Industrial/employee relations

Entrepreneurs may be very keen and willing to work hard, and they may have abilities in their chosen field. For example, a new restaurant owner may be an excellent chef, but they could lack management skills. Some entrepreneurs learn these skills quickly once the business is up and running, but this is a risky strategy. Other entrepreneurs buy in the skills by employing staff with management experience, but this is an expensive option. Just because a business is new and small it does not mean that enthusiasm, a strong personality and hard work will be sufficient to ensure success. This may prove to be the case, but often it is not. Potential entrepreneurs are encouraged to either seek management experience through employment or attend training courses to gain some of the required skills before putting their capital at risk. Challenge 9: How do I deal with change? Setting up a new business is risky. Not only are there the problems and challenges referred to above but there is also the risk of change, which can lead to the original business idea being less successful. New businesses may fail if any of the following changes occur, turning the venture from a successful one to a loss-making enterprise: • new competitors appear • legal changes, e.g., the product is banned • economic changes that leave customers with less money to spend • technological changes that make the methods used by the new business old-fashioned and expensive. The list of changes could be longer, but even these four factors show that the business environment is a dynamic one, and this makes owning and running a business enterprise very risky. Challenges and opportunities for starting a business – conclusion This section has identified and explained the opportunities and challenges for new entrepreneurs. People who want to start a new business should always be encouraged to create a detailed business plan (see 1.7 Business management tool: Business plans). This will help to analyse how the opportunities can be exploited and the challenges overcome.

CASE STUDY 1.3 Why do start-ups fail? Based on research performed on small businesses across various industries in the US, around 90% of start-up ventures eventually fail. In 2019, the industries in which start-up failure was especially high were grocery retailing, trucking, plumbing, air conditioning and heating, as well as security brokerage. The risk of failure was much lower in health care, social services, construction, transportation, and warehousing. The same research identified the main reasons why start-ups often fail. Some of the most significant factors are the inexperience of entrepreneurs and managers, the failure to understand the exact consumer needs and wants and the lack of adequate financial resources. On the other hand, one of the most important factors increasing the chances of success is the use of third-party experts as advisers who help the entrepreneurs to put their plans into action. Start-up businesses using professional advisers grow 3.5 times faster than start-up businesses that rely only on the know-how of their founders. 1 Define the term ‘start-up business’. [2] 2 Suggest two possible reasons why the probability of success varies across different industries in the USA. [4] 3 Suggest two reasons why small SAMPLE start-ups that use third-party professional advisers grow faster than the ones which do not. [4]