Is your startup aligned with a risky industry? A high-risk business is defined by the credit card industry as a company in which there is a lot of potentials for significant issues to arise. There are some obvious candidates – the gambling, pornography, and firearms industries are all attractive targets for criminals and fraudsters, for example.
But other high-risk businesses exist, too – some of which are entirely ‘normal.’ Health care, for instance, is seen as high-risk, as is banking , or any startup who has no previous financial records to speak of. In short, there is a good chance that your new startup will be seen as a risk – and it will have consequences.
Today, we’re going to reveal some of the issues that could spell disaster – and how to protect yourself from them.
First and foremost, if you work in a dangerous industry, there will be many rules and regulations that you must follow. Failure to do so could lead to severe fines – and even closure. Take the gambling industry as the perfect example. There are laws you must follow laid out by the federal government, and each state will also have strict procedures to follow. Your best bet here is to hire a lawyer to ensure all your practices are within these regulations.
As we mentioned in the opening paragraph, it is credit card companies that define you as a high-risk industry or business. Whether it means you are more attractive to fraudsters, or just have wildly erratic levels of income doesn’t’ matter. The fact remains that you will have to pay for your status. You will need to invest in a high risk credit card processing system, for a start. You’ll also struggle to get decent terms for loans and other financial packages. While the returns in a high-risk business can be high, it can be tough to find the funding for growth.
While we are on the subject of financing, it’s important to understand that many investors will take an instant dislike to your business. You are a risk – and that it precisely what investors try to avoid. Not only that, but personal ethics come into play, too. Some investors might have issues with the gambling or arms industries, for example. Not only that but consumer appreciation of these industries is often at low levels – meaning some investors may not want your name on their books.
Finally, high-risk businesses are often highly competitive. It can be tough to get a foothold when there are so many rival companies attempting to eat up your share of the market. Sure – the rewards can be incredible. But you will need an excellent business sense to get anywhere near success, and you will need to be hard-nosed about it, too. CEOs of risky businesses have a reputation for being cutthroat in their approach – you will need to match their desire and dedication at a minimum.
Are you a startup owner in a risky field? Why not let us know about your progress in the comments section below?