Reduce the risk of business failure with these 4 strategies

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In the current inflationary environment and the looming economic recession, starting a business seems riskier than ever. In fact, 89% of small business owners have increased the price of their product or service since the global health crisis, and 60% are concerned about their company’s financial health due to inflation.

Still, brands are launched every day, but not without some necessary linchpins. For brands to thrive, they must make tough decisions around ingredients, packaging and distribution. Knowledge of risk factors and the ability to implement risk management strategies is critical before launching your brand.

See also: 5 ways entrepreneurs learn to manage risk

Lay the foundation for your risk management plan

It can be difficult to take an idea from ideation to product development to market launch. It is important to create a risk management plan for your small business.

The first thing to calculate is the cost of going to market, including your marketing and sales plan. Solidifying concrete numbers gives you a solid foundation to work from.

Next, make sure you assess and know your target market and determine your unique selling proposition. Your product or service should fill a gap, and knowing which gap you’re filling will help you and your employees stay on track.

Finally, you need to set realistic sales goals for your products. Are you becoming an online-only ecommerce store? Brick and Mortar, or maybe you choose to sell your products through a retailer like Amazon? A solid business plan that addresses these key areas and questions is key.

Once you, as a company, have worked through the risk factors, you are ready to launch your brand. Here are four key strategies to help you mitigate risk.

Related: Why you should look into risk management before you even start hiring

1. Consider risks in your business plan

Your business plan is your guide. It should be very detailed and contain information on all aspects of the business, including an industry overview, marketing strategies, finance, human resources, and other various operating procedures.

To do this, ask yourself the following questions: What is the current market situation for this type of product (think supply and demand)? What does our ideal customer profile look like? How do competitors fit into the landscape? How are we different? What is our profit margin and how do we plan to pay off debt? Do we have the right contracts?

And last but not least, make sure you plan beyond your first launch. According to the US Bureau of Labor Statistics, as reported by Fundera, about 20% of small businesses fail within the first year, 33% within the first two years, and 50% within the first five years. A one, three, and five year plan with extensive business knowledge that you may need to adjust can help prevent business failure.

Taking steps to avoid risk doesn’t mean you’re exempt from the risk of failure, but a business plan will help you redirect faster. Setting this expectation with your company upfront can help you mentally prepare for potential obstacles and treat them as opportunities, not setbacks.

See also: 7 steps to a perfectly written business plan

2. Establish your place in the market before you scale

You don’t need a huge collection; You need a pain point and a solution. According to a study by CBInsights, startups fail most often for two reasons: failure to assess market needs and not spending money wisely.

It can be easy to get caught up in size and scope, but consumers are looking for quality authenticity and a compelling brand story. Focus on these things first. A quick way to drive your mark into the ground is to sprint out of the gate too quickly with no clear direction. Find your place in the market and develop a really good product first and the rest will follow.

Take Sara Blakely’s formfitting shapewear brand, Spanx, as an example. While the company is now expanding into other apparel categories, the brand began in 1998 when Blakely had just $5,000 in her bank account. When Blakely chopped off the legs of a pantyhose, she designed her shapewear prototype. That’s how Spanx was born.

You can always innovate your products later, but establishing your place in the market is key to building your brand reputation. When it’s time to maximize growth, you’re ready.

Related: The Power of Purpose: Fostering Authentic Consumer Relationships in an Era of Awakened Capitalism

3. Find a manufacturer who can help you scale up your minimum order quantity

From facility size to quality and speed, ensure your manufacturer has capabilities to meet your needs. You don’t want your initial brand launch to be like Jaclyn Cosmetics was in 2019 when its much-anticipated makeup products were found covered in mold, hair, and blisters.

The reason for this error? The fibers of the cleaning towels were left in a large tub in which the lipsticks were mixed. While this wasn’t the brand’s fault, it took the hit and its reputation never recovered.

It is important to know what to look for in a manufacturer. Don’t be afraid to ask questions on the front end before choosing a manufacturer. Check out their website, read reviews and visit their factories. Invest in your manufacturer the same way you invest in your own brand.

See also: How to find a manufacturer for your product

4. Conduct small test runs to gauge consumer interest

Gathering feedback on a product’s performance doesn’t have to be expensive or a big undertaking. To gauge consumer interest, test your product in the marketplace. This could look like doing a soft launch on your website or using more general third-party selling platforms. Instead of buying 500 units, stock up on 50 of each SKU and measure product performance against key KPIs.

Once your product is on the market, pay close attention to customer reviews. Criticism isn’t necessarily fun, but take it to heart and respond accordingly. This information is a gold mine and can help you create the best product on the market. Would you like to know what your customers want? listen to them

The fact is, launching a brand comes with risks. And with costs rising, it might feel too risky right now. But with the right plan, maker, and mindset, you can successfully start a business while cultivating your unique place in the market.

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