5 Common Risks Faced by Every Entrepreneur and Their Solutions

Risks are a part of every entrepreneurial journey. Entrepreneurs go through multiple risks every day while discovering their true potential. It can be overwhelming to navigate your way through these existing risks. It is crucial to managing the risks efficiently to avoid any adverse effects on the business. Finding a way out of such business risks and reaching the end goal is the utmost satisfying moment for every entrepreneur. In this article, we shall look at the 5 common risks faced by every entrepreneur and their solutions.

Entrepreneurship: What Is It?

A zeal for creating a revolutionary product to bring a difference in the market and gaining profitability from innovation is what gives rise to a successful entrepreneur. Entrepreneurs are risk bearers and creators of unique product that does not exist in the current market. They are individuals who identify a gap in the market and design a solution in the form of a product or service. Entrepreneurship is one in all processes of planning and executing a business idea, including research, development, marketing, customer acquisition, and financing.

Entrepreneurs manage the overall operations of the business and work in different departments simultaneously. They are multi-taskers who bear the risks of starting a new venture all by themselves. They handle multiple responsibilities around the clock to push their venture toward success. Being adaptive to changes, flexible and innovative are a few characteristics that define successful entrepreneurs.

5 Common Risks Faced by Entrepreneurs and Their Solutions

Entrepreneurs invest their money and time into an idea that they wish to turn into a successful venture. There are huge risks associated with starting a new business. While entrepreneurship is a rewarding path and can make you a rising star in the industry, some risks can alter the course of your action and turn your plans around. Managing these risks is essential for businesses to maintain their sustained growth.

Startup founders must know the common risks that exist on their way before they embark upon their startup journey. Starting a business without a proper idea of such risks can be catastrophic. As an entrepreneur, you must understand your path well and plan your business keeping some room for navigating these risks. Here are 5 common risks every entrepreneur comes across during their journey −

1.Financial Risk

Money forms the base of every business’s future. Without adequate funds, a business can plunge into its death in the blink of an eye. You need a considerable amount of funds to start your business. Most entrepreneurs use their savings or opt for loans from friends, families, or banks as seed capital for their businesses. Startups must generate sufficient cash flow from their initial stages to meet the expenses. Failure to generate sufficient revenue since inception can create catastrophic situations for startup founders. Entrepreneurs find themselves buried in never-ending expenses which can lead the company to the verge of shutting down.

To avoid the financial risks of a business, you must have a clear understanding of your market and business before you start your entrepreneurial journey. You must do deep market research and formulate a logical business plan based on your industry. Your business plan must include all possible costs associated with starting your business. It must also consider the funds required for the survival of the business for the first few months. Alongside the costs, you must set aside a contingency reserve for unforeseen situations such as market trends, unexpected competition, development of new technology, etc. You must keep a careful check on your finances and take control over areas that result in resource wastage.

2. Legal Risk

Entrepreneurs have to comply with a significant number of legal requirements to start their businesses. Legal risks occur when the startup founder fails to abide by the rules and regulations of the government. Some common legal risks that exist in a business are a violation of labor laws, infringement, failure to follow industrial standards, improper documentation, etc. Legal risks can lead to huge expenses for the company. It is time-consuming to rectify the legal mishaps and can also create a bad image of the company in the market.

Legal risks can be avoided if the entrepreneur hires a well-educated lawyer to look after the legal matters of the business. Your lawyer must ensure that you are in line with the country’s business rules and regulations. You must be careful while signing contracts and documents. Your contracts must not violate any law of justice to tamper with your business operations. In the end, you must keep yourself updated with the developments of the country's laws and take necessary steps to comply with the same.

3. Market Risk

Failure to understand the market is one of the common risks faced by most entrepreneurs. Market risk results in an increase in overhead expenses at the cost of less or negligible cash inflow. Entrepreneurs often fail to understand the market demand and fulfill the same with their limited resources. They struggle to stay ahead of their competition and hence lose out on potential business opportunities. Such risks make the business extinct in the market in an instant.

The solution to market risks lies in the market research conducted for a business. You must be well aware of your industry and potential customers. Your products must be designed as per the requirements of your target market. You must know about the existing and potential competitors in your industry and identify ways to set your business apart from them. Innovation and hands-on approaches can help you stay quick on your feet and capture the attention of your customers in this rat race. You must keep your business plans flexible and adaptive to market changes.

4. Operational Risk

Apart from the external risks, entrepreneurs are also prone to the risks that lie within the business. Operational risks occur when an entrepreneur follows a faulty operational system for their business. Improper demand forecasting can disrupt the production of the company and lead to unfulfilled customer queries in the market. It also includes the inefficiency of the supply chain to distribute the goods to every nook and corner. With limited resources, entrepreneurs fail to procure the necessary equipment required to conduct their business operations.

You must have a good connection in the market with your suppliers and vendors to mitigate such operational risks. You must choose your suppliers carefully and establish a personal connection with them. It can help you manage your procurement and supply chain issues efficiently. Your operations must be data backed and planned to keep a contingency plan at hand for situations that may not work out as per your plans.

5. Team Risk

Entrepreneurial risks can also be found within the team if the employees are not aligned with the organization. Entrepreneurs usually face communication gaps within their team that leads to low productivity and poor outcome. Several conflicts exist within teams if they are not bonded well and in line with the organizational goals. Lack of proper talent to manage everyday operations can also be seen in most startups. Without proper human resources, the business fails to cope withthe market requirements and becomes extinct in no time.

You must focus on informing a strong business team by promoting a positive work culture. Focusing on employees' well-being is crucial for businesses to excel in the industry. You must address the concerns of your team members and acknowledge them for their hard work from time to time. This makes the employees feel valued at the company and improves their morale. You must invest in team-building exercises to create an emotional connection between the employees and the organization. It is important to have a strong conflict resolution system to dismiss issues effectively and efficiently.


A successful entrepreneur is open to exploring different business avenues while calculating the risks that lie in each step. You must be accepting of business risks and have a flexible and proactive attitude toward navigating the same. Businesses are successful when an entrepreneur can look into the bigger picture and take necessary smaller steps to achieve the organizational goals.

Updated on: 21-Mar-2023

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