Risks of Starting a Business

Posted:Abigail Andrews – Friday, October 26th, 2007

I mentioned earlier many reasons to start your own business, however, for all the pros there is also a con. Take a read through the following list and be objective before you even think about becoming an entrepreneur. You may find too many reasons to abandon your quest to strike out on your own.

The Cons

You will still have a Boss

This is the common appeal used by the purveyors of get-rich-quick schemes. It's an appeal that works for them because it's in the minds of many people trapped in a job under bosses they don't like. It has been a strong motivation for many people who have successfully become their own bosses. However, you will still have "bosses" who can be very demanding and unreasonable in the form of customers, competitors, suppliers, lenders, bureaucrats from regulating agencies, employees and partners. As is often the case, the most demanding boss will be yourself. Especially, if you have an overwhelming desire to be successful.

Longer hours not shorter!

Unless you are prepared to accept less personal income, it's unrealistic to expect replacement of your salary from the proceeds generated by a fledgling enterprise. Will you be able to forego or replace the perks and benefits provided by an employer? Do you have an independent source of income or are you able to reduce your needs? Do you have skills which can earn greater compensation on a freelance basis from people prepared or contracted to provide those payments? Be very realistic with your calculations and your answers to these questions.

Poor finance handling

A personal track record that does not include a history of saving. Has your saving habit resulted in accumulated financial resources and in demonstrating your success at handling money with budgets to meet goals? The amounts are not as important as the portion of revenue saved and the length of time your habit prevailed. You will be the person responsible for the tough financial decisions.

Limited Funds

Having no personal revenue producing assets or to replace capital expenditures on such requirements as furniture, fixtures, equipment, supplies, operating space and transportation.

Possessing insufficient skills

Each skill you lack must be contracted to someone else. Will you be able to generate sufficient revenue to pay these costs? In addition, do you possess sufficient knowledge for supervising the skills you delegate? What do you know about bookkeeping, accounting, selling, advertising, training, product knowledge and the many other essentials of small business management? Most importantly, what's your expertise in self administered time management? How are you going to gain these skills while handling the day-to-day operations? Successful implementation of a great concept demands effective management skills.

Harboring the slightest doubt

Your business will generate enough doubts which don't need to be complicated by self doubts. Setbacks and imperfect plans afflicting most enterprises require your personal ability to cope with these challenges. This demands you have a firm belief in yourself together with the support of perfect health, the energy and the resourcefulness to survive and overcome.

Being risk averse

Despite your being able to state you have none of the above shortcomings, are you uncomfortable taking even calculated risks let alone unexpected ones? Every day an entrepreneur is required to make decisions and each is accompanied with some element of risk. You will be required to incur liabilities each time you sign a contract. There will be risks resulting from neglect or deferral caused by your preoccupation with the hustle and bustle of day-to-day operations.

• Steep learning curve.
• May fall in love with the business and forget the point e.g. to make profit.
• Most business start-ups fail in their first year.
• Ability for your friends to say 'I told you so' if you fail

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