Tech startups face a variety of risks that can slow down progress if they don’t practice strong risk management. Different forms of insurance coverage exist as solutions to unfortunate financial turbulence. Here are six common startup business risks that can threaten your tech company and deter progress.
1. Reading the market and competitors incorrectly
Every business must conduct market research before launching into a new commercial venture. You need to know if the market will support a new player in your niche. Often the key to disrupting a market is applying research results that identify where market holes and barriers exist. Aside from misinterpreting market trends, one of the worst moves new entrepreneurs can make is to underestimate their competitors.
2. Poorly positioned products or services
A product or service must be clearly defined in your business plan to connect with the target market. It must be positioned appropriately through branding to fit in the market as a legitimate choice. When investing in expensive marketing doesn’t generate the desired ROI, you may have to adjust your business plan. For protective coverage against product or service flaws, consider product liability insurance.
3. Uncertain cash flow
Newly staffed companies that don’t plan their cash flow typically struggle to achieve success. Developing a sound financial plan is essential when approaching banks for commercial loans. Your financial plan should include data for your operating expenses, the capital base amount, current cash flow, debt, and future projections.
4. Cybersecurity breaches
It’s clear that even large corporations can get attacked by cybercriminals, which raises red flags for all businesses. Your business must be compliant with laws relating to protecting confidential information such as personal financial information. You’ve got to do as much as possible to reduce the chances of a breach, which can lead to costly litigation. An effective safety net that pays for these legal costs is cyber liability insurance.
5. Lack of quality leadership or team spirit
Without developing trust between the employer and employee, a company’s output and image may be in jeopardy. Employees who feel mistreated might sue the company, which can protect itself with employment practices liability insurance. This coverage pays for claims such as wrongful termination, discrimination, and other forms of mismanagement.
6. Intellectual property issues
Most businesses own some form of intellectual property, such as their logo. Tech companies often own patents, trademarks, and copyrights that protect their proprietary products and services. Lawsuits can erupt when an entity uses an intellectual property owner’s assets without permission. General liability insurance usually covers court and attorney costs for intellectual property cases.
Every business owner needs to review and assess their business insurance needs periodically. Contact us at ISU-Wissink Agency for more information on how to protect the value of your assets in the event of a disaster. We’ve been serving insurance needs for nearly seven decades and are ready to help you build the right protection plan for your enterprise.