Running a startup successfully inherently comes with a lot of risks. Several aspects can significantly impact the business but are beyond the control of even the smartest entrepreneurs.
Further, these risks may occur at any stage of the project, leading to delays or even the failure of the project.
To navigate such challenges, young startup professionals can use various proven risk management techniques or strategies to ensure the timely completion of projects without much hassle, thus lowering the costs as well as efforts for the company.
The ability to mitigate risk as a startup founder allows you to acknowledge as well as accommodate such risks proactively. To this end, we will talk about different strategies you can use to mitigate risks in today’s ever-dynamic startup world.
Strategies for mitigating risk as a startup professional
Here are some of the strategies young entrepreneurs can use to manage as well as mitigate risk in the startup world.
Prioritise financial discipline
Young professionals in the startup ecosystem often get so engrossed with the operational aspects of the business that they overlook the financial details.
However, a lack of financial discipline can prove quite harmful in the long run, as you can soon run out of money before you even raise subsequent rounds of funding.
As a young startup founder, it is very important to prioritise financial planning to run the business smoothly. A startup and the founder that understands the basics of finance, such as budgets, financial planning, and cash flows (where its money is coming from and where it is going) enjoy higher chances of meeting its business goals.
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The best way to navigate this is by using a monthly financial analysis approach and doing a thorough financial evaluation during the early stages.
Assess your business risk in measurable terms
Similar to other aspects that you are going to encounter in the startup business world, the risk your startup is exposed to must be observed in measurable terms too. Failing to do this will give you numbers and observations that are very limited.
It is, therefore, important to assess the potentially risky situations of your business and measure them against three of the most important KPIs.
- Time: Does the task or project you are going to take fit within the estimated timeline of your company?
- Quality: Is the associated business risk capable of hurting the overall quality of your brand?
- Resources: Is your company capable of implementing the project within the available monetary resources?
Cut down on fixed overhead costs
One of the areas that almost every startup professional struggles with are justifying investment in the infrastructure needed for fulfilling large orders from the start. This is primarily because founders have no way of projecting accurate levels of demand with high certainty, even after a lot of detailed planning.
Minimising initial overhead costs are, therefore, very important for startups as there is a high degree of uncertainty about recovering these costs through operating revenue.
One of the best ways for startups to eliminate a majority of these initial overhead costs is by developing several creative fulfilment strategies during the planning stage.
Further, you can also build a robust network of suppliers to minimise the commitment associated with fixed overhead costs when fulfilling customer orders during the initial stages.
Have a well-planned marketing approach
Having a well-thought-of marketing plan in place can make a great difference in defining the success of a startup. This is especially true for young startup owners or millennials who do not devote enough time to marketing from the beginning.
The right marketing strategy allows you to not only outdo the competition but also mitigate risk. In fact, any success you achieve with your startup business relies heavily on having a strong marketing plan that helps you build a trustworthy reputation among your customers.
Further, promoting your product or service through strong marketing will allow your business to boost its sales and reach your target audience much faster. With the ability to visually showcase your product or service, tell your brand story, and connect with your audience on a more personal level, video marketing can be a powerful tool for building brand awareness and driving conversions. Whether you’re creating product demos, customer testimonials, or engaging social media videos using any online video editor, a strong video marketing strategy can help your business stand out in a crowded market and achieve its growth goals.
Material risks
Material risks in the context of startups include:
- Any kind of damage to inventory, either in storage or transit
- Damages to real property by the business (owned or rented)
- Damage to other assets, such as company vehicles or any other forms of material losses
To be able to mitigate the risk of material losses, it is important to ensure that the appropriate business insurance policies are taken covering different things such as accidents, natural disasters, product losses, and other similar material risks.
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When it comes to policies, there are multiple types of specialised policies available to startups. These include business interruption insurance, coverage for equipment breakdown, and other policies such as healthcare providers, electricians, and others.
Most of these specialised insurance policies cover a range of risks to keep you safe from known and unknown contingencies.
Safeguard yourself against security risks
Recent years have seen a significant increase in cyber crimes and other security-related risks. Regardless of the size and nature of the business, there is a tremendous risk of data hacks where hackers are largely targeting cloud-based systems because that’s where organisations store their important data. That’s why It is also important to use a secure social intranet tool so that data leaks can be restricted and the team can work flawlessly without any worries.
As a startup entrepreneur, devising a robust risk management strategy to mitigate such security risks should be among your top priority. The best way to tackle this is by having a proper policy against cybercrime that should entail informing employees about the importance of protecting confidential data, creating safe passwords, and how to use the web safely. It is also essential to include internet safety rules in the policy to ensure that employees know the potential risks of browsing unsecured websites or clicking on suspicious links.
To wrap up
Today an increasing number of startups struggle for success or wind up operations too early because young entrepreneurs fail to assess and adequately address the risks and uncertainties associated with running a startup.
A strong risk management plan helps you minimise the impact of various kinds of risks and also allows you to tailor specific risks to your business’s unique challenges and requirements.
Further, a well-planned risk management strategy also helps you anticipate as well as resolve the challenges that are yet to arise. This, in turn, makes it easier to achieve the company’s long-term goals and achieve the desired success.
The need here is to identify the top uncertainties and assess them thoroughly, followed by proactively managing the risk through the ways and strategies listed above to increase your probability of success manifolds.
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