An entrepreneur cannot avoid risk in a start-up and everyone knows that a large proportion of new businesses eventually fail. The trick is to assess:
The third part of the assessment above is perhaps the most important. For the small business, often starved of cash, even a relatively small event can prove disastrous. The entrepreneur has to assess the potential impact on the business of a risk, but also assess the upside (where things turn out to be better than expected).
So, a calculated risk can be defined as follows:
"A risk that has been given thoughtful consideration and for which the potential costs and potential benefits have been weighted and considered"
Entrepreneurs take calculated risks everyday, since they take decisions everyday. Each time they take a decision they are weighing up the significance of the options and (often intuitively) working out whether to go ahead.
Rewards from enterprise
That's enough about the negative side of setting a business up. What about the rewards? We looked earlier at the motivations for setting up a business. Many of the intangible rewards that arise from being in business happen because these motives are achieved.
These are the kind of non-financial rewards that give entrepreneurs a buzz.
However, ultimately, it is the financial rewards that justify the effort and make taking the risk worthwhile.
You should also remember that there is a strong tradition of entrepreneurs who have built and sold one business for a substantial amount going onto build other successful businesses. They never lose the entrepreneurial buzz. Such people are called "serial entrepreneurs".
Fully worked A Grade answers to recent Edexcel GCSE Business Studies Unit 3 exam papers with detailed examiner commentary on how good technique scores top marks
This resource comprises two practice exam papers (with supporting mark schemes) for each of the two Year 1 (AS) papers. The format of each practice exam paper follows precisely the format of the specimen assessment materials issued by the board that have been accredited by Ofqual.