What Is One Way for an Entrepreneur to Decrease Risk? (With 12 Insights From Seasoned Business Owners)

 founder of Starting a business can be an unnerving venture. People always tell you about the inherent risk of being a business owner and how you need to develop risk tolerance.

But what about decreasing risk? How do you protect what you have and ensure safe continuity? 

In this article, I will explore precisely this, with invaluable insights from entrepreneurs who've already been through it all.

Let's get started!

The challenging reality of starting a new business

First, I think it's important to address the elephant in the room.

There's a reason that many of us are looking to decrease business risks.

That's because what comes with the entrepreneurial risk territory is a lot of scary statistics.

You've probably heard some of them:

Less than two-thirds of businesses started in 2018, persist today.

Businesses have a 50/50 chance of survival in five years.

Or the worst of all — in the long run, 90% of startups fail.

That's 9/10!

And while risk-taking is in the very nature of successful entrepreneurs:

Nevertheless, conducting a thorough risk analysis is more important than ever.

(And find unique ways to decrease risk.)

What business risks do new entrepreneurs face?

Possibilities can be both negative and positive, as experienced business owners will be able to tell you.

It's crucial to create a balanced picture of what you should expect.

(You've probably already assessed what could go right. Otherwise, you'd not be running a new business.)

However, it's equally important to assess what might go wrong and plan accordingly.

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Common risks new founders may face

• Competition from different sources: When you think of competition, you may just be thinking of those businesses that produce the same products or services as yourself. But competition can mean many things. For example, if you sell luxury goods, you may find that you're competing for the "spending money" of consumers who may opt to spend their leisure allowance on air travel instead.
• Rising costs: Business is expensive. And sometimes it can get even more so. You may discover that your suppliers keep increasing their prices with inflation, your utilities are getting more expensive, and rent has been steadily rising.
• Unforeseen incidents: We often don't prepare for every potential circumstance—but I mean, who can? Business owners may not always be able to anticipate everything that might go wrong. However, considering and being properly prepared for environmental, political, or socio-economic issues will help you stay afloat during tough times.
• Cybersecurity issues: Did you know that Yahoo received a $35 million fine for failure to disclose a 2014 cybersecurity incident? The online world has become ridden with bad actors, so knowing how to protect your business has never been more critical.

The fact of the matter is that risk preparation can help mitigate many of these risks or, at the very least, reduce their effect.

Let's explore 12 ways you can reduce risk in your own business - taking sage advice from experienced business owners.

1. The founder of FutureFund — decreasing risk by building a resilient organizational culture

"A singular, transformative approach to decreasing risk as an entrepreneur is to invest deeply in building a resilient organizational culture.

This means fostering an environment where adaptability is ingrained, failure is not feared but used as a stepping stone for growth, and continuous learning is part of the daily ethos.

At Square and Weebly, we embraced challenges as opportunities for innovation, encouraging the team to experiment boldly and learn rapidly from every outcome.

This culture of resilience and adaptability doesn't just mitigate risk; it transforms potential obstacles into avenues for innovation, ensuring the organization survives and thrives in the face of volatility.

Embedding this mindset into the fabric of your company creates a dynamic capability that acts as a buffer against the uncertainties that come with entrepreneurship.

It's about building a ship that doesn't just weather the storm but learns to sail better because of it." - Darian Shimy, founder of FutureFund.

2. The Founder of Lead from the Front — decreasing risk through learning

"Knowledge, knowledge, knowledge.

The best way to mitigate risk is to learn.

Learn all the aspects of your business, industry, and market, especially how they all interrelate.

Not only does this mitigate risk, but entrepreneurs who build their knowledge will also discover new opportunities and insights into building their ventures." - Ed Brzychy, founder of Lead from the Front.

3. The founder of Thooja — decreasing risk through delegation

"I would argue that TIME, not MONEY, is the asset we risk most as entrepreneurs. Too many founders have a good idea that never makes it off the ground because they cannot see where their skills lie and how best to invest their time.

That's why delegation, by hiring skilled team members you trust, is fundamental to derisking any business venture.

In 99.9% of cases, you can't create a successful business on your own - attempting to do so is, by it's very nature, risky." - Ultan O'Callagham, founder of Thooja.

4. The founder of Just Value Doors — decreasing risk through a customer feedback strategy

"As the visionary director of Just Value Doors Ltd., one approach I've employed to mitigate risk involves deeply integrating customer feedback loops into every product development and business strategy phase.

This process allows us to stay ahead of market trends and directly address consumer needs, significantly reducing the market and product development risks.

By prioritizing customer satisfaction and leveraging feedback, we align our offerings more closely with market demands, ensuring our products and services meet and exceed expectations.

This strategy has been pivotal in our success, positioning Just Value Doors as a customer-centric brand in a competitive industry.

Understanding and responding to customer feedback is a cornerstone of entrepreneurial success and risk management." - Chris Langley, founder of Just Value Doors.

5. The founder of Lake.com — reducing risk by cutting out fixed costs

"Business risk is always measured by its costs because, without financial investment, all a failing entrepreneur loses is time.

When I started both businesses, I cut out every fixed cost I could from the very start.

If you don't absolutely need an office space, choose a remote setup. Hire freelancers, so you have labor cost flexibility and the time and energy to focus on real core competencies.

Use cloud-based tools and pay-as-you-go services. Consider dropshipping, partnering with fulfillment centers, and on-demand delivery services.

Use content marketing, social media campaigns, and other relatively inexpensive marketing tactics to start testing the market and proving your business's viability. Barter with other businesses and trade services on the cheap.

Question every single expense until you've released an MVP that allows you to test market viability.

Invest slowly, and always invest in scalable options when they're available to you." - David Ciccarelli, founder of Lake.com.

6. The founder of Ormi Media — decreasing risk through logical decision making

"Decreasing negative risk in business takes reflection and being strategic before making your financial decisions.

You have to position yourself as the business owner to make good decisions based on logic and not emotion.

If you're B2B that means not taking on bad clients just for the money.

If you're B2C, don't just offer every product under the sun.

You end up spreading yourself too thin and losing more money in the long run." - Natalie Le, founder of Ormi Media.

7. The founder of DriveSafe Driving Schools — decreasing risk through competitor analysis

"Taking risks is crucial for a business to succeed, but not all risks are created equal.

The less you know about your business venture, the riskier it becomes.

However, there is a way for entrepreneurs to decrease their uncertainty: check the competitors.

Figuring out whether your business will thrive or tank can be easier when you know what your rivals are doing wrong (if they are) and vice versa.

This should help you get a clearer picture of the market and make smarter decisions that could minimize risk for your own company.

Look at it this way:

If you're constantly keeping tabs on other businesses like yours, then why wouldn't customers choose yours instead?

Having a competitive analysis strategy is one-way entrepreneurs can decrease risk.

By understanding the strengths and weaknesses of your competitors, you can identify potential opportunities for your business to stand out in the market." - Tariro Goronga, founder of DriveSafe Driving Schools.

8. The founder of Able Hardware — decreasing risk through supply chain management

"As the founder of a successful metal fabrication business, one way that I've learned to decrease entrepreneurial risks is through robust supply chain management.

It's crucial to ensure continuity in your supply chain to avoid disruptions that could harm your operations.

I achieved this through owning our raw material factories and maintaining diverse sourcing strategies.

This way, if one supplier faces issues, we can continue our operations with minimal disturbance.

This has been key to maintaining our prompt delivery times and reputed product quality at Able Hardware.

It has also empowered us to export approximately 200 containers annually to various countries.

So, diversifying and controlling your supply chain can significantly reduce the risk and ensure a steady flow of business operations." - Jason Woo, founder of Able Hardware, boasting over 20 years of metal fabrication expertise.

9. The founder of TechNoir CIO Solutions — decreasing risk through stakeholder collaboration

"When I took on the CIO role at The John Marshall Law School in 1998, the school's technology needed updating.

Rather than assuming I had all the answers, I spoke with faculty, staff, and leaders.

I wanted to understand how they used technology day-to-day and what improvements could ease their jobs. Getting input from across the school helped ensure we focused on real needs and pain points.

Taking this team approach to heart, I made stakeholder collaboration central when starting TechNoir CIO Solutions.

I spent time understanding clients' unique challenges, and worked with partners to design solutions tailored to their goals.

Getting ongoing feedback and adjusting the course prevented assumptions and blind spots that increase risk.

I continue this collaborative ethos today by regularly tapping into advisory boards on industry changes and new opportunities.

We believe in the power of working together - both within our company and alongside clients - to navigate risks and uncertainties." - James Velco, founder of TechNoir CIO Solutions.

10. The founder of Sphere IT — decreasing risk through IT management

"As the Managing Director of Sphere IT, my team and I have emphasized the importance of anticipatory measures to safeguard against potential IT tragedies before they occur.

This involves rigorous system health checks and continuous monitoring and investing in robust cloud backup solutions to ensure data integrity and availability under any circumstances.

Our commitment to implementing forward-thinking, preventative strategies has minimized downtime for our clients and bolstered their confidence in our ability to protect their most valuable digital assets.

This proactive approach to IT support and disaster recovery planning is an essential cornerstone of risk reduction for any entrepreneur venturing into the digital domain." - Michael Collins, founder of Sphere IT.

11. The founder of Tina Willis law — decreasing risk through proper insurance coverage

"One of the most effective ways to decrease risk for any business owner is to purchase sufficient & comprehensive insurance coverage.

This should include general liability insurance to protect against claims of bodily injury or property damage, professional liability insurance (also known as errors and omissions insurance) to safeguard against claims of negligence or mistakes in any entrepreneur's professional services, and workers' compensation insurance if the owner has employees.

Having comprehensive insurance coverage dramatically reduces financial risks, because many injury and accident lawyers will not pursue remedies above insurance policy amounts.

So these policies should provide true peace of mind (one caveat: any insurance policies should roughly cover the value of owner and business assets, otherwise lawyers will pursue further recovery on behalf of any client with serious injuries)." - Tina Willis, founder of Tina Willis Law.

12. The founder of Protostar Inc. — decreasing risk through market responsiveness 

"I believe that as an entrepreneur, it is crucial to adapt to changing consumer preferences to reduce market risks. I can quickly adjust my products or services to meet changing demands by keeping a close eye on shifting consumer preferences. This approach ensures that my business remains relevant and responsive in changing market dynamics, reducing the risk of losing customers unexpectedly due to sudden changes in what they like or want." - Olivia Tian, founder of Prosostar, Inc. and marketing director of Raise3D.

What is one way for an entrepreneur to decrease risk? Listen to good advice!

This article covers precisely how you can ensure the longevity of your business plan, from forming resilient organizational cultures to signing up to insurance policies.

But it doesn't stop here; now it's all about application! 

How does the above advice apply to your business? And how can you utilize it for your own success?

Best of luck, entrepreneur!

Additional resources

Looking for more seasoned wisdom? Here are a couple of more articles featuring business owners who know what they're talking about:

• What Must an Entrepreneur Assume When Starting a Business? (Let's Explore the Top 10!)
• Navigating Generational Differences in the Workplace — A Communication Expert's Insights
• How to Start a Business With Nothing in 2024