No matter how well you plan and prepare, starting a business is a gamble. More truthfully, it's several different gambles. Will your money hold out long enough to turn a profit? Are your employees capable? Can you compete in the market? You can minimize risk, but it's not possible to eliminate it.
Financial risk, of course, is the big one. Most businesses require investing some of your money – and often other people's. If you commit to working full time at your new gig, you're also risking your ability to pay the rent and put food on the table. Careful planning, building up a cash reserve and budgeting well can reduce the risk, but they can't eliminate it. All it takes is one wild card – the cost of raw materials or rent shoots up, a customer doesn't pay – and your company's suddenly struggling.
Any capable entrepreneur starts out knowing the laws controlling his business. Trouble is, laws can change. New health and safety regulations. New labeling requirements. New rules and guidelines for how you treat your staff.
Consider the tobacco industry. Up until 1971, cigarette companies advertised on TV, and then the federal government banned cigarette commercials. The industry survived, pouring money into print advertising instead. Smaller companies or ones less flexible in adapting to new regulations might not have done so well.
The Human Factor
Unless you're a one-person show, you'll have to gamble that you can hire reliable employees. Doing so involves several smaller gambles:
- Can you hire qualified staff without busting your salary budget?
- Are they as competent as their resume makes them look?
- Are your employees trustworthy, or will pieces of equipment disappear when you're not looking?
- Will your best employee take a higher-paying job elsewhere?
There's also your own human limits to consider. To manage employees, you have to be a capable leader. You've got to withstand every blow and misfortune that hits your business, without giving up. The long hours and stress will cut into the time you spend with family, friends and even yourself.
Whatever you're selling – jewelry, software, consulting services – your business can't succeed unless someone's buying. Even if you conduct good research, it may turn out customers don't want your product as much as your business plan projected. Even if customers love your offerings, tastes may change or a new, stronger competitor can start slicing market share away.
Don't let the potential risks discourage you from living the dream. To keep the dream alive, do your best to anticipate the possible risks and have backup plans to deal with them. Ask yourself how you'll cope if a customer takes too long to pay. Can you find alternative suppliers if prices go up? Have you bought enough insurance to protect you against some of the possible catastrophes? Successful entrepreneurs know that despite the risks, they can't win if they don't move forward.