business studies
- Created by: lucy wright
- Created on: 05-10-18 10:39
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- The term "enterprise" has two common meanings.
- Firstly, an enterprise is simply another name for a business. You will often come across the use of the word when reading about start-ups and other businesses…"Simon Cowell's enterprise" or "Michelle set up her successful enterprise after leaving teaching".
- Secondly, and perhaps more importantly, the word enterprise describes the actions of someone who shows some initiative by taking a risk by setting up, investing in and running a business.
- Look again at two key words above – initiative and risk.
- A person who takes the initiative is someone who "makes things happen". He or she tends to be decisive. A business opportunity is identified and the person does something about it. Showing initiative is about taking decisions and being bold – not everyone is like that!
- Risk-taking is slightly different. In business there is no such thing as a "sure fire bet". All business investments carry an element of risk – which is the chance or probability that things will go wrong. At the worst, the risk of an enterprise might mean the person making the investment loses all his/her money or becomes personally liable for the debts of the business.
- The trick is to take calculated risks, and to ensure that the likely returns from taking a risk are enough to make the gamble worthwhile.
- Someone who shows enterprise is an "entrepreneur".
- 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:
- What the main risks are in a new business (e.g. unexpected costs, lower than expected sales, failure to secure distribution)
- The probability of the risks happening (this has to be an estimate)
- What would happen if the risks occur – cost, cash etc
- 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…
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