1.1.2 risk and reward Flashcards
Business
failure
If a business fails to plan for the
future it may risk losing out to
competitors
A business must have a clear
strategy and plan if it is to
survive in a today’s dynamic
business world
For example Blockbuster failed
to take up the Netflix offer as
they had no digital strategy
What is the chance of failure in
a new start-up?
20% of small businesses fail in their
first year
30% of small business fail in their
second year
50% of small businesses fail after five
years in business
70% of small business owners fail in
their 10th year in business.
Financial risks
Starting a business can be a
financial risk for the owner
The owner may put their own
cash and other assets (e.g. a
van) into a business
If the business is sole trader or
partnership then they have
“unlimited liability” which
means they could lose their
personal assets to pay the
business debts
Lack of security
If an entrepreneur has a
regular job, and they decide
to leave that job to open
their own business this is a
huge risk
They may have a mortgage,
a car and other bills to pay
Also there may be insecurity
of sales with falling
consumer incomes
Define business rewards?
A business reward is a benefit that it brings to the
owner
State 1 risk starting a new business?
Financial risks as she left her current employment
Explain one risk a entrepreneur takes when starting a new business
One risks is a financial loss. This is because starting a new business can be expensive and require finance from someone’s possessions. And as a result, were the business to fail, the entrepreneur would lose money.
