1.14 Risk and Reward

Risk – this is where the business makes a decision to do something which may or may not pay off. A business might fail for a number of reasons including cash flow issues and too much competition. Research has shown that more than half of new businesses don’t survive beyond 5 years.

The obvious risk is that the business could fail so that you would need to start a new business or get another job. Or it could be financial loss – you invested all your savings and the company was not successful then you may never earn that money back

Entrepreneurs risk their families’ security – the security that would be provided by a regular income to pay the bills, provide food and entertainment, to pay for transport costs or even holidays.

Reward – this is the benefit the business receives if the risk pays off.

Starting a business is a big risk, especially if the owner is a sole trader or in a partnership as they have unlimited liability. 

Rewards are not always just financial. Sure this is important, but there are other rewards such as independence, being the boss, and securing better working conditions. Some entrepreneurs take great pride in their companies receiving awards. Other people may get satisfaction from knowing that their business is providing a form of social enterprise as well.