Starting a business can be a daunting task, even for experienced entrepreneurs. Some of the reasons many startups fail include inadequate cash flow and poor team management. To increase your chances of success as an entrepreneur, you should be aware and protect yourself from the following technological risks.
1. Underestimating Your Competition
Many startups make the mistake of underestimating their competitors and misjudging the market demand. It is crucial to research the market when launching your startup. This entails knowing about consumer preferences, current trends in your industry, and competition.
2. Poor Products Or Services
Tech startups need to define their products and identify their target consumers. One of the best ways of defining your products and services is by creating a minimally viable product (MVP). This is a product that has fundamental features. The aim of launching this product is to determine how consumers will respond. If the launch receives a positive response, you can build on your MVP. However, if it turns out to be a failure, you will find another viable product.
A good startup tip is to create a business plan. This will guide you on how to proceed with your business. Some of the good business plan features include an executive summary, a list of products and services, and your marketing strategy. Do not rush to launch a product, as this can either make or break your business’s reputation. If you offer services, consider taking professional liability insurance. This will protect you from mistakes, oversights, and negligence.
3. Cash Flow Problems
Another common risk for startups is cash flow problems. Over 80% of small enterprises fail due to financial problems. It is important that you forecast your spending to address these risks. The first step is to create a financial plan. The main features of a financial plan are operating expenses, total budget, capital raised, current income and cash flow statements, and financial projections. Also, maintain an emergency fund to cater for hidden and unexpected expenses.
4. Cyber Threats
A cyber-attack is a threat that mainly affects businesses that deal with sensitive data. Data breaches can be costly, leading to huge data losses. To protect your business against a cyber-attack, you should invest in cyber liability insurance. The main types of cyber liability insurance are first-party and third-party insurance. First-party insurance secures your business against data breaches and losses. This form of insurance caters for costs such as fraud monitoring services, public relation costs, and security weaknesses.
Third-party cyber insurance caters for legal expenses in case a client sues you for a data breach. Some of the expenses covered in this insurance include settlements, court costs, and attorney fees.
It is not enough to have cyber insurance; you should also have a system in place to help you identify potential risks. Some of the things you should watch out for include suspicious emails, leaked passwords, stolen devices, and exposed data. These risk assessment systems begin with identifying sensitive data, valuable systems, and company operations. Think about the information that might be valuable to hackers.
5. Protecting Intellectual Property
Tech startups may also have large amounts of intellectual property. This includes product designs and patents. Intellectual property can easily get exposed if you deal with subcontractors.
A subcontractor agreement should include a warranty clause, non-disclosure terms, work scope, and payment details. It should also have ownership rights and hold harmless agreements. You may consider fidelity bond insurance to protect your organization from intellectual property theft. You can either opt for a first-party fidelity bond or third-party fidelity bond insurance. This insurance covers costs related to employee theft, fraud, and forgery.
6. Team Troubles
Many startups fail because they do not have the right team. The members of your team will affect your business’ success. Recruit members who have the appropriate expertise and talent. It might also help to seek advice from successful startup founders.
Consider investing in a directors and officers insurance, also known as a D&O policy. This form of insurance protects your board members, officers, and co-founders if they make decisions that result in losses. D&O insurance caters for lawsuits related to employee complaints, regulatory compliance, mismanaged funds, libel, slander, and copyright infringement.
Many business owners focus on making money that they forget about the potential technological risks for startups. A successful business owner should beware of common startup risks and develop a risk management strategy. It does not matter what risks your business faces; having the appropriate business insurance should be part of your risk management strategy. With the right amount of planning and protection, you have a high chance of running a successful business.