Business Risks
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9 Business Risks Budding Entrepreneurs Should Watch Out For

In the spirit of optimism, solopreneurs and small businesses tend to set their eyes more on growth and innovation and less on survival. Sadly, the optimism may blind the business owners to certain risks that can kill their enterprises. Identification, evaluation, and control of the threats make all the difference between success and failure.

20% of small businesses fail within the first year of operation. 50% will have shut their doors by the fifth year. Constrained by limited human and financial resources, small companies are often more vulnerable to disruptions than their larger counterparts. Budding entrepreneurs may need to employ comprehensive risk mitigation strategies.

Here are nine business risks that every small business owner should watch for and how to manage them.

Business Interruption

From geopolitical issues to natural disasters, business executives may need to watch out for events that can halt the company’s operations. The greatest threat faced by businesses currently is the COVID-19 pandemic. 94% of executives say the pandemic affected their supply chain logistics. The economic downturns recorded continue to fan the flames.

Small business leaders may need to identify areas of vulnerability from external forces in the operations. Proper evaluation of the potential losses and probability of occurrence can help businesses adapt quickly to the changing market environment.

Brand Value or Reputation Damage Business Risks Budding Entrepreneurs Should Watch Out For

Businesses face the risk of a reputation event every day. From employee misconduct to consumer privacy breaches, situations that affect brand perception in consumers’ eyes can grind your operations to a halt. A non-stop news cycle and social media make it harder to control the narrative.

You can build a foundation for brand value by controlling your content creation. Identifying SEO services for small business can set you apart as a thought leader in your industry. Maintaining that brand image is burdensome.

Budding entrepreneurs may need to look into cost-effective strategies for reputation management. Proactively come up with response plans for your business in case a reputation even occurs.

Regulation or Legislation Change

Increasing regulatory clampdown across multiple industries presents a threat to the survival of small businesses. Legislation or regulation changes can increase the cost of doing business or competitive pressure within your industry. Closer government scrutiny may make it difficult for entrepreneurs to access credit for their businesses.

Small businesses may need to keep tabs on the existing and emerging laws regulating their industries. Hiring a business lawyer is advisable for sections that appear grey to you. You may need to operate within the law to avoid punitive fines, which can run you out of business.

Cyber AttacksCyber Attacks

Internet security threats are quickly becoming a concern for small business owners. According to Ponemon Institute’s Cost of Data Breach Study, the average cost of a successful cyber attack is $3.86 million. From direct fines to forensic investigations, the implications of a data breach can be enough to run you out of business.

Small business owners often view their businesses as less of a target to cybercriminals and fail to prepare adequately. As a budding entrepreneur, you may need to invest in a managed services provider to protect your clients’ and organization’s data.

Cash Flow Risks

Financial risk is arguably the greatest threat to the survival of small businesses. Entrepreneurs often pour in their life savings or take out massive loans hoping that the start-ups will thrive. Events impairing your cash flow can prevent you from meeting short- or intermediate-term obligations, putting you out of business.

Small business leaders may need to consider where to source money to maintain their operations. You may need a positive cash flow to effectively pay your staff, rent, and invest in market opportunities.

Market Developments

Intensified competition, volatility in the market, and uncertainty about the future are some of the concerns that small business owners across the globe are facing. Business owners now have to come up with long lists of objectives that they need to attain to outsmart their competitors.

You may need to invest in data analytics as a small business owner to identify and spot trends that can give you a competitive edge despite the market developments. You may also need to source talent to grow and adapt your business to the prevalent market conditions.

Natural CalamitiesKey Personnel Losses

Businesses worldwide are feeling the effects of climate change, especially with the increased number of catastrophic natural events. The 2020 California wildfires left behind a damage cost of approximately $12. 08 billion. Property damage arising from calamities such as hurricanes can easily kick you out of business.

Business executives may need to take time to assess the probability of such events occurring in their location to analyze their risks better. Additionally, small businesses can take out business insurance policies that cover such events.  Low-cost monthly premiums may be cheaper than starting afresh when disaster strikes.

Key Personnel Losses

Small businesses tend to grow and build around the talents and expertise of a few individuals. An injury to an employee crucial to the running of a business can grind operations to a halt. Founders or early employees resigning can frustrate and demotivate the existing personnel, with the company taking a nosedive.

Business leaders may need to diversify their operations without overly relying on specific individuals for the day-to-day activities. Stability during an employee change can keep the business moving without any drastic consequences.

Disruptive Technologies

The ease of internet access continues to support the release of novel technologies realigning the structure of traditional industries. Small businesses that fail to adapt to the disruptive technologies are swept away by the wave, with owners incurring massive losses and debts.

Business executives may need to remain vigilant to the technological changes occurring within their respective industries. Leverage the innovations to create a competitive edge that cements the top position in your niche.


Entrepreneurship is an exciting yet complicated journey for people. Proper assessment of risk factors that can disrupt your business is vital to keep you afloat during a crisis. You can use the tips above to come up with creative solutions to challenges plaguing your specific industry. Allocate time in your calendar to periodically revisit the threats, creating plans to mitigate the after-effects.

Article by

Alla Levin

Seattle business and lifestyle content creator who can’t get enough of business innovations, arts, not ordinary people and adventures.

About Author

Alla Levin

Hi, I’m Alla, a Seattle business and lifestyle content creator who can’t get enough of business innovations, arts, not ordinary people and adventures. My mission is to help you grow in your creativity, travel the world, and live life to the absolute fullest!

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Written by small business experts and seasoned journalists

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