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Why reducing risk is essential for entrepreneurs

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You probably know the saying: “It takes money to make money.” But what you may not know is that it also takes risk. When it comes to starting your own business, risk is a necessary evil.

You can’t eliminate risk entirely, but by understanding it and managing it effectively, you can minimize the chances of failure. Here are some tips on how to reduce risk when starting a business.

What is the risk?

Risk is the possibility of a negative event occurring. For example, if you are invested in a company and it files for bankruptcy, your investment is at risk.

Another example of risk is the one that exists when you start a business on your own. If you don’t plan well and take the risk, your business may fail.

In any case, it is important to take the risk when you start a business, otherwise you risk failure.

Why is it essential for entrepreneurs to reduce risk?

Reducing risk is essential for entrepreneurs because it allows them to focus on their business without having to worry about possible losses.

When starting a business, there are many factors to consider. One of the most important is to reduce the risk as much as possible. This means making sure you have a solid business plan and not putting all your eggs in one basket.

It also means being realistic about the potential for failure. No business is immune to risk, but if you recognize it and take steps to minimize it, you’ll have the best chance of success.

How can entrepreneurs reduce risk?

There are a few things that entrepreneurs can do to reduce risk when starting a business.

Investigate the risks of the industry

It is important that you consider the risks of the industry in which you plan to operate. Don’t know how to do this? Here are some ideas:

          Get to know your buyer persona or ideal customer very well: learn about their consumption habits, what worries them, what they think of the sector and what they expect from it.

          Look for official statistics: you can go to specialized websites for your sector or to sites like Statista to get a more objective view. Based on data.

          Identify internal and external risks: make an internal analysis of your capabilities in relation to external aspects.

          Assess the likelihood: try to identify which of the risks is more likely to occur given your own case, your own industry, and your own resources.

          Periodically review the risk analysis: Once you have started, be sure to review the risks, assess your own situation and the market reaction.

These are some of the things we recommend you keep in mind. But as you get to know your sector, its risks and difficulties, you will surely come up with some ideas. Try to do this work carefully.

The idea is to have all the risk elements clear. Once you have these clear ideas, you can make a business plan that takes into account the different risk scenarios.

Create a business plan

To do this, you can create a SWOT matrix, consider the risks and create an action plan according to the evaluation of your business and the possible risks it may face. But always keep in mind that not everything can be predicted. Therefore, you must keep an open mind and consider many possible situations.

Get business advice

Consider hiring people with more business experience, especially if they have a good track record in the industry you plan to enter. I know this may not seem like a viable option with a low return on investment, but it is vital to reduce risk in any venture.

Make a correct analysis of the competition

Try to analyze your competitors. Evaluate their social networks, their brand, the product they sell, the way they sell it and the type of customers they attract. This will help you get an idea of how the market works and will guide you on how to differentiate yourself from them.

Having a good digital marketing plan

One of the most important aspects when starting a business is to have a good marketing plan. The same principles do not apply to all businesses and making sure you have the right medium to long term promotion is of vital importance.


If you need us to help you with your marketing plan, contact us and we can help you.

building a business case can involve which of the following

What are some of the risks that entrepreneurs must take when starting a business?

Some of the risks that entrepreneurs must take when starting a business include the following:

1.       Financial risk: In order for their business to be successful, entrepreneurs must invest a significant amount of money. If the business doesn’t work out, they can lose everything they’ve invested. But, the rewards can be enormous if they are successful.

2.       Technological risk: Entrepreneurs face the risk that their products or services may become obsolete. If their offerings are not competitive, they may fall behind and lose market share.

3.       Market risk: Entrepreneurs risk that the market will not be interested in what they are trying to sell. If there is no demand for their product or service, they are unlikely to succeed.

It’s important for entrepreneurs to be aware of these risks and to take steps to mitigate them. This can be through market research, the development of effective marketing strategies, and a willingness to adapt to technological change. By making calculated decisions and managing these risks effectively, entrepreneurs can increase their chances of success in the business world.


There are also other common risks. These include inexperience, intense competition, and economic uncertainty. These risks are also important for you to consider. Try to mitigate them as much as possible.

Learn from some real examples

Uber Example risk

An example of economic risk is that faced by Uber. Uber had to adapt to the regulations and laws of each place where it offered its services, which meant legal costs, taxes, fines, and lawsuits.

It also had to compete with other similar companies, such as Lyft or
Cabify, as well as with the traditional taxi industry. To manage this risk, Uber diversified its services by offering options such as Uber Eats, Uber Pool or Uber Health. This allowed it to achieve better results and outperform the competition.

Example of Sony security

Another example, albeit of technological risk, is that of Sony, a Japanese multinational electronics, entertainment and video game company. Sony has been the victim of several cyber attacks that have compromised the security and privacy of its customers and employees.

For example, in 2011, the company’s PlayStation Network was hacked and the personal and financial information of more than 77 million users was stolen. To manage this risk, Sony invested in improving its security systems, hired cybersecurity experts, and offered compensation to affected customers.

Kodak example

In terms of market risk, we have the one faced by the company Kodak, which unfortunately did not know how to manage itself, an American company that was a pioneer in analog photography. Kodak did not know how to adapt to the digital revolution that changed the photography market and lost its leadership to competitors such as Canon or Nikon.

The company was also affected by the emergence of smartphones with integrated cameras, which reduced demand for digital cameras. To manage this risk, Kodak filed for bankruptcy in 2012 and restructured to focus on other areas such as printing or medical imaging.


These are good and bad examples of what it means to take risks in
business. They don’t have to be yours, but they can help you identify your own risks.

¿How can entrepreneurs build a business case for risk reduction?

There are five areas that entrepreneurs should focus on when trying to build a business case for risk reduction:

1.       Have a clear vision: Many entrepreneurs fail because they do not have a clear vision of what they want to achieve. You must know exactly what you want to accomplish and how you are going to accomplish it, then work hard to achieve your goals and objectives.

2.       Focus on the market: Another common mistake is not focusing on the market. You need to identify your target audience and understand their needs. Getting this right can be the key to your success.

3.       Develop a solid business model: Your business model must be sound and credible. If it’s not, no one will invest in your business. Not only that, but it will also be important for you to build trust with your customers

4.       Have a strong team: You can’t do everything alone, so you need to surround yourself with talented and trained people to help you drive your business to success.

5.     Have a contingency plan: No one is free from failure, so you need to have a plan for dealing with problems when they arise. It will be very helpful to have assessed the risks as we suggested above, as part of your risk analysis, to create a contingency plan.

6.     Manage your finances: You must have a realistic budget and cash flow projection, and keep track of your income and expenses. You must also have access to funding sources, such as loans, grants or investors, in case you need extra capital.

7.     Protect your assets: Your business assets, such as your intellectual property, your equipment, your inventory or your data, are valuable and vulnerable. You must protect them from theft, damage or loss, by using security measures, insurance policies or legal contracts.

8.     Monitor your performance: You must measure and evaluate your progress and results, using indicators and metrics that are relevant and reliable.

9.     Adapt to change: The business environment is dynamic and unpredictable, and you must be ready to face new challenges and opportunities. You must be flexible and innovative, and willing to learn from your mistakes and successes.

10.   Communicate effectively: You must communicate your vision, goals and strategies clearly and consistently, to motivate and align your team. You must also communicate with your customers, suppliers and stakeholders, to build trust and loyalty.


Applying these 10 ideas will surely help you to create a safer and less risky path for your venture.


Reducing risk is essential for entrepreneurs because it helps them avoid potential problems that could jeopardize their business. There are several ways to reduce risk, but one of the most important is to build a business case.

A business case can involve a number of different things, but the most important aspect is identifying potential risks and then creating a plan to mitigate them. This may involve using market research, financial analysis, and other tools to assess risks and then develop a strategy to address them.

Building a business case is essential for entrepreneurs because it helps them identify and reduce risks that could destroy their business. By taking the time to assess the risks and develop a plan to mitigate them, entrepreneurs can increase their chances of success.


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