Invoice Bazaar Blog

What are the risks you may have to encounter as an entrepreneur?

By Invoice Bazaar | November 16, 2021

As an entrepreneur, you should be a risk-taker by nature, as your journey to success will be fraught with risks and unexpected failures. For instance, you may face threats because of failing to identify the right product or connect with the best market segment, lack of funds, or inadequate cash flows. Similarly, there might be challenges associated with relying on inefficient growth channels, your inability to launch the product appropriately, or your reposed trust in the wrong executive. Threats may also emanate from incompatible marketing strategies or because of changes in government policies or due to fluctuations in forex rates, or insufficient information regarding your potential competitors, customers, or partners. 

However, all the risks mentioned above are just the tip of the iceberg, as troubles can arrive from any angle or direction that is left unguarded. Generally, an entrepreneur’s risks can be broadly categorized into five types: market risks, product risks, competition risks, technology risks, and financial risks. Market risks get triggered because of sudden or unpredictable changes in market trends beyond the entrepreneur’s control. Product risks may be due to a significant surge in input costs or the price of raw materials or due to errors in product design or service delivery, which may result in excessive returns or lead to defective products or services.

Meanwhile, competition risks result from direct or indirect competition that can inflict a severe blow or negative impact on your business enterprise, drastically affecting the bottom line. Technology risks include cybersecurity threats or those leading to operational failures despite having invested heavily in new systems and processes. The financial risks of a business owner will stem entirely from cash flow issues and will have to be handled with sound accounting and working capital management. So, you will have to prepare a proper financial plan depicting income projections, cashflows, break-even points, and expected returns or operational profits. If you fail to plan and calculate all these accurately, you may face substantial financial risks that can even make you bankrupt.