Start-up risks that could spell game over for your new enterprise

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English: Hydrangea macrophylla - Hortensia hyd...
English: Hydrangea macrophylla – Hortensia hydrangea, picture from Longwood Gardens (Photo credit: Wikipedia)

One late evening recently I was at a garden nursery and was taken around the place by two of the managers. We went down to goods receiving where a supplier had brought in a load of hydrangeas late in the afternoon after closing time. The managers who are also horticulturists took one look at the hundred or so crates of hydrangeas and unfortunately had to reject them because of the quality. To me the hydrangeas looked pretty and appealing but to the expert eye there were major flaws. The grower of these hydrangeas had grown them too close together which meant that they grew trying to reach for sunlight, which lengthened the stems. The result of this was that the hydrangeas had long stems and either drooped or fell down. Not every nursery has such strict quality control and most nurseries with lower quality standards would have accepted them. But how can you claim to be a tip-top garden nursery if you display hydrangeas like these on your nursery floor?

From the grower or in this case what you would call the supplier’s point of view, they thought they were growing to standards that would be acceptable to the high-end garden nurseries. Hydrangeas take about a year to grow so the supplier has lost all the money that they invested in growing these flowers. Yes, it’s a loss that they can probably make up because they are a big grower but it does show anyone who is starting a business of their own how important product quality is. Product quality is only one of the risks that a small business or start-up faces.

The myth is that entrepreneurs are big risk takers but when you look behind the scenes you find that smart entrepreneurs find every way they can to mitigate risks. Sometimes they would not proceed with certain investments if they are not willing to take the risk. They will also try to transfer the risk such as purchasing insurance cover on critical risk that may spell disaster for the business such as fires, floods or even the death of a director. The point is that you cannot eliminate all risk from any business venture but you can take steps to reduce, transfer or avoid certain risks.

One consultant has identified some key risks in start-ups or small businesses that could spell disaster or even closure. Some of these risks include ensuring that you have identified a genuine market need, you have estimated the market size correctly, have the capacity to implement your new business idea or innovation, figure out how you going to sell it for more than it cost you to make, ensure that you stay ahead of the competition and don’t run out of money. There are other such risks but these are the main ones. It could be a good exercise before you start your new venture or revise your risk plan for an existing business to look at market risk, competitive risk, technology and operational risks, financial risk, people risk, legal and regulatory risk, and systemic risks.

If you need help to develop your risk management plan, you should get input from your team of trusted advisers and if you are a larger size business involve your management team, to make sure that you anticipate the major risks in your new business or existing one. While there is still time, if you are starting out with a mere concept or promising new idea, you may want to get hold of a copy of “Breakthrough Ideas” which takes you through some of the key risk areas in taking an idea from conception through to development and implementation. Stocks are limited so without any obligation get your name down on the waiting list now.

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