1.1.2 Risk & reward Flashcards
what is Risk
business failure, financial loss, lack of security
what is reward
business success, profit, independence
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.
what are 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
what is 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
what is a Business reward
Not everyone defines reward the same way. For
some it might be seeing a new venture grow and
succeed. For others it may be conquering the
unknown and striking out on their own
A business reward is a benefit that it brings to the
owner e.g. better working conditions
what is Business success
The rewards of a good
business is success
This may mean; awards,
fame, survival, growth or
making more money than
they would working for
someone else
Keep all the profit
Profit = Total revenue – Total
costs
A reward of setting up your own
business is you get to keep all
the profit that the business
makes
In time equipment may break or
get old and you may need to
invest some of your profit back
into the business
If you take on a business partner
you may also need to share the
profits with them
what is Independence
A reward of setting up your own business is that you could be your
own boss
Being your own boss means you get to make the major decisions in
the business
You can also change the business if you want to
Many people would like to have this degree of control in their
working lives, which motivates them to start their own business
