I'M THINKING OF STARTING A NEW BUSINESS
4. How do I reduce risk in my new business?
When you’re starting a business, it’s normal to be concerned about the risks involved. To reduce these risks, it pays to identify potential issues, before you get started. Using this information, you can then work out how to mitigate possible risks and plan for the future.
Business risk typically falls into three different categories:
- Market risk.
- Internal risk.
- Financial risk.
Let’s start by going through each type of risk, so you can identify the factors that may affect your business, and how to overcome them.
- Market risk
Market risk is based on the possibility that your services or products will not sell as well as you’d like them to. This is a very common concern held by new business owners, but the risk can almost be removed completely by conducting some basic customer profiling and market research.
We’ll go through how to do this research a little bit later on. For now, just be aware that this is a risk you’ll need to deal with before starting your business.
- Internal risk
This kind of risk is typically based on your ability to deliver goods or services on time, and to a high-quality standard. It involves having the staff, or if you’re a sole operator, the capabilities, to take care of everyday issues, as they arise.
To lower your internal risk, you’ll need to determine if there are any issues with your ability to effectively handle the demand for what you’re selling.
- Financial risk
This is probably the most important risk of all. Financial risk refers to the fear that you will be unable to make a profit, or that unforeseen costs may negatively impact your progress. Effective financial planning is one good way to reduce financial risk.
Having support with handling this risk will give you the space to breathe easier, and focus on growing your business successfully.
Assessing risk before starting a business is critical to identifying and overcoming challenges that may otherwise sabotage your success.
If you need support with assessing risk in your business, consider speaking with one of our business accountants, who can assist you with creating a strategy to minimise risk and set your business up for success.
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