Essay on Risks in a Pre-Startup Phase

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Harvey Mudd College
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Each pre- startup phase in venture has its risk factors and its equal chances of success that do make one to take the next step of starting a business or abandon the idea. Through a research study of 517 people over a period of three years, it was identified that 195 people among this number were courageous enough to set up business. Those others had their business ideas die. A lot of factors are attributed to the failure of a venture at this phase. They arise from the one analyzing the markets and the possibility to navigate it and have a successful investment. These factors are both physiological depending on ones mind setup. How far you are willing to risk and sacrifice for the business and also the environmental factors.

Financial risk and security: Most people wishing to start up a business are in employment sector be it formal or informal. A startup requires a lot of investments in both resources and time. It is hence challenging for one to risk the financial security one enjoys in employment as a business more so a startup has a chance of either success or failure. The financial risk involved in most business is also high. It requires one to get a loan which you must repay no matter the outcome of your business or spend your entire savings. The analysis of what stands to lose, make one abandon their ideas.

Economic and political risks involved: Most developing countries provide the ideal location for a startup. The completion is lower as compared to the developed countries and a large market for the products. The nearness to the required raw materials that are essential to running the business. These countries are however politically unstable. It's unpredictable of the state of peace in those countries to facilitate the running of an investment. Therefore most entrepreneurs tend to shy off from setting up businesses in those areas. The politics of a country may make it undergo tough economic times. Resulting in regression more so from the large nations that control the economy of the world. Those with the idea of a start-up entailing luxury products have to give up their belief as their consumption is low. People tend to purchase necessities.

The competition that exist in a certain field will make one abandon an idea. The market may be so receptive but most startup do not enjoy the economy of scale in their production. Their products and services are at higher cost. The clients will have a preference for the cheaper products. Even when the competition is low one has not been very innovative and persuasive to the clients why they need to change their taste and preference and consume your products.

The pre-startup phase of a business is a very crucial phase in each successful venture. It is a phase in which an entrepreneur is researching more about an idea. As one is trying to identify the market gap, what need will your business serve. One is also able to identify the potential clients and plan on how best to make them consume your product. The identity of the various raw materials in the market that suit your business and the final product from each will help one decide on the best as per your target market tailoring your scale of production and identifying the best chain. A lot of work has to be put up in place before one can have a startup. A proper survey during a pre-startup phase is one of the significant contributors to success in business. Its advisable to take a reasonable amount of time at this stage to study the market and all it entails.

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