Startup Risk Analysis is not Trivial – Robert Sherwood

It is not trivial, nor obvious, to define the initial risk of a new business. I am not talking abut the risk of success, but the risk in the underlying concept. Let me give you an example. Ten stores exist on a street and each store sells oranges, but no apples. You elect to start a store selling Oranges. What is your risk? More than likely it is not market.

If ten stores are selling oranges, there is likely a market for oranges. Now if you elected to start a store selling apples, then you might be compelled to conclude that the other store managers were stupid, or perhaps more correctly, there is no market for apples. Always give the competition some credit.

startup risk analysis

Robert J Sherwood while receiving ‘Entrepreneur of the year’ award

In another example, you fly to a small village in Africa. Upon arriving, you notice that no one is wearing shoes. Do you conclude there is a large market for shoes? Or do you conclude no one needs shoes and therefore there is no market for shoes.

Startup Risk Analysis is not mandatory

Risk analysis for a startup is a nonobvious, yet critically important, exercise. Most people who have given risk analysis little thought will casually reply to the risk question, “Our business risk is we run out of money.” Yes, my feathered friend and the team that scores the most points always wins the football game. Risk is underneath the obvious.

Your risk might be the product you have conceived on paper will not work. Your risk might be you can not achieve the estimated manufacturing cost. Your risk might be that after you have designed the best website in the world, you are unable attract visitors. Your real risk might be you do not truly understand your risk.

Look at your startup business and identify where is the real  risk. Once you have identified the real risk, you have a much better chance of overcoming it.

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