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Overcoming the obstacle path in a new business

November 4, 2010

As surveys go, 50 per cent of most startups shut down in the first five years. They start out with little foresight and too much drive. Several entrepreneurs believe they will cross the many bridges of problems when they get there and sometimes this approach becomes a fatal one for the enterprise. This is probably the flip-side of their risk-taking trait. But while risk-taking is important, daredevilry isn’t: a fact many entrepreneurs learn only after getting burnt. Thus, what is more valuable in any new venture is your ability to manage risks.

The risks that unfold in a new venture are many and often unforeseen. Before you set out on your entrepreneurial journey, take a look at a few risks that you may encounter and some ways in which you can manage them.

  1. Finding good manpower: Every enterprise is primarily made up of its people. The force determines the strength. No matter how great an idea, business plan or strategy, all these are meaningless without a good lot of people, who can implement them. But often, startups are unable to compete with the salaries offered by big corporates. In order to avoid losing talented staff to the bigger fish, it becomes important to offer them a good equity package. This could also mean convincing them to work for the bigger picture and showing them the value of the enterprise in the long run.
  2. Funds going dry: What most entrepreneurs fail to gauge is the exact cash flow that will be required to see their startup through its early years of operations and growth. Most shy away from this harsh reality and only take notice when they are beginning to go down under. And while an entrepreneur may have succeeded in getting the first round of funding, it’s the funding for the second and third stages of growth that is crucial. Thus, it becomes important to have avenues of funding ready for such growth phases. Institutional funding, help from wealthy friends and family who can come in at the right times are some ways of ensuring a positive cash flow.
  3. Inability to delegate: Most entrepreneurs tend to feel that their vision will get diluted if it is shared by many. This, sometimes, makes them unable to delegate work to the right people and very often they land up doubling up in areas, which are not their core competences. Trying to control all aspects of the business is one of the surest ways of not scaling up. Hence, bringing in a good team, sharing your dream with them and empowering them thereafter, will not only ensure faster growth but also more harmony within the organization.
  4. Too much enthusiasm: Excess of anything is not a good thing. Very often entrepreneurs get excited over their first infusion of funds or the first big order that has been bagged. While excitement is good, it shouldn’t lead to taking foolhardy risks or making unrealistic expansion plans. Another probability is complacence that often results from a successful win. This could lower the startup’s receptivity to market trends or delay innovation in product development. Thus, the feeling of being a startup should never fade as it provides both humility and measured drive.
  5. Partner splits: Most startups are founded by partners and as is often seen, partnerships can go sour. While nothing can reduce the messiness of separations, what one can do is try to reduce doubt and ambiguity among employees and clients. Employees need to be honestly told about the real reasons of the split and clients need to be assured that standards of quality will not suffer as a result of the separation. Also, since the partner also brought his/her talent or expertise to the company, all efforts must be made to fill his/her gap quickly.
  6. When markets move on you: Markets are fickle and markets evolve. Moreover, every market reaches a saturation point beyond which you just cannot penetrate further. Also, a product or service that worked initially may soon get redundant. It is thus important to be in sync with the market and adapt quickly to its changing demands. Very often, entrepreneurs stick to doing what worked in the past, often leading to outdated business strategies and unexplored options and markets. Thus, it is important to constantly be on top of the market, track trends and make exits when needed. It is also essential that one is open and dynamic to exploring new markets.


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