Risk, Failure, and Important Steps (I)
In this video, we’ll discuss the risks in creating a startup. We’ll also talk about the causes of failure and important steps to take to reduce risks and avoid failure.
Entrepreneurs often have to take risks with their career and their money. When they decide to create a new business. This happens because entrepreneurs usually do not have time to start a company and have a regular job at the same time. If the startup does not succeed, they often have to find regular employment again, which could be difficult. Entrepreneurs also often invest some or all of their personal savings in their startup. In addition, because they often do not have another job, they do not have much money for daily living expenses. Because it can often take a few years for a startup to make money, this situation can be very stressful and risky, particularly if the startup does not succeed in the end. If an entrepreneur or other loved ones to support, this stress can be even worse.
Now, let’s look at the causes of failure. Experienced entrepreneurs work and plan to avoid failure, but there are several common reasons for failure that the entrepreneur cannot control. Let’s look at three important ones: the economy, customer loyalty and competition. We will look at each of these now.
An economic crisis can cause failure for an entrepreneur. Customers may no longer have money to buy products. The entrepreneur will sell many fewer products than expected and the business might fail. An example of this is what happened in Greece for several years. Greece had an economic crisis, many people lost their jobs or had their wages or pensions reduced. They no longer had money to buy products and many businesses failed.
Customer loyalty may also cause failure because target-market customers are not always loyal. What does this mean? If a customer is loyal, they buy the same product all or most of the time. When a customer buys toothpaste, it is always the same product. When a customer is not loyal, they buy a different product instead. Why do they do this? One reason is customers aren’t sure what they want, so they try many products to find out.
Another reason is other competitors come into the market with a new product, with a different style or lower price. The customer likes this style and price better. Entrepreneurs must always be aware of the risks of competitors.
Economic changes, changing customer loyalty, and competition – these can all cause a new business to fail. An entrepreneur has no direct control over these.