Module 1, Video 10: Risks, Failures, and Important

Steps (Part 1) Transcript

In this video we'll discuss the risks in creating a startup. We'll also talk about the causes of failure and important
steps to take to reduce risks and avoid failure. In video six, we discuss the challenges that entrepreneurs face when
they create a new business. In this video, we'll be more specific about what those are for the entrepreneur.

Entrepreneurs often have to take risks with their career and their money. When they decide to create a new
business. This happens because entrepreneurs usually do not have time to start a company and have a regular job
at the same time. If the startup does not succeed, they often have to find regular employment again, which could
be difficult. Entrepreneurs also often invest some or all of their personal savings in their startup. In addition,
because they often do not have another job, they do not have much money for daily living expenses. Because it
can often take a few years for a startup to make money, this situation can be very stressful and risky, particularly if
the startup does not succeed in the end. If an entrepreneur or other loved ones to support, this stress can be even
worse.

Now let's look at the causes of failure. Experienced entrepreneurs work and plan to avoid failure, but there are
several common reasons for failure that the entrepreneur cannot control. Let's look at three important ones. The
economy. Customer loyalty and competition. We will look at each of these now.

An economic crisis can cause failure for an entrepreneur. Customers may no longer have money to buy products.
The entrepreneur will sell many fewer products than expected and the business might fail. An example of this is
what happened in Greece for several years. Greece had an economic crisis; many people lost their jobs or had their
wages or pensions reduced. They no longer had money to buy products and many businesses failed.

Customer loyalty may also cause failure because target market customers are not always loyal. What does this
mean? If a customer is loyal, they buy the same product all or most of the time. When a customer buys toothpaste
it is always the same product. When a customer is not loyal, they but a different product instead. Why do they do
this? One reason is customers aren't sure what they want, so they try many products to find out. Another reason is
other competitors come into the market with a new product, with a different style or lower price. The customer
likes this style and price better.

Entrepreneurs must always be aware of the risks of competitors. Economic changes. Changing customer loyalty,
and competition. These can all cause a new business to fail. An entrepreneur has no direct control over these.

© 2022 by FHI 360 M1 T10 Risks, Failures, and Important Steps (Part 1) Transcript for the Online Professional
English Network (OPEN), sponsored by the U.S. Department of State with funding provided by the U.S.
government and administered by FHI 360. This work is an adaptation Deciding on a Risks, Failures, and
Important Steps by University of Pennsylvania licensed under the Creative Commons Attribution ShareAlike
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