By Fernando Berrocal

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When it comes to entrepreneurship, it doesn't matter how carefully you prepare or how skilled your team is–there is no guarantee that your organization will thrive. This makes entrepreneurship a dangerous endeavor.  However, the benefits can be substantial on a personal and financial level.  In terms of personal fulfillment, entrepreneurship is one of the best careers you can pursue.  In terms of risk, it’s one of the more dangerous choices.  If entrepreneurship is for you, it’s crucial to be prepared for the various liabilities business owners face.

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Entrepreneurs must take risks.  The best way to take calculated risks is implementing a solid strategy; you need a specific plan for launching a product and/or service that addresses a specific market's need.  Many entrepreneurs undertake significant financial and personal risks in abandoning secure employment to start their own business. Individuals in this position need to understand that success is hardly guaranteed on this path–and the necessary challenges (such as living with relatives or monthly budgeting) may be very challenging.  All entrepreneurs - and investors - must contemplate the following risks:

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• A strong strategic risk plan will draw in important investors. A fast-moving, dynamic world can render solutions ineffective in a short amount of time. A chosen strategy might not be the best one due to constant changes in the marketplace and business environment. Businesses may struggle to meet their standards and accomplish their goals in terms of key performance indicators (KPIs).

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• When starting a business, there is a financial risk. When starting a business, the entrepreneur will have to put their funds at risk. Savings or business loans from investors might be a viable option. Any new business plan should have this kind of strategy, which should include income predictions, liquidity needs, and anticipated returns for investors within the first few years. If an entrepreneur doesn't prepare and their investors lose everything, they risk going bankrupt. When they launch a business, entrepreneurs are subject to a variety of dangers. They should take preventative measures to safeguard themselves against any likely scenarios.

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• Since new technologies are continuously being developed, there is a technical risk to be aware of–especially during the digital age.  Disruptive technologies and paradigm shifts are two terms that might be used to characterize these developments. To compete, a new business may need to make significant investments in innovative systems or business procedures.

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• There are also market and competitive risks. When it comes to market risks,there are various factors that might influence a product's landscape. As the economy and market trends shift, new businesses are exposed. If the economy struggles, people are less inclined to buy premium products and instead save money. There is also the option of gaining market share, in which a rival may offer a similar product at a lower cost. For entrepreneurs, market analysis is crucial.  It evaluates market conditions and consumer behavior. Otherwise, for competitive risks, entrepreneurs need to be conscious of their competitors. If there are a significant number of competitors, it can be a sign that the market is saturated or that the firm is having trouble competing. Innovative businesspeople should apply for patents to protect their intellectual property (IP).

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• The reputational risk is especially true when a new business is introduced in a market and the clients have expectations of it. If a new business initially lets its clients down, it could not survive in the medium to long term. In that specific case, social media plays a crucial part in managing brand reputation and word-of-mouth advertising. A single critical social media post or comment from a dissatisfied customer might result in significant income losses. Reputational risk can be managed with a strategy that shares product information–and fosters connections with consumers and other important stakeholders.

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Why Should Entrepreneurs Take Risks?

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Every entrepreneur has a unique set of motivations for launching their own business; they pursue their concept while incurring a distinct set of risks. The following five factors sum up the underlying reasons why business owners should take risks and their positive outcomes.

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1. Risk-taking is a learning process. Even while taking risks may not always pay off, those who are ready to do so can learn from mistakes and turn them into opportunities. Whatever the result, it's critical to have a system in place that enables performance analysis. This will let you learn from errors and modify your plan as necessary. Consider failure as a chance to sharpen your strategic thinking and planning skills.
2. If you don't try, you won't know. No one can be assured that the risks will be profitable, no matter how carefully they may have been evaluated. If you want your enterprise to flourish, however, you still must take them. It is hard to know whether your business will flourish; however, you may take proactive steps to lessen the likelihood that your business will fail. By developing a plan, examining potential financial outcomes, or reviewing your prior performance, you may aid in navigating uncharted territory. Even if you can't know if you don't try, you can at least get ready to deal with various circumstances.
3. The price of innovation is risk: As of today, customers' demands are continuously changing and innovation is all about change. There is always a chance for new businesses to launch and fill those requirements. It's all about imparting our knowledge to others, continuously developing new ideas, and putting them into action. Reduce the likelihood of failure by carefully weighing all available alternatives; do your absolute best to estimate the risks. There is a better chance of success, even if it's risky, the more convincingly you support your viewpoint or course of action.

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4. Risk-takers are more competitive: Since fewer individuals are striving for the same possibilities, those who are ready to take chances may benefit and interact with consumers more productively. Always consider what your rivals are doing while making decisions. If you don't take a chance, they could end up surpassing you. You may choose whether or not to take the risk as long as you are aware of the potential return on investment (ROI).
5. Risk-takers are happier: Risk-taking might be frightening, but it is also rewarding. In hindsight, you will be pleased with the instances where you took chances–and grew as a result.  Additionally, you will avoid excessive risks and can decline new ones based on prior failures. A guaranteed path to success and fulfillment is striking the appropriate balance and taking chances when they make sense; even if there is a potential for failure.

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Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

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