Common startup risks and how to handle them

Starting up

15 February 2018

There's no way around it: starting your own business means taking a risk. For many, it’s a leap into the unknown, with only your instinct and determination to guide you and make it work.

The rewards can be great, but in many cases the drawbacks are real too: statistically, four out of ten new businesses survive the first five years.

But the world of startups isn't about taking reckless gambles. The difference between the companies that survive uncertain periods and the ones that don't is careful planning.

Take a look at our guide to some of the common uncertainties facing startups – and how to survive them.

Funding the company

The risk

Startups need money behind them to develop the product and bring it to market. Securing funding from investors, government grants and loans can be unpredictable in itself, as you need to pay back the debt eventually. It's possible that you may need to throw some of your own savings into the pot, too.

The solution

Having a clear financial forecast and a working budget will help to mitigate the uncertainty. Cash flow can be the big challenge for new companies: try taking the advice of Ben Rubenstein at marketing startup Yodle, who negotiated flexible payment terms with suppliers to make those early days less unpredictable.

Dealing with competition

The risk

If you've had a great idea, chances are someone else has had it too. A crowded marketplace, dominated by big companies, will be hard to break into – meanwhile a nonexistent marketplace could be a red flag. Even in an open marketplace, there's the chance of people stealing your ideas.

The solution

Wherever possible, patent the unique selling point of your product so your competitors can't borrow it. Keep your ideas secret until you're ready to launch onto the market. By the time your competitors respond, you're already creating a new, improved version. The kind of secrecy where even employees don't know about new products until launch day is how Apple stays one step ahead of the pack.

Shifts in demand

The risk

Your product might not set the world alight in the way that you'd hoped. Technology can change and render your product obsolete, or a giant company might take your idea and add their own spin – for example Google Flights vs flight comparison websites.

The solution

Future-proof your business, and be prepared to pivot. The Twitter founders were working on a podcast platform called Odeo when Apple announced that iTunes was launching built-in support for podcasts. Knowing they couldn't compete with an industry giant, they turned their idea into a social network built around fast, fun status updates – and created a $19bn company.

Coping with accidents

The risk

Your business plan might seem rock solid, but accidents happen. Nasty surprises can be expensive, especially for businesses in those tricky early days.

The solution

You can make sure your business is protected from unexpected shocks with AXA business insurance. When you've got the coverage you need you can focus on success.

All businesses start with a story. Protect yours.

Businesses start with a bold step and a restless determination to succeed. So if you’ve got a business story to share, tell us about it using #AXABusinessStories.