What you can do to keep your tech company safe from six common risks for new businesses

There are risks for every computer company, six common risks for new businesses from not having enough money to getting in trouble with the law. As a tech company starts up, here are some of the most common risks it faces and how to avoid them.

Even for entrepreneurs with a lot of experience, starting a tech company is hard. It is not a surprise that many new businesses fail. Anything from not having enough cash flow to not managing the team well enough can kill a tech company that had a lot of potential.

Even if you like to take risks, you should stay away from these common starting business risks if you want your business to do well. If you own a business, you should know about these six types of risk and how to keep your company safe from them.

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Not recognising the competition or wrongly judging the need in the market

Many successful startups fill a need in the market. However, a lot of tech companies get the market demand wrong and the competition wrong.

That’s why you should do study on the market before starting your tech company. To do this, you need to collect and analyse data about what customers want, your competitors, and industry trends.

To do this, you don’t have to pay a marketing expert. Why not do your own market study and lower your risk of losing to competitors? Here are some low-cost ways to do it:

  • To keep up with market trends, use Google and read accounts from reliable groups.
  • Ask possible buyers via email what products they would like to see more
  • Ask the people you want to reach what they want from your brand through social media polls.
  • Ask people for feedback.
  • Find out about your competitors and keep an eye on their marketing, new product releases, and other activities.
  • If you do enough study on the market, you might find that it is already full. If a market is already very crowded, it’s hard for tech companies to do well unless they’re really changing the game.

If the market is very competitive or full, look at other options in the market and think again about what you’re selling. Find your area early on and think about what makes your brand different from others in the same field.

Not well explained or bad products or services

You may know a lot about what you’re selling, but it’s even more important to know who you’re selling to.

Tech companies need to be very clear about what their product is, how it works, and who needs it. People who might buy from or invest in the business need to know this.

A Minimum Viable Product (MVP) is a good place to start when you want to describe what you’re selling. An MVP is a new product that comes out with only the most basic features to see how interested people are in it.

If the launch goes well, you can use what you learned from the first release to improve your MVP. If the product doesn’t work, you’ll have saved a lot of money.

Always write a business plan before you start your tech company. You should still make a business plan even if you don’t need to raise money. It will help you plan how to run your business in the future.

These things should be in your business plan:

  • A outline for executives
  • A brief outline of your company
  • A list of the things you sell and do
  • What makes you different from the others?
  • SWOT study and market research
  • Plan for marketing
  • Model of the business, management, and team layout
  • Plan for money
  • Getting the money (if any)


Startups may want to rush to get a product on the market. You need to fight the urge to rush and take your time making the product. The quality of your product can make or break your business’s image. If the quality of your product is bad, you could even be sued.

If your tech company offers a service, you might want to think about getting professional liability insurance. This type of insurance, which is also known as “errors and omissions insurance,” will protect you from charges of carelessness, mistakes, and oversights.

Product liability insurance might help you deal with the risks that come with making a new product. It keeps you safe from claims that your goods hurt someone or damaged property. Most of the time, this policy is added on as an add-on to general liability insurance.

Trouble with cash flow

Start-ups take a big risk when they run out of money. Over 80% of small businesses fail because they can’t make enough money.

To account for this risk, make sure you properly predict how much you will spend. You’ll have to make changes if your running costs are higher than your budget lets you.

In the early stages of your tech business, you need to make a cash plan. The following items should be in your business plan:

  • Your whole budget
  • Costs of doing business, like rent, wages, supplies, and so on
  • Income and cash flow figures for now
  • Money raised
  • Loans and debts
  • Forecasts of money

Your business plan should have a cash plan in it. Banks and venture capital firms will want to see your financial plan if you want to get money. This is so they can understand why they need to give you money. Good budgeting and having good records can go a long way, and so can a thorough budget.

As a business starts out, it’s important to keep its cash safe. Don’t rush to pay off your debt; instead, save money in case of a disaster. It is better to pay back low-interest loans slowly than to spend all of your money on one payment.

Threats from the internet


An attack or data theft is bad for any business. They are even more at risk if they store or deal with private info.

Being hacked can cost a lot of money. You could lose a lot of money if someone breaks into your business. Also, you could be sued for a lot of money if you’re blamed for a client’s data breach.

You might want to get cyber liability insurance to protect your startup from online dangers. Cyber risk insurance comes in two types: first-party and third-party.

If your own network or systems are hacked, first-party cyber liability insurance will protect your business. It helps pay for things like

  • Notifying customers and keeping an eye on credit and fraud
  • Looking into and fixing security holes
  • It costs money to do PR.

If a client sues you because of a data breach at their business, third-party cyber liability insurance will cover the costs. It helps pay for things like court fees

  • fees for lawyers
  • Agreements or court orders
  • Other court fees

Issues with the team

A lot of startups have failed because the people on the team didn’t have enough experience or because they took help from people they didn’t trust. Your managers and team members are very important to the success of your company, so be smart about how you hire them.

Get around people who can help your business grow and be led by their skills and knowledge. Talking to successful business owners and asking for their advice can be helpful. If this is your first business, find someone who has been in business for a while and can show you the ropes.

You can also get and keep good leaders with the help of directors and officers insurance (D&O) policies. If your co-founders, board members, or officers make a choice on behalf of the company that costs it money, D&O insurance will protect them.

Directors and officers insurance protects against complaints about:

  • Badly handled money
  • Problems with employees
  • Claims of slander, libel, and copyright theft
  • Not following the rules set by the company
  • Compliance with regulations


You might also want to think about getting hiring practices liability insurance to protect your company from claims from your workers. This can help pay for claims about:

  • Badly handled benefits
  • Using sexual language
  • Termination without cause
  • Being unfair
  • Breach of the job agreement


People who run startups often make the mistake of asking a small team to do too much or letting you and your partners make all the decisions. Things that are important can get missed either way.

To keep important information from getting lost, cross-train your team. Someone should keep an eye on things from above so that problems can be seen quickly.

Keeping intellectual property safe and other legal matters


There is a lot of intellectual property that tech companies can have. When you work with partners, information like patents and product ideas can get leaked by mistake.

A written subcontractor deal is important to properly protect your intellectual property. Make sure that every subcontractor you work with signs it. It needs to have:

Detail on the work and how to pay for it
Terms of not competing and not disclosing
Rights of ownership
A clause of warranty
A phrase or deal that says “hold harmless”
Needs for insurance
You might want to think about getting loyalty bond insurance to protect your business from employees who steal intellectual property or commit other crimes. It comes in two different types: first-party and third-party.

First-party loyalty bond insurance pays the costs of:

  • Fraud or theft by employees at your company
  • There is theft in your company by employees
  • Forgery by employees that hurts your business
  • Third-party loyalty bond insurance will cover the costs of:

A worker stole from a client

  • Fraud by an employee against a client
  • Forgery by an employee that hurts a client

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