4 things you need to know before you invest in Startups

4For small-business entrepreneurs startup is a very popular model to follow. Many do not have the privilege to gain money form big sources. So, they often have to depend on closed ones for the funding. This is why, if you are choosing a startup option you must be careful about certain things. First of all startup is a risky business. It is highly important to have total understanding of the risks involved with the enterprise. You should also have backup plans for mitigation if anything goes wrong. Let us discuss four important things to remember before getting into startup business.

  1. Consider the high failure rate

According to a reliable survey around 50 per cent of new startups fail within their first five years. You might not find any science to calculate the cause of this failure. This is because there is a huge amount of uncertainties involved in this business. The top three can be listed as less market demand, cash flow crisis and not working with the right team. To avoid it you should take help from an experienced investor.

  1. Comprehend the structure

Before making investment you must comprehend the structure of your business. You should find out the liabilities and your source of profits. If you see the level of liabilities is higher than that of profits, you better rethink about starting the business.

  1. Long time waiting for returns

There is a chance that you might have to wait longer than usual to see profit in your business. This is difficult to explain as so many variables work in this part.

  1. Have planning of exit strategy

This is important because once you start the business you might not be able to quit in the middle of it as you might start getting dividends despite success.

So, you should keep the above points in mind before starting a startup.

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