risk and reward Flashcards
Risk
business failure, financial loss, lack of security
Reward
business success, profit, independence
Business
failure
If a business fails to plan for the
future it may risk losing out to
competitors
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. Also there may be insecurity of sales with falling
consumer incomes.
Business success
This may mean; awards,
fame, survival, growth or
making more money than
they would working for
someone else.
Keep all the profit
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.
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.
Risky business
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