1.1.2 Risk and reward

Question 1

What is risk?

Answer 1

Things that the entrepreneur may lose if their business fails

Question 2

What are some examples of risk when starting a business?

Answer 2

• business failure-through cash flow, fall in sales or action of competitors
• financial lose-owners may lose the capital they invested
• lack of security-no guarantees income, sick pay or holidays

Question 3

What are some examples of reward when starting a business?

Answer 3

• business success-personal satisfaction, excellent product/service, growth, awards and recognition
• profit
• independence-business owners will value the freedom of working for themselves

Question 4

How can risk be reduced?

Answer 4

• carry out detailed market research
• produce a business plan
• ensure that the business is competitive
• raise sufficient start-up finance

Question 5

What makes some businesses riskier than others?

Answer 5

• seasonal demand, such as for ice cream
• a small market
• a highly competitive market with lots of competitors
• an owner who knows little about the product or market.