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4 Biggest Threats to New Businesses

4 Biggest Threats to New Businesses

When the day comes to open a real brick-and-mortar business’ doors, entrepreneurs feel they’ve accomplished something colossal—and they have! But it’s important not to fall into a false sense of security. New businesses face their most challenging period after opening. Common threats capable of bringing a down new business loom everywhere. Be mindful of these four significant risks, as they could sink a company almost as soon as the enterprise starts.


Whoever said competition is good for a business was correct. As YFS Magazine points out, competition leads business owners to work smarter and harder. That said, don’t assume the presence of competition doesn’t represent a threat. When an already established company delivers a similar service to an established customer base, then attracting customers could prove difficult. Maybe choosing a business location further away from the competition is advisable. Perhaps you need to assess the quality of your products and services. If you aren’t doing things better than the competition, customers won’t gravitate in your direction.

Legal Threats

Lawsuits and settlements could sink a company. Take careful steps to avoid negligence. You don’t want to injure customers and create problems for the business. Everything from slip-and-fall accidents to product liability could ruin a business.

Additionally, take steps to avoid claims from employees. Avoid wrongful termination, negligent injuries, and harassment compensation suits as the cost might be enormous. In fact, according to Legally Mine, for small-to-medium-sized businesses, the average total cost of employment-related claims that resulted in a defense and settlement payment is $125,000.

Calling in an expert to assess risks might be advisable, and procure the right amount of insurance. Overall, do what you can to protect your business.


“Undercapitalization” is another way of saying “not enough money.” defines undercapitalization more formally as any situation which restricts the business from acquiring the funds which they need. New business owners can find themselves in a quandary. Budgets remain tight, so spending isn’t easy. Borrowing could drive a venture into the direction of burdensome debt.

Regardless, business owners can’t always launch a company with too little money. Not paying for cleaning services won’t contribute to good impressions. Failing to invest in the necessary marketing doesn’t bring in customers. Eventually, cutting back on essential spending may lead to missed opportunities and lost revenue. Business can’t survive when these troubles pile up.

Poor Customer Service

The Hartford explains how poor customer service could ruin a business’ name and reputation quickly. Always deliver on promises promptly. Respond to criticism and complaints professionally. Establish procedures for dealing with customers, so problems don’t occur in the first place. Most importantly, invest in customer service training. Don’t overlook any means of improving customer service.

Starting a new business is scary, but it’s an adventure that is rewarding when you are successful. Don’t let these challenges scare you away from jumping into a new business venture. If you plan thoroughly and work hard, then starting your own business can be one of the greatest accomplishments of your lifetime!

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by Eileen O'Shanassy // Eileen O'Shanassy is a freelance writer and blogger based out of Flagstaff, AZ. She writes on a variety of topics and loves to research and write. She enjoys baking, biking, and kayaking. Check out her Twitter: @eileenoshanassy.

Opinions expressed by contributors are their own.