TA1: Characteristics, risk and reward for enterprise

What you need to know

• Explain why each characteristic might help an entrepreneur to be successful over time.

Characteristics are the qualities or features that determine somebody’s personality. Successful entrepreneurs possess a similar set of characteristics that help them to achieve amazing things.

Definitions of characteristics

• Creativity: using your imagination to create something original. • Innovation: coming up with new ideas and ways of doing things and putting these into practice. • Risk-taking: taking a chance when the outcome is not guaranteed. • Communication: exchanging information with others by writing, speaking, etc. • Negotiation: working with others to come to an agreement. • Confidence: having belief in yourself or others. • Determination: continuing to do something even though it is hard or there may be setbacks along the way. How they will help the entrepreneur to be successful Creativity can help entrepreneurs to get ahead of the competition with new products or services. Character istics of successful entrepreneurs

Innovative ideas and processes can help an entrepreneur to save time or money. Communication is vital. Good communication can make you seem professional and trustworthy. Risk-taking needs to be carefully thought through. A calculated risk can lead to long-term reward.

Confidence will convince people that a business or idea will be a success. Determination is needed to overcome challenges.

Negotiation is needed to agree business deals or bank loans. A good negotiator can get what DRAFT their business needs.

Practise it!

Identify two characteristics of a successful entrepreneur and explain how they can help the entrepreneur to become successful. (4 marks)

Remember it!

• Entrepreneurs possess a range of personal characteristics which help them to become successful. • Entrepreneurs will possess these characteristics in different quantities.

What you need to know

• Identify the rewards an entrepreneur may gain for taking risks.

When an entrepreneur starts a business they are taking a risk. There are potentially large rewards for those who are willing to take these risks.

Rewards of risk-taking

Risk-taking is necessary when starting a business, but the rewards can be high. Financial • Entrepreneurs will aim to make sure all costs incurred by the business are paid. This is called breaking even. After that, they will aim to make a profit. This can be used to reinvest in the business to develop it further or for the entrepreneur to live off.

Independence • Many entrepreneurs want to be their own boss. By taking the risk of starting a business, an entrepreneur can decide their own work schedule and make their own decisions.

Self-satisfaction • Creating a successful business is a proud moment for an entrepreneur. Seeing their first sales or making a profit can lead to a sense of self-satisfaction. Making a difference/ change

• Some entrepreneurs create their business to help change something. This could be a social/environmental change or something that helps other people. • By identifying a gap in the market, they could improve something that has impacted other people or they could improve someone’s life. • Another difference they could make is to provide a product that is not offered by other businesses. DRAFT

Practise it!

1 State three rewards for risk-taking. (2 marks)

2 Explain one reward of taking a risk as an entrepreneur. (2 marks)

Remember it!

• Risk-taking has both benefits and drawbacks which must be considered alongside each other. • By taking the risk of setting up a new business the entrepreneur may enjoy specific rewards.

What you need to know

• Identify the potential drawbacks to an entrepreneur of risk-taking.

When an entrepreneur starts a business they must consider the drawbacks of the risk that they may take.

Drawbacks of risk-taking

Starting a business is also a risky thing to do – many businesses fail within the first few years. Financial • Not all businesses are financially viable – they might run out of money or not make a profit. Despite planning, hard work and market research, some business ideas fail. An entrepreneur may lose the money they used to set up the business and/or find themselves in debt. Health/

well-being

• Setting up a new business requires hard work and long hours. This may cause stress, especially if the entrepreneur works alone and cannot discuss problems or decisions with others. If they work alone they will have to work if they are unwell, as there is nobody else to cover for them.

Work–life balance

• An entrepreneur may work long hours, especially at the start, leaving little time for relaxation. • Entrepreneurs may have a poor work–life balance, with work taking up all of their time. Personal relationships

• An entrepreneur may have little time to spend with their children, family and friends, who may become resentful. They may lose touch with family and friends. DRAFT

Practise it!

1 State two drawbacks, other than work–life balance, that come from taking risks. (2 marks) 2 Explain one way that a poor work-life balance may affect the entrepreneur. (2 marks)

Remember it!

• Benefits and drawbacks are not only financial. • Many potential drawbacks can relate to the entrepreneur’s health/well-being or relationship with others.