Risk and reward

• Risks in business are an estimate of the probability of an unwanted outcome and depend upon the chance of it happening and the consequences if it did happen.
• A successful entrepreneur is a calculated risk-taker who sets up a business in return for financial gain and must be willing to take risks.
• Business activity can expose an entrepreneur to different types of risk: financial loss, lack of security, and business failure.
• Financial loss is when an entrepreneur needs money to set up a business, which may be their own money or borrowed money, and if the business is not profitable, the entrepreneur and any lenders risk losing the money.
• Lack of security is when setting up and running a business takes time and energy, and entrepreneurs often have to give up their existing job to pursue their business idea, along with the security of a regular income.
• Business failure is a major cause of business failure is a lack of cash flow, which can be caused by a lack of market research to find out what customers want, running out of raw materials, or poor management.
• Risk is unavoidable in business, but with careful planning, an entrepreneur can minimise the amount of risk they face by carrying out market research to find out what customers want, writing a business plan, and ensuring that there is sufficient money available.
• Reward in business is profit, business success, and independence.
• Entrepreneurs consider risks and rewards when making business decisions, often taking risks if they believe potential rewards are greater
• Starting a business involves risk as success is never guaranteed; entrepreneurs may make decisions based on intuition or belief in their idea
• Entrepreneurs calculate risks involved in starting a business and weigh them against potential rewards like profit, business success, and independence
• Rewards of starting a business may include profit (amount of money made after expenses), business success, and independence
• Profit is the driving force behind many business start-ups as it can be reinvested to help the business survive and grow, providing an incentive for entrepreneurs
• Success in business can mean various things, from seeing ideas become popular to achieving a growing business, positive reputation, winning awards, or becoming a well-known business person
• Independence is a significant reward for entrepreneurs who want to make their own decisions and control their working hours by setting up their own business