What kind of risks do entrepreneurs face in starting a new product or service?
Businesses operate in a dynamic and changing environment which means risks change all the time and often rapidly.
Each business faces different risks depending on the nature of a product or service and the nature of the market.
Some of the risks include the market sector risks, competition, cash flow, fluctuations in sales, poor management, unproductive staff, property leases and excessive rentals, changes in passing trade, safety and crime, new technology, bad debts and bad advice.
This is only a sampling of the potential risks that any business faces before launch and when operations commence.
It makes business sense to constantly review risks as the business environment changes.
The main risks with a new product or service are feasibility of the concept, market demand and execution.
Feasibility requires proving prototypes, testing the concept and a pilot or trial. Usually products are rigorously tested to iron out the bugs.
Market demand is not to be taken lightly. Here initial surveys, interviews and even in-house trials are required to gauge interest in the product or service. The market needs to be defined in detail, the potential market share estimated and sales forecasted. Assumptions and numbers need to be checked and double checked.
The new business may sound attractive on paper. Only a trial transaction will uncover hidden risks in every step of the process. An online retailer who sells shoes ran a complete dummy online store before launching their business. Trials like this flush out execution risk.
New ideas are a source of opportunity but detecting and managing risk helps to increase the odds of achieving success.