Starting A Business: How Entrepreneurs Handle Risk

Every successful business begins with one thing: someone willing to take a risk. If you’ve got an entrepreneurial spirit, chances are you’ve already imagined big ideas, set ambitious goals, and envisioned what success could look like down the road. That kind of forward-thinking is essential, but it’s only part of the equation. Turning an idea into a sustainable business requires smart planning, confident decision-making, and a willingness to take calculated risks. 

Even with a solid plan and strong motivation, the challenges entrepreneurs face include real risks that can impact early success—from financial setbacks, logistics changes, and supply chain issues to market competition and changing consumer demand. Nearly 1 in 5 small businesses fail within their first year, and around 50% never make it past five years. That doesn’t mean success is out of reach—but understanding the risks of starting a business is the first step toward building a strategy that minimizes them. With the right knowledge and preparation, many risks of starting a business can be anticipated, managed, and transformed into opportunities.

One of the most significant challenges new business owners face is managing financial demands. Whether the venture is self-funded or backed by investors, financial risks are inevitable. Effective management can turn risks into opportunities instead of setbacks.

Key financial risks include: 

Initial investment. Launching a business often requires upfront investment. Startup costs can include everything from product development or inventory, equipment, and technology to branding, marketing, licensing, and legal fees. 

Cash flow management. About 82% of business failures are due to managing cash flow problems. Monitoring income versus expenses, especially in the early stages, is essential.  

Unexpected costs. Emergencies and supply chain issues can throw a wrench in even the best-laid plans. A contingency fund provides a vital safety net.  

Personal finance exposure. Entrepreneurs often use personal funds or credit to get their business off the ground. Separating personal and business accounts protects personal assets.  

Debt management. Managing debt is as important as having enough funding. A clear repayment plan prevents overextending. 

Revenue uncertainties. Profitability can take months, or even years. Overestimating income can strain operations, but forecasting based on conservative estimates can help businesses stay grounded during early growth.

Investor expectations. While outside funding can accelerate growth, it brings accountability to investors. Investors expect returns, so it’s important to set realistic milestones.

Breaking into just about any market is a challenge. Every business needs to find its audience and prove its value—even with a solid product or service. 

Common market and competitive risks include:

Market saturation. It can be hard for a new business to stand out in a saturated industry. Finding a niche or underserved market can make all the difference in gaining traction. 

Consumer demand uncertainty. Just because an idea is exciting doesn’t mean there’s a market demand for it. Testing interest through surveys, beta programs, or pre-orders can help a business determine if the concept is valid before going all in. 

Competitive pressure. Established businesses often have resources, brand recognition, and loyal customers that new ventures won’t. Startups have to be strategic about what sets them apart. 

Market timing. Launching too early or too late can impact success. Strategic timing is key.

Product–market fit. Every product or service should provide a solution. Clear messaging and customer feedback helps find the right audience. 

Pricing strategy. Pricing too high or low can hurt revenue. New businesses must strike a balance to profit yet stay competitive. 

A great business idea is just the beginning. Daily operations must be well-managed from the start. 

Common operational risks include:

Supply chain and logistics management. Vendor delays and shortfalls affect order fulfillment and customer satisfaction. Having backup suppliers keeps operations moving. 

Quality control. Reputational risk arises when inconsistent products or services damage consumer trust. Maintaining standards is vital to helping a new business flourish.

Staffing. Attracting and retaining talent is one of the biggest challenges new businesses face. Competitive pay and a positive culture help attract and retain top talent.

Scalability. Every business has growing pains. Plans for scaling systems, processes, products, and services can turn ambitious goals into achievable outcomes.

Legal compliance. Staying compliant with licenses, permits, and industry regulations is essential to protecting a new business. 

Time management. Startup life is demanding. Being intentional about work-life balance can prevent burnout. 

Modern businesses rely heavily on technology—and with that reliance comes a new set of risks. Cybersecurity threats, data privacy concerns, and system vulnerabilities can disrupt operations, violate customer trust, and damage a company’s reputation. Technical debt and outdated systems can cause reliability issues, while poor software implementation can end up costing time and money. IT infrastructure is essential to scaling effectively. 

IT degrees like WGU’s B.S. in Cybersecurity and Information Assurance prepare professionals to address critical concerns. Advanced programs in software engineering and computer science develop the technical leadership skills needed to navigate technological risks.  

In business, taking risks is unavoidable—but that doesn’t mean reckless. Calculated risks set thriving businesses apart. For example, a Harvard study showed that CEOs who take calculated risks are more likely to achieve long-term success. Calculated risks rely on data, experience, and a clear understanding of potential outcomes. Balancing risk with strategy leads to better decision-making and increases the chance of success. 

Understanding different types of entrepreneurial risk helps business owners make informed, strategic decisions. Some of the most common risks in business include:

• Founder risk. Are co-founders aligned and collaborative? 

• Product risk. Does the team have the technical skills to build it?

• Market risk. Does the product solve a real problem? 

• Competition risk. How does the offering compare to others?

• Sales execution risk. Can the product be sold effectively? 

Many well-known entrepreneurs took huge risks early in their journey. While not everyone can turn their entrepreneurial dreams into the next Facebook, Amazon, or Canva, there’s value in the lessons they learned. The following real-world examples show how bold decisions can change industries.

Mark Zuckerberg launched Facebook from his college dorm and created one of the world’s most widely used social media platforms. In a bold and controversial move, he rebranded it as Meta, and introduced the metaverse, using technology to redefine how people connect and interact online.

Jeff Bezos left a lucrative Wall Street job to start Amazon in his garage. Originally envisioned as an online bookstore, he quickly expanded Amazon into a global e-commerce powerhouse. His recent expansion into Amazon Web Services and space exploration company Blue Origin reminds us that risk and innovation are essential for entrepreneurs who want to build something truly transformative. 

Melanie Perkins drew upon her background in communications and design to develop Canva, an online platform that simplified graphic design so anyone could use it. Despite the risk of dropping out of college, Canva’s rapid growth led to Perkins becoming one of the youngest female tech billionaires. 

When it comes to risk, mindset matters. Optimism and confidence play a big role in helping risk-takers succeed. The luckier someone believes they are and the more confidence they have in their skills and abilities, the more likely they are to overcome entrepreneurship challenges. 

While risk can’t be eliminated, developing a strong risk management strategy helps entrepreneurs anticipate challenges and respond proactively. Key strategies include:

• Conducting market research and competitive analysis 

• Writing detailed business plans with contingency scenarios 

• Developing minimum viable products (MVPs) for market testing  

• Establishing strong financial controls and monitoring cash flow 

• Forming diverse teams with complementary skills 

• Implementing robust cybersecurity measures 

• Obtaining solid business insurance   

• Creating strategic partnerships  

• Developing adaptable business models 

• Using technology to streamline operations 

Small business owners who understand risk are more likely to build companies that last. Whether facing market competition, operational challenges, or financial uncertainty, business and leadership degree programs provide the skills to think strategically, navigate risk, and lead with confidence. 

Business Education Foundations 

Foundational knowledge in finance, marketing, sales, and accounting prepares aspiring entrepreneurs to navigate real-world business challenges. A bachelor’s degree in business is an ideal starting point for gaining foundational insights into how companies operate. For those looking to deepen their expertise, a master’s degree in management and leadership or an MBA can provide advanced education in strategy, planning, and leadership.

Technology Knowledge as a Competitive Advantage 

Digital fluency can differentiate a startup in a crowded market, and entrepreneurs benefit from understanding data, security, and IT systems. Analytics knowledge, for example, reveals customer behavior and market trends. Cybersecurity awareness helps safeguard customer data. Understanding IT infrastructure and software can help business operations stay efficient and cost-effective. 

Earning a technical degree such as a bachelor’s degree in cybersecurity and information assurance prepares students to identify and manage digital threats. A master’s degree in software engineering or computer science dives deeper into programming and system design. These types of degree programs help entrepreneurs gain critical skills to support growth and innovation. 

Accelerated Learning Pathways for Entrepreneurs 

Accelerated degree programs like WGU’s B.S. to M.S. in IT or the one-year MBA empower aspiring entrepreneurs to build technical and business expertise while gaining industry-relevant certifications. With affordable tuition and 24/7 online access to coursework, WGU offers flexibility and a strong ROI for busy entrepreneurs looking to upskill.

Starting a business  always involves risk, but smart entrepreneurs manage business risks strategically. WGU’s business and technology degree programs are designed to help aspiring business owners and leaders do exactly that—develop the skills they need to launch a business, lead with innovation, and navigate risk with confidence.  Learn more.