Entrepreneurship inherently poses a large amount of risk and while that risk can pay off substantially in the future, success is not guaranteed. A lot of people will talk about the risks that you may face as an entrepreneur, but how often do you hear about solutions and things to do to avoid ending up in that situation in the first place? Don’t walk in blind, walk in with a plan to be successful.
Entrepreneurs wear many hats as they start their company, often acting as accountants, designers, marketers, and laborers all at once. Each of these positions is a full-time job in and of itself, and doing them all at once is enough to exhaust anyone. This stress could cause them to quit, hating the dream they once loved. And at the beginning, when you are running on a lot of energy and passion, this may not seem like too much, but it doesn’t take too long for that initial rush to fade a little and leave you feeling overwhelmed and overworked, especially if you haven’t been separating work from the rest of your life.
Maintaining a healthy work-life balance is crucial to avoid burnout. Work hard, work longer if needed, but also schedule time each day to relax and decompress. Even if you are starting your business at home, you should make sure there is a separation between when and where you are working and everything else in your life. If you are feeling overwhelmed with tasks, this is the time to bring in a partner. Whether it is a trusted friend or family member to bounce ideas off or an actual business partner, having someone tackling problems with you can be a great way to avoid burning out at the beginning.
Bankruptcy is one of the biggest risks that start-up companies face. Many new businesses struggle with a reduction of cash flow due during the first few years due to a large number of start-up costs. The reduced cash flow coupled with business debt can lead to a cash deficit, and extended deficits will lead to bankruptcy. If you haven’t separated your personal and business finances, you may end up not only bankrupting your business but yourself as well. Bankruptcy has several consequences, besides the obvious financial ones. Being behind on payments can lead to harassment from creditors, mental stress, and an overwhelming sense of failure, even if you tried your best.
The best thing to do is obviously avoid having this situation ever happen. One of the very first things you should do is make sure that your business and personal finances are not only separate accounts but also that you legally separate them when you form your business. You should also make sure you are keeping careful records and not spending more than you can afford to as a business. This means your initial growth may be slower than you would like, but it is better to be slow and steady than to flame out. If you do end up needing to file bankruptcy, it is important to talk to legal counsel to make sure that everything is taken care of properly.
Start-up businesses often struggle to get new clients because people don’t know they exist and they have to compete against companies that are already established and have a good reputation. Without a solid marketing strategy, you could lose a substantial amount of money in the early stages of your business. For this reason, it’s essential to market yourself and market your business. The initial investment may seem a little steep, but this is one part of your budget you shouldn’t neglect. Make sure you are getting the full package and you aren’t just dabbling without any real strategy. The faster you can show the world who you are, the faster the money can start coming in. Invest in marketing to create your unique brand and have sustained success as an entrepreneur.
Education is the first step to avoiding unnecessary risk as an entrepreneur. You can avoid burnout, bankruptcy, and marketing issues by educating yourself about these risks and taking extra care to avoid them.
If you are looking to get funding to start your new business, check out our application process!