Quitting your day job and taking the leap into entrepreneurship is a big step, so it goes without saying that there are risks involved. On average, half of new businesses are likely to fail within five years. That’s a big number!
While those statistics look scary, they should be used as a lesson for entrepreneurs.
Yes, there are a lot more risks involved in entrepreneurship than working for a reputable company. However, that doesn’t mean that people can’t excel.
Every business will face challenges along the way, but they shouldn’t scare anyone away from chasing their dreams. The reward is definitely worth the risk.
Here are 8 of the biggest risks people face when they start their own business, and also some tips on how to handle them:
1. No More Regular Paychecks
A lot of entrepreneurs bring in some big bucks, but it did take them some time and hard work to get there.
It didn’t happen overnight and most of today’s successful entrepreneurs had to spend a long time working without seeing any money coming in. Their journey to success took time.
The trickiest thing for most new entrepreneurs is getting used to the idea that their first year in business should be focused on establishing their name, not making money. With entrepreneurship, the guarantee of an income is not there, especially in the first year.
One way to be prepared for this is to have a cash reserve before beginning. Always be prepared financially to make very little to zero money in the first 6 months of business.
It’s a good idea to have enough money in the bank to keep things afloat until the business begins to see regular customers.
2. There’s Always Going to Be Competitors
Competition is something that can’t be avoided for entrepreneurs. Even the most successful business owners worry about other competitors finding a way to steal their customer base.
Remember when Blockbuster used to be every city’s Friday night hot spot?
Once Netflix and other sites made streaming more accessible and affordable, the movie rental business became a distant memory.
There’s no proven way to eliminate all of the competition, but there is a great way to be prepared for it. Running a proper analysis of your chosen industry may help you spot potential disruption. This can help entrepreneurs get ready for upcoming challenges.
3. Keeping Customers Interested
Most entrepreneurs will say that landing their first customer was hard enough, However, maintaining a steady stream of customers is another challenge.
Sometimes plans foil because no matter how much research you put in, even most professionals can’t predict an accurate estimate of popular interest.
Every business owner is working to gain new customers. In the beginning, this is crucial. One of the best ways to pique interest is to ask current customers for a referral, you can even offer a reward system for new referrals to get more people involved.
4. Say Goodbye to Personal Capital
Some entrepreneurs are fortunate enough to have financial resources outside of their business. However, most people have to use their own money to get things running.
This is one of the biggest risks that many people face because it means that they are looking at handing over their safety net to the business.
There, unfortunately, isn’t a way to get around this risk, so an entrepreneur must not move forward with their plans unless they are ready for this challenge.
5. Can You Trust That Employee?
Most new businesses only begin with one or two employees to get everything done. Many people don’t see this as a risk because almost every business has employees, but as a business owner, it actually could be one of the riskiest steps in the process
Business owners have to put trust in their employees. Some people luck out with shining star employees, while others manage to hire employees that cause more problems than solutions. The employee that gets hired will have access to a lot of the company’s data and information. This is something you don’t want to put in the hands of the wrong person.
6. Online Data Threats
Cybersecurity is another risk that business owners need to be cautious of. In today’s world, every business does better if it has an online presence. However, there’s always the threat of confidential information being leaked out. Always be cautious of who has this information.
These security risks could cost the company a lot of money. The best way to be prepared for them is to make sure you identify any prospective threats before they could get to you.
If you have any employees, they should be encouraged to take the same steps to protect their work information. Your company can never be too safe against online security risks.
7. Less and Less Personal Time
With a regular job, people clock in and clock out and the rest of their time belongs to them. Entrepreneurs don’t have that luxury.
To be successful, entrepreneurs need to dedicate almost every waking hour (and then some) to their plan. People often get frustrated because they feel like all their time is spent working for very little profit.
Many people struggle with this challenge because it takes them away from the life they are working for. There is little time left in the day to spend with family and loved ones. Friends have to take a rain check, as you hope they don’t get upset with how distant you’ve become. Suddenly you realize that you’ve missed out on almost every social event you planned on going to.
Yes, this is a challenge that every entrepreneur is likely to face. However, try to remain positive about it and remember that it is just an obstacle along the way to a brighter future. Every successful entrepreneur had to put the same level of work into their vision. This is one situation where the reward is very much worth the risk.
8. Never Ending (and Nearly Impossible) Deadlines
Every business has deadlines to meet, but in the beginning, entrepreneurs have so much more that they have to prove. Before they become established many entrepreneurs face stricter deadlines for keeping their customers satisfied.
The best way to handle this situation is to be prepared. You may face nights where you have to stay up working until dawn to make it happen. However, that’s just part of the process to success.
Final Thoughts: Are the Risks of Entrepreneurship Worth the Rewards?
Nothing good comes easy, and this saying can be doubted when it’s applied to entrepreneurship.
There are many challenges that everyone is destined to face when starting a new business. The same guarantees and benefits that come with regular jobs can’t always be expected with entrepreneurship.
However, those who don’t give up when the journey gets too tough are likely to see a reward that’s much sweeter than anything they got out of their old job. Once they get established, they can enjoy perks, like:
- More flexible schedule: No more asking the boss if you can leave for a hair appointment. Schedule your work on your terms.
- Job satisfaction: Have the freedom to love what you do!
- Career values: Always work in a respectful environment
- Pick your staff: Let’s be honest, a job is always better when it’s with people you like.
- Self-confidence: Running a successful company can be a boost for anyone’s confidence
For those who are willing to put in the time, effort, and work: the risk could very much be worth the reward.