This study explicitly focuses on the risks and assessments involved within a particular business process. The entire process is a clear indicator of tasks and evaluations involved within that process through which productivity ensured. In this research a quantitate approach was followed to take the follow and comparison of techniques already present within literature. It is a conceptual framework and entirely based upon the measurable outcomes observed and expected through different case studies.
Early-stage failure of start-up businesses has documented as a common problem with researchers recording various reasons why nascent entrepreneurs fail in business rather in the early years of starting the business. There are many start-ups which fail in their first year of operations. Statistics assert that up to 75% of startups do not survive beyond the first two years of operations with more than 90% failing within the first five years of service. On the best-case-scenario, only 10% of startup enterprises on 11th, August (Hung, 2016). Through statistics, the general problem is that the startups do not consider the risks that they may face in their operations. The issue is that the startups fail to correctly identify the systematic and unsystematic risks facing the business and; hence, they are not able to manage the risks leading to early-stage failure of startup (York & Danes, 2015).
This study highlights both the systematic and unsystematic risks to start up the official business process. It also proposes the system of identification of uncertainties. By addressing these topical issues, the study would be able to explain the risks that the nascent entrepreneurs need to be predisposed to and on the same note, the research would help in lowering the rates of early-stage failure of start-up and this is the goal of the study.
Nature of the Study
The study herein proposed seeks to identify the risks to which startup businesses need to be predisposed. They have followed a data driven model. The context analysis model may also use. This research will highlight some risk areas considered in need to identify the risks within both systematic and unsystematic frameworks. The nature of the study, qualitative methods of research will be employed. The proposed method is the use of the interviewing technique in data collection. In the process of data collection, the proposed research will identify the business in the early-stage development, determine the entrepreneurs, and contact them with the intent of understanding the risks and uncertainties that they have faced in the process of their operations. Additionally, the study will use the snowballing technique to identify entrepreneurs whose businesses failed in the early years of operations. Notably, this would enable the research to get firsthand information on what caused such companies to fail and what the entrepreneurs think could be done to prevent similar occurrences. Lastly, the study will identify industry-specific uncertainties from the accounts of players in the industry and this will help future entrepreneurs to anticipate the risks and have the necessary measures in place.
The general research question stated as follows:
Are the nascent entrepreneurs able to identify the systematic and unsystematic business risks which may lead to the early-stage failure of the startup and what risk management strategies are available to such entrepreneurs?
The specific research questions stated as follows:
- Risk analysis by newbies to recognize the systematic business risks.
- What are the causes of startup failure while not considering business risks?
- Will newbies identify risks within the unsystematic environment?
- What are risk management strategies available to such entrepreneurs?
This theory indicates the classification of between uncertainty and asserts the profit margin. Where the profit margin is the return for risk by entrepreneur (Knight, 2012).
Significance of the Study
The importance of the survey anchored in Knight’s risk-bearing theory. The relevance of this theory in the discourse rooted in the finding that entrepreneurs are presumed to be risk tolerant. The risk tolerance of the entrepreneurs do not explicitly separate uncertainties from risk but with the theory at hand, the research will be able to separate the changes from risks, and with the knowledge, the study can then provide recommendations on how to deal with the risks. Still, the theory provides a loophole for the separation of systematic risk from the unsystematic risk in defining how much risk absorbed by the entrepreneur (Knight, 2012). Chiefly, this is important because handling unsystematic risk is different from how the systematic risks treated. Therefore, the theory is relevant in informing the direction taken in this research concerning the definition of the risks that the entrepreneurs need to be predisposed to during their operations and most importantly within the first five years of doing business. In other words, the theory helps in the understanding the risks that may lead to the failure of the firm if not properly handled and those uncertainties for which the entrepreneurs earn a return.
Review of the Professional and Academic Literature
Many nascent entrepreneurs do not consider competency as a risk yet it is one of the reasons why many enterprises don’t even to get on their feet. In a study titled Entrepreneurial Characteristics for Business Success: A Review of Literature, the researchers focused keenly on competency as one of the components that result in a business fail. Notably, the risk can also be referred to as ability uncertainty and has referred to elsewhere in this research. The importance of focusing on this risk is that getting to understand the risk would enable entrepreneurs to avoid bad investments and avoid failure in the first year of operations. Further, predisposition to this risk is critical in ensuring that startups prepare to gain the required competencies to run a successful business venture (Kaur & Bains, 2015).
In summarizing the views on risk-bearing among entrepreneurs and why startups fail in the first year of operations, one of the critical observations herein made is the fact that nascent entrepreneurs are more risk tolerant than experienced entrepreneurs. At the same time, the nascent entrepreneurs are more exposed to failure than the experienced entrepreneurs (Hopp & Sonderegger, 2014). The lack of predisposition to risks that the nascent entrepreneurs may face is a critical reason why the start-ups fail in the first year of operations, and it is for this reason that risk training is necessary (Renko, 2012). In fact, (Renko, 2012) found that follow-up for a period not less than four years may require for the success of the nascent entrepreneurs. It is for this reason that the study at hand will focus a lot on this risk.
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