12 Risks to be Aware of When Starting a Business

March 20, 2024
March 20, 2024
9 Risks to be Aware of When Starting a Business

When starting a business, you’ll be working overtime and poring yourself, heart and soul into it. You also invest your time, money, resources, and energies into your newfound business just to get it off the ground. When you invest so much, you inevitably face risks.

What are the risks of starting a business? When you set out on your business venture, you face risks of; losing your capital, sacrificing your sleep, family life, peace of mind, creating a product that has no market demand, and the emotional and physical toll on your health, and you may be risking damages due to employees failing their tasks, not delivering on time and losing credibility in the market.

However, some risks need to be taken to move forward and succeed in business. We have brought in the experts in the business world to share what they believe to be the greatest risk starting out on your business venture, with some great suggestions for entrepreneurs to muscle on and succeed.

1. Pushing your Boundaries too Far

“One of the top risks when starting a business is how it can push you to redefine your priorities and boundaries, in both healthy and unhealthy ways. Some recent data from the WHO shows the dangerous side of overcommitting to work: Those who work 55 or more hours per week put themselves at a 35% higher chance of stroke and a 17% higher chance of heart disease. This, besides the emotional and relational toll it can take when your work (or startup) becomes too strongly a part of your identity. It’s always a good idea when starting a business to take an honest look at what you’re willing to give in the name of success. How many hours do you want to give to work vs family vs hobbies? Are you willing to work weekends? What if it requires you to quit your 9-5 and lose some income for  the short term? None of these are bad decisions, but setting clear boundaries for yourself up front can be helpful when those hard choices have to be made.”

Sam Underwood, VP, Strategy & Operations Futurety

2. Exhausting your Capital without Seeing a Return

“It’s important to recognize that even the best ideas don’t always generate a return on investment. It might be a case of ‘wrong place, wrong time’, or simply just insufficient demand for your product or service within the market. With this said, you’ll never know unless you commit fully and confidently. To equip yourself with as much assurance as possible, run the numbers. Understand how much cash you need to break even, and how many years it will approximately take to do that. Make this information clear to stakeholders such as investors so that they too feel confident investing their funds in your business plan. After all, they want to see a return just as much as you do.”

Anthony Martin, CEO & Founder of Choice Mutual

3. Losing Credibility

“Other than the obvious risk of losing money, there’s a risk of losing credibility. There’s a stigma attached to starting a new business and then not succeeding, which happens more often than not. People lose confidence in you as an entrepreneur especially if you try to start another business. This could be investors or suppliers or even family members. My advice would be to cut the noise. Don’t focus on what could happen and what people would think if you don’t succeed. Businesses don’t take off for many reasons. As long as you’re committed to doing your best, you have no reason to doubt yourself.”

Rodney Yo, Owner of Best Online Traffic School

4. Running an Unincorporated Business

“One risk in starting a business is starting an unincorporated business. It is wise to incorporate your business from day one as a formal business structure, such as a limited liability company (LLC) or corporation. Incorporating under an entity formation provides entrepreneurs with limited liability protection. This creates a separation between the personal assets belonging to the business owner, like houses and cars, and assets that belong to the business. Having this added layer of protection ensures that if something unforeseen were to happen to the business, such as accruing business debt or a lawsuit, it would not impact the entrepreneur’s personal assets. My advice is to incorporate as a business entity formation to ensure you are not running an unincorporated business, which may be at much more risk than its incorporated counterpart. If you are unsure which is the best for your business, consult a legal professional for extra guidance. Read more here to know about starting a business with lower risks.”

Deborah Sweeney, CEO, MyCorporation

5. Losing too Much

“The biggest risk is not knowing how much cash you have to gamble. Smart gamblers know how much they can lose before they walk away. Always have exit strategies when you start a business. If you succeed, your exit may be the sale of the business. If your business fails to take off, know when you need to stop before you seriously damage yourself. Every startup is an experiment. It hurts when the experiment fails. You wound your pride. You lose time and money. But it’s not a tragedy. A tragedy is when you risk so much you lose your house, your marriage fails, or you destroy your health.”

Rob Stephens, CPA Founder CFO Perspective

6. Volunteering One’s Time (and Health)

“Entrepreneurship has a significant cost to the common individual. You’ll spend endless hours working to ensure the success of your business, and the remainder of your time fretting about what you’ve done or haven’t done so far. You’ll lose sleep, miss out on personal time, and suffer far more stress than normal. Entrepreneurship’s advantages often surpass these personal dangers, but you must be prepared to live this lifestyle. Risks should not deter you from pursuing entrepreneurial endeavors. Rather than that, see them as essential stumbling blocks on a larger road. While there is no way to escape the dangers associated with entrepreneurship, by anticipating and mitigating them, you may plan for and manage them.”

Nicole Graham, Lifestyle/Relationship Coach Womenio

7. Risking your Job

“I see a lot of people getting into their first business without carefully considering all the consequences. Primarily, the biggest mistake you can make is just quitting your full time job to become a freelancer or a business owner. While that is a nice goal to aspire to, it’s not the wisest move ever. You may not make enough money to support yourself early on and your business could be months away from even becoming profitable. When you’re running low on cash, you’re also bound to make some stupid business decisions. My suggestion is to take on your passion project as a side gig along a full time job. When you see that it has potential, that you have a target market in mind and that there is interest enough to warrant a decent income, this is when you should quit your full time job and pursue your own business. Anything sooner than that will ruin you financially and force you into taking shortcuts just to pay bills.”

Adam Hempenstall, CEO and Founder of Better Proposals

8. Trusting your Employees

“One of the risks of starting a business is trusting your employees. It is rare for a business to start with a full team of employees working for you. What usually happens is that you have a small group of people working together to make sure your business takes off. This means that you have to put all of your trust in them, especially if you found someone with the skills of a whole team and is willing to start at a lower salary than the industry standard. For example, if you hire a digital marketing manager, you need to believe and trust their ability to get the job done and market your product and service properly. While it is risky to trust your business over a stranger, it can be rewarding, especially if you know you have chosen the right person to trust.”

Dave Herman, President EZ Surety Bonds

9. Market Irrelevancy and Other Unforeseen Risks

“Riding trends can often be very lucrative, however, the downside is that these trends can be very short-lived. Businesses need to ensure to either be flexible enough to adapt to new trends or choose niches that can cater to long-term demand. 10. Unsustainable growth: Although rapid business expansion is every entrepreneur’s goal, growing too fast without proper accounting techniques, time management skills, and resources, your business might be on a trajectory towards failure. Not being prepared for a booming business is an actual risk that could doom your business very quickly. 11. Injuries to employees: Small business owners don’t realize the overall costs of employees  nor the risks associated with keeping them on their payrolls. Accidental injuries can not only be expensive to compensate for,  but they also lead to loss of productivity and significant rises in insurance premiums. Not having a comprehensive safety program or procedures in place can significantly increase the risk of injuries. 12. Digital security risks: Many small businesses or startups don’t have proper digital security measures in place, making them susceptible to malware and online hackers. This is a growing risk for businesses as digitalization rapidly increases with data, now more than ever, being stored online. Not having cyber-security coverage or anti-hacking systems  in place is a huge risk that can quickly doom your business.”

Kevin Mercier, Founder Travel Blog Kevmrc.com


  • Ruth Rosario

    Ruth is Chuck's former Assistant Director of Events and Marketing and has been with our CEO for almost a decade before deciding to join him in bringing Los Angeles ahead in the business industry. Now, Ruth is her own boss when it comes to deciding on which articles we'd put up on our website, upholding high-quality standards while providing great attention to detail.

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