By Fernando Berrocal

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In the startup world, all organizations are inherently prepared to confront a certain level of risk. Risk can manifest itself in a variety of ways, ranging from financial gambles to recruiting the best talent. According to recent statistics, up to 20% of new startup businesses fail during the first year of operation–and only 10% survive for more than 10 years.   While disaster can sometimes not be avoided, there are viable methods to lessen these risks and steer clear of figurative “icebergs” when you’re an early-stage startup. 

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Even though the statistics might show that these problems will sink your dreams of having a successful business, that is something that can be prevented. In this blog, we'll identify the most common problems–and explain why new businesses fail.  We’ll also offer suggestions for promoting a proactive attitude toward this reality.

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Startup Business Founders Frequently Face Many Dangers

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Different issues and difficulties confront every leader. New startups are frequently more vulnerable to business risk because their founders and workforce may lack the experience and expertise to deal with them. You could also create business tools to overcome obstacles, or adequately address issues. New businesses may limit risks, avert problems, and guarantee that they respond quickly to aid recovery and minimize interruption by adopting a "proactive rather than reactive" mentality. 

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Although each business is distinct and may face various dangers, there are several elements that all new businesses share and that can be established in advance. Concerning those concepts, they might potentially consist of:

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• Small Business Security

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Most new business owners are aware of the threat that cybercrime and related security breaches pose to organizations nowadays. However, they might think this occurs mainly in big and multinational businesses, not in small businesses. Nevertheless, cybercrimes affect small firms almost as much as big ones. The business news frequently focuses on ransomware attacks or high-profile data thefts that affect global organizations with tens of thousands of employees and clients. That’s why there is the perception that large businesses appear to be the target of cyberattacks in the great majority of situations. Small businesses are the target of nearly 40% of cyberattacks; and this number continues to grow every year. 

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For startup businesses, downtime and security breaches may be fatal (due to their overall business structure). They contribute to long-lasting financial losses and reputational harm. Within a year, 60% of people who are the targets of cybercriminals will cease to exist. Startups face a serious challenge from security, one that will become more prevalent. There is no need to panic since there are techniques to reduce dangers and reinforce your defenses. Online safety and security may be improved by protecting networks, systems, and devices, frequently updating software and technology, putting adequate security policies, and offering cybersecurity awareness training to all your employees. If you don't have IT specialists, you might think about hiring a business to review and assess the procedures and security measures you have, provide suggestions for security improvements, and keep an eye on systems for unusual behavior.

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As threats have increased and personnel patterns have evolved over the last couple of years, small company owners are becoming more concerned about security. Many workers nowadays have flexible schedules and working conditions, making them either remote or hybrid employees. It's crucial to update procedures and adopt new standards to accommodate various surroundings and tackle difficulties if your business has a "bring your own device" policy (BYOD) or has staff working from home or distant places.

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• Finances in Business

Most startups that fail do so because they are unable to maintain a profit. It may be highly expensive to establish a business, and frequently, it takes a long time (a couple of years) to recover those expenditures and begin turning a profit. In addition to startup expenses, new businesses may also face obstacles from broader economic shifts or issues that affect the market, customer demand, and operating costs. One such is the issue caused by rising living expenses. Running a business is more expensive now than it was five years ago, and the ultimate stabilization of pricing is still not in plain sight. For enterprises and their end users, costs like gasoline and electricity are higher. Lower levels of disposable income for customers because of rising expenses have an impact on consumption. Spending declines result in a decrease in demand for items, particularly those that are not necessities.

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It is crucial for ambitious business owners to carefully plan the date of their debut and to keep a close eye on demand within their target markets. Costs must also be considered, along with any potential changes and fluctuations related to national and international economic concerns. To maximize revenues and minimize risks, new firms should seek for ways to boost productivity and efficiency wherever feasible. Planning is crucial in preventing financial risks and cash flow issues. Maintain a close watch on the finances from the beginning, cut expenditures early, and set aside money for unforeseen emergencies. Utilize accounting software to monitor the books and act when there are early indicators of a high risk of future cash flow problems.

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• Business Reputation

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Currently, before contacting a firm or making a purchase, over 90% of consumers read internet reviews. Before they ever have an opportunity to dominate the market, new businesses might go out of business due to negative feedback, bad press, and instances of poor customer service. According to statistics, 96% of customers will stop doing business with a business because of poor customer service.

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Setting service, customer support, and customer experience as a priority from the start is the greatest approach to preserving and improving your reputation. Small business owners and their staff should be proactive in offering a pleasurable, stress-free, and professional service, always putting the needs of the client first. Offering quick customer service, keeping an eye on performance, and using client feedback are a few easy methods to do this. You can make your customers feel appreciated and respected, make it simple for them to get information and assistance, and reward loyalty when it comes to customer interactions.

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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.