash is the perfect recipe for ending any business.

Several financial risks can lead your business to this point with the most common being customers not paying for your product or service when they should.

Competitive Risk

The constant innovation of technology makes the market more competitive and in most cases exciting. Businesses that stay current with these innovations tend to have a more competitive edge than businesses that disregard the use of technology.

For instance, data analytic technologies help businesses identify the customers that need their product per time. This helps them target the right audience at the right time. Hence, giving them an edge over businesses that just advertise their products to random people.

Economic and Political Risk

The success of any business is often affected by economic and political factors. Some policies can help move your new business to the next level while others might be a nightmare. If a new government introduces a policy that favors your competition more, keeping your business afloat might be challenging.

Also, unexpected circumstances like the COVID-19 pandemic can affect any business. Economic and political risks are usually uncontrollable.

Environmental Risk

Environmental risk is something you might face after starting a new business. This form of risk will often be out of your control. Precautions can be taken in some cases to minimize their effects on your business. For instance, you may not be able to control when rain falls but you can take measures to ensure that your products and equipment are safe.

The ultimate measure you can take to reduce the effects of environmental risk on your new business is to get good insurance.


Starting a new business is risky and not starting is also risky. Since uncertainty is often something we have little or no control over, facing some level of risks as an entrepreneur is inevitable. However, with proper planning and taking the right measures, we can minimize these risks’ effect on our businesses.

Folarin Olalekan
Folarin Olalekan
Folarin Olalekan
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