Here are 10 start-up risks that MUST be managed if a business is to be successful:

1. Having too many ‘big ideas’
By their nature, entrepreneurs are very creative and excellent at coming up with new ideas. But too many ‘big ideas’ can be a threat if not managed correctly. Developing too many products or services will consume valuable time and prevent you from quickly moving on to the next stage. Once you believe a good idea is a ‘goer’, it requires constant focus and attention.

2. Not knowing what the customer really wants
Not closing deals, lower than expected sales, customer complaints, returns and write-offs are all symptoms of not really knowing your customers needs. Knowing what the customer actually needs can be extremely difficult. Start by researching your target customers needs by building a ‘reference network’ of people you can call, not to sell, but to ask questions. Be informal but professional, gather information, analyse trends and who knows, over time you will not only better understand your potential customers, but perhaps convert a few to become long term clients.

3. Not planning ahead
When you go somewhere you haven’t been before, you should take a map with you. A good business plan is like a map. Without it, you’ll get lost. The business plan should be appropriate to your needs. Start with a basic plan and then build on it. At a minimum, it should have a one year financial plan, cash flow, your business model, target customer/market profile, your objectives, strategies to achieve them and target dates. Then add a SWOT analysis, risk analysis, marketing plan, sales scripts, product profiles, operational plan and other relevant information as you need it.

4. Having no exit strategy
How long are you prepared to commit to the new venture before moving on? An exit strategy is something that you should consider earlier rather than later. An exit strategy involves identifying events that could trigger a decision to exit the business. It may be that if your working capital reaches say five hundred dollars, you pay all your debts and close the business. Conversely once your turnover reaches one million dollars, you could sell your business or groom a successor.

5. Not really knowing your stakeholder
Stakeholders are people or organisations who have an interest in your business, influence decisions and could be a barrier to success. It is important to identify them early and understand their needs and expectations. Most people identify their financiers or shareholders, but for an entrepreneur changing career ‘mid-life’, your family is a big stakeholder. Consult and communicate constantly because when things get tough, their support is just as important as the financiers.

6. Not managing financial risks
For a start-up, the risk of not being a financially viable business is one of the biggest risks it will face. Borrowing too much or too little, high cost of financing, stock shortages and high overheads are a recipe for disaster. Prepare a ‘realistic’ budget and then a cash flow plan. Cash flow is critical because cash pays bills, accounting profits don’t. Make sure you have an adequate contingency fund for a few rainy days. Look at all possible ways to finance your business and choose the best considering cost and risk. Price correctly and think about using ‘penetration pricing’ for your first few customers to entice them over. To make money you have to spend money, but keep your spending to basic needs.

7. Not managing risk and understanding compliance
All businesses face uncertainty and have legal obligations. The ability of a new start-up to absorb just one large undesirable event or risk is very low. One unmitigated risk could end it all. Legal obligations are mandatory and will apply to your business, customers, financiers and staff. Use professionals like accountants, lawyers and specialist consultants in the areas you are weak in to help you manage risk and comply with various legal and financial requirements. Join industry associations to stay close to developments that affect your business environment. Use contracts and agreements to protect yourself and your interests. Consider using insurance as tool to help you absorb financial losses. Have a good disaster recovery plan because not everything is insurable.|

8. Burning out
The time and effort put into starting a new venture will be considerable. It is often normal to feel frustrated, get depressed and become anxious at times, however during burnout, you will feel these emotions more frequently. Listen to your body, believe it or not, your body comes with its own risk management system built into it. Good planning will help you focus on and prioritise important tasks. Don’t try and do it all yourself, use experts in areas you need help.

9. Not managing people
Play your cards right, and over time, a small business will grow into a larger business. At this point the risks associated with people will increase. Staff shortages or surplus staff, unclear roles and responsibilities, not managing performance, poor culture, poor OH&S environment and high staff turnover can adver-sely impact a growing business. Establish a formal structure. Set specific responsibilities but also encourage cross training of staff. Develop appropriate remuneration and reward structures that are aligned to your business objectives. Create and nurture a team culture where people are empowered individually yet can still support each other.

10. Growing pains
Growing too quickly or uncontrollably is a real risk, especially if the business does not have the supporting systems, processes and infrastructure. Good planning to forecast demand is just the starting point. The ability to change your plan to respond to the growth is just as important. Ensure your systems, processes and infrastructure are good enough to deal with higher volumes. Consider building strategic alliances and business relationships to help you deal with peaks and troughs of demand. For products, ensure your suppliers can meet higher volumes. For businesses that require people, build relation-ships with personnel agencies and have an effective training and induction program ready.