Starting a business is an inherently risky venture. There’s no two ways around it. On average, 20% of new businesses fail within their first two years, with 45% failing within the first five years and 65% failing within ten years. According to the U.S. Bureau of Labor Statistics, these statistics haven’t changed much over the last 30 years. Although there’s no way to eliminate the risks of starting a business, being clear-eyed about them is a good place to start.

Let’s look at some of the most common startup risks and how you can overcome them by franchising instead.

Top 4 Startup Risks

1. Financial Risk

There are several financial risks involved in starting a business. Many involve cash flow, with up to 82% of businesses that fail experiencing cash flow issues.

Whether you’re funding your business entirely with your own money or with the help of investors, it’s important to make a diligent, detailed financial plan that includes forecasted balance sheets and incomes, the time needed to break even, and an estimated ROI over your first years in business.

2. Low Consumer Demand

Not all entrepreneurs know exactly what kind of business they want to open, but for those who do, it can be tempting to move forward with your idea before doing any market research.

If your business doesn’t meet the community’s needs , it will not succeed. It’s important to take the time to understand what your community wants and can support – for instance, if your area already has a number of popular gyms at varying price points, it’s not the right time to open a new one.

3. Overlooking the Details

A lot of leg work goes into developing a new business, beginning with your business plan. This document will include an overview of your business itself, market analysis that shows why your business is needed now, the organization of your business, your overall goals, financial projections, a marketing plan, and more.

If you cut corners on the business plan, you’re more likely to make costly or strategic mistakes that could cause your business to fail.

4. Poor Scalability

Most successful businesses are scalable, which means they can adapt in a way that allows profits to grow faster than operating costs. Businesses that are too niche have a particularly difficult time being scalable. On the other hand, scaling up too fast can create the same kinds of issues as being unable to scale at all. In either case, you run a considerable risk of missing out on opportunities to profit, which may lead to the failure of your business.

How Franchising Reduces the Risks of Starting a Business

There are many benefits to franchising vs. starting your own business, but reducing your startup risks may be number one. In fact, a recent multi-year study found that 92% of new franchise businesses remain open after two years, with 85% continuing through five years. Why? Simply put, the franchise model is designed to help entrepreneurs thrive.

Franchising offers entrepreneurs a safer path to business ownership.

• First and foremost, your franchisor will have a proven business model that’s been perfected over time. All you’ll need to do is learn their systems and procedures in order to hit the ground running. When your franchise is ready to scale, the brand’s business model will help you manage it responsibly. responsibly manage.
• Reputable franchisors set financial requirements that all potential franchisees must meet to invest. This ensures you have the cash flow and resources needed to get through your first years in business. Many franchise brands also offer help with financing, either in-house or through trusted third-party vendors.
• Franchise brands perform thorough market research. If your territory is available, the franchisor has determined that your community is likely to support the service it provides. Some franchisors also offer protected territories, meaning you won’t face local competition within the system.

Start Your Entrepreneurial Journey with Home Franchise Concepts

Franchising with an industry leader like Home Franchise Concepts puts you in the best position to build a successful business. Submit our franchise inquiry form today to get started.