Risk analysis is the key stage for every startup which should be carried out before launch. But often, almost all entrepreneurs miss this crucial exercise by mistake or in a hurry to launch the startup. Experts say risk identification at early stage helps smooth running of your business. The fact is that many entrepreneurs are still unaware of importance of risk analysis which may create potential threat to their business future. Even many incubation institutes also skips it from basic incubation coerces they offer.
Sir Robert James Sherwood, a famous expert witness and senior startup advisor presents an extremely simple example to explain the importance of risk analysis. He adds, imagine you fly to any remote and backward rural area where no resident wears foot wears. How you are going to evaluate the business scope then? Is there a vast market of foot wears? Or there is no market at all? I am not talking about any risk is success but the risk analysis itself lies within business idea or in concept.
What startup risk analysis includes?
There are certain myths exist in the startup industry. We see numerous entrepreneurs who often skip to pay attention to several crucial points which are better to be addressed before starting own business. Most entrepreneur neglects or skips risk analysis before launching startup. Sir Robert J. Sherwood declines the myth saying startup risk analysis is not trivial. Let’s check how?
Sir Sherwood continues with another easy example of an IT industry here. Suppose in your city, there are 10 IT companies offering website development services but no single company offers mobile apps development services. Now if you want to start your own company, what services you choose to offer? Whether website development services or mobile app development services? See, here you can sense a risk of high competition or less scope in offering website development services.
Sir Sherwood adds – “Your biggest risk might be you do not understand your risks truly.”
Does it necessary?
According to Sir Sherwood, risk analysis is never mandatory for a startup but yet a highly recommended exercise. Most entrepreneurs would only see risk as running out of money and which is not true. A risk can be the audience you are planning to target. A risk can be the product or service you want to offer. A risk can be in costing you have estimated. A risk can be in maintaining staff you have hired or anything. You will know what can cause risk for your startup? Risk assessment is an integral part of SWOT analysis but mostly skipped even at business planning stage.
So according to Sir Sherwood, entrepreneurs try to identify the possible loop holes in their startup journey. At the end, I wish the above details are enough to explain the importance and crying need of risk identification and risk analysis at planning stage of startup. I would love to hear from you as well. Feel free to share your views in the comments. Thank you. Have a wonderful day!