Five Important Business Lessons On Minimizing Risk
There are numerous risks involved with starting a new business. Many of these risks have been experienced enough times that serial entrepreneurs can learn from the mistakes.
The following will provide five business lessons in the hope of minimizing risks you’re likely to find during launch:
Risk #1: A Lack of Understanding for the Marketplace.
A great product will have no value to a marketplace that is resistant. Failing to understand the marketplace and proceeding to create a product/service based on “feeling” is going to be troublesome to market and promote due to fact that you do not completely understand who actually wants what you have to offer.
Do this: Spend at least half of the time during the development of your business to understand the market by examining trends, reading industry reports, and tapping into third party data. Run advertising and marketing campaigns early on into the development phase to begin collecting data on the marketplace to give your business a greater understanding of what’s to be expected by consumers.
Risk #2: Being an Innovator in a Backwards Industry.
Some industries are simply backwards and resistant to change (i.e. telecoms). When a new product/service is introduced to the market there is a chance there will be great resistance from the consumers and other leaders in the industry whether it’s because they can’t foresee its long-term value or because it challenges the traditional model.
Do this: Focus a great deal of time into the engineering, market placement, marketing, and support for the early adopters. Run scenarios to understand the effect of launching early versus waiting for the competition to make their move. Find comfort in spending a few extra months refining the offer than rushing it to market for the sake of being the first.
Risk #3: Failing to Launch with the Best Possible Offer.
There is a great deal advice and theory around the process of “failing fast” but, like impressions, a business may only have one opportunity. Launching too early with a product/service plagued by problems will have consumers turning away and, likely, forming a permanent negative image for your business – one which will stick no matter how hard you work on improving your offer.
Do this: Test every possible aspect of what you have to offer. Physical products should go through an extensive quality assurance process to fix any issues likely to be found by the customer. Software should go through testing both internally and through software testing services like Tricentis to minimize problems, understand possible issues, and create risk coverage for the team.
Risk #4: Becoming Bedfellows with the Wrong Individuals.
Multiple risks are to be found when doing business with particular individuals. Starting a business with a friend may lead to unbearable tensions. Early investment from a third party may remove the creative control needed to stand out in the market. Partnering with service providers that are disingenuous could harm your efforts during the launch and management.
Do this: Use your gut feeling and diligence when approached by third parties. Try to understand what they get out of a partnership or offering their services. Learn when to say no and stand strong by your decision. Set policies which prevent repeated follies such as drafting iron-clad contracts if the other party fails to deliver on promises in an attempt to dissuade problematic experiences.
Risk #5: Poorly Documenting the Process.
The human brain is quite terrible at remembering a lot of small details. Your business shouldn’t be run on the hope that people remember what needs (and how) it should be done. Losing a single important employee at an early stage, who never taught others or documented the important processes, can cripple your business as you try to train a new individual taking their place.
Do this: Create a habit out of documenting the importance processes and procedures of your business as if you plan to hand the work off to an inexperienced employee. Document it in such a detailed fashion that it becomes impossible not to complete the process. Do so through a variety of means like written word, audio guides, and video presentations.
What risks have you run into that have taught you the biggest lessons in business?
Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.