1.1.
2 Risk & Reward
Lesson Title: Why take the risk when there's no guarantee of reward?
Which of the following best describes an innovation? Define the term obsolete product.
A. Creating a completely new product from scratch.
B. Adapting an existing product to meet consumer trends.
C. A product becoming out-of-date.
State whether "Independence" is a financial or non-financial Identify the Missing Link
aim.
W1: An entrepreneur adapts a fitness tracker.
W2: This reduces development costs so they don't need a
massive bank loan...
W3: [MISSING LINK]
1.1.2 Risk & Reward
Lesson Title: Why take the risk when there's no guarantee of reward?
Which of the following best describes an innovation? Define the term obsolete product.
A. Creating a completely new product from scratch.
B. Adapting an existing product to meet consumer trends. A product that is out-of-date and at the end of its life.
C. A product becoming out-of-date.
State whether "Independence" is a financial or non-financial Identify the Missing Link
aim.
W1: An entrepreneur adapts a fitness tracker.
Non-financial aim. W2: This reduces development costs so they don't need a
massive bank loan...
W3: [MISSING LINK] resulting in the entrepreneur taking
less time to launch the new business idea into the market.
1.1.2 Risk & Reward
Lesson Title: Why take the risk when there's no guarantee of reward?
Learning Outcomes
To be able to explain the impact of risk and rewards
How does this link to what we have learnt this term/last lesson?
How does this link to our bigger question/theme for the term?
How will this link to future learning?
Risk: The possibility of financial loss, lack of security, or business
failure when setting up a new venture.
Reward: The positive outcomes gained from starting a business,
which can be financial (profit) or non-financial (independence).
Every single entrepreneur faces a choice. When you launch a business, you step off a cliff. You give up a steady paycheck,
but you gain total control over your life. Enterprise is a constant balancing act between what you stand to lose and what
you stand to win
The Risks (What you could lose) The Rewards (What you could win)
Financial Loss: Spending your life savings or taking out loans that Profit: Unlike an employee with a fixed salary, the
must be paid back even if the business goes bust. entrepreneur keeps the surplus wealth the business generates.
Lack of Security: No guaranteed monthly income, no paid sick Independence: Being your own boss, making your own
leave, and no holiday pay. If you don't sell, you don't eat. choices, and choosing your own working hours.
Business Failure: Nearly 60% of new UK businesses fail within their Personal Satisfaction: The emotional buzz of seeing your own
first 3 years due to a lack of cash flow or market demand. original idea turn into a real-world success.
Scenario: Sarah is a highly successful manager at a major bank. She
earns a guaranteed £65,000 a year, gets 30 days of paid holiday, and I think Sarah should quit
has excellent job security. However, she hates being told what to do by because it fulfills her
her corporate directors. non-financial reward of.…
Linking to that …
She has an idea to quit her job and launch an eco-friendly mobile I agree/ disagree with you
because…she faces a massive
coffee van.
A financial risk of
B
Overall I mostly
agree with
1. Identify two distinct risks Sarah faces if she
leaves the bank?
2. Identify two distinct rewards Sarah could gain if
her coffee van succeeds.?
I think Sarah should quit
because it fulfills her
non-financial reward of.…
Scenario:Sarah recently quit her secure job as Linking to that …
I agree/ disagree with you
a bank manager where she earned a salary of because…she faces a massive
A financial risk of
£65,000 a year, to spend time with her young
family. She made this move to launch her own
business, Roast & Go, which is a mobile coffee B
van pitched outside a busy train station.
Overall I mostly
agree with
To establish the business, Sarah invested
£20,000 of her own savings to buy the van and
equipment. She is located near a the train 1. Identify two distinct risks Sarah faces if she
leaves the bank?
station and a Costa Coffee
2. Identify two distinct rewards Sarah could gain if
her coffee van succeeds.?
Risk or reward? Identify whether each of the following is a risk or reward to an
entrepreneur of starting up a business enterprise
Where We Have Been: Section A
● The Questions: 3-mark "Explain" and 6-mark "Discuss" tasks.
● The Rule: Completely generic questions. You did not need to use a case study or real-world business context to get full marks.
Where We Are Going: Sections B and C
Generic questions completely disappear later in the exam. Instead, you face five case-study questions based on a real business
scenario:
● 1 Mark: State
● 2 Marks: Outline
● 6 Marks: Analyse
● 9 Marks: Justify
● 12 Marks: Evaluate
The New Golden Rule (AO2 Application): You must include specific facts about the business scenario. Without real-world
context clues, your answer is capped at the lowest mark band.
Today's Mission
Today, we are mastering how to apply context to the first two case-study skills:
1. The 2-Mark "Outline"
2. The 6-Mark "Analyse"
Analyse the disadvantages to Sarah of leaving her secure job to start Roast & Go (6)
One financial risk of starting a new business is financial loss
This is because entrepreneurs often invest their own personal
savings or take out expensive bank loans to pay for upfront
start-up costs.
Which means that if the new venture fails to attract enough
customers to buy its products, the business will not generate
sufficient revenue to cover its costs which results in business
failure
A second financial risk of starting a business is the lack of
financial security and guaranteed personal income.
This is because a brand-new startup does not have an established Read the model answer
customer base or steady cash inflows during its initial months of on the model answer:
trading. 1. Can you tell me what
Which means that the entrepreneur cannot draw a regular, type of business the
guaranteed monthly wage or salary from the business account. person owns?
Analyse the disadvantages to Sarah of leaving her secure job to start Roast & Go (6)
One impact of Sarah risking her own capital is the high threat of
financial loss. This is because she has invested £20,000 of her
own savings into a mobile coffee van. If she fails to attract the
daily train station commuters, she will not make enough sales to
cover her costs. Which means that she will lose her entire
investment, therefore leading to the failure of Roast & Go and
leaving Sarah with no guaranteed salary or financial security.
A second financial risk of starting a business is the complete
lack of financial security and guaranteed personal income.
This is because Sarah’s brand-new startup, Roast & Go, does not
have an established customer base yet and must compete
Read the model answer on
directly with a nearby Costa Coffee during its initial months of
trading. the model answer:
1. Can you underline how
Which means that if train station commuters continue buying you know what this
their morning drinks from the established rival, Sarah cannot person sells /type of
draw a regular, guaranteed monthly wage or salary from the business the person
mobile coffee van business account to support her young owns?
family.
Analyse the disadvantages to Sarah of leaving her secure job to start Roast & Go (6)
One impact of Sarah risking her own capital is the high threat of Read the model answer on
financial loss. This is because she has invested £20,000 of her the model answer:
own savings into a mobile coffee van. If she fails to attract the 1. Can you underline how
daily train station commuters, she will not make enough sales to you know what this
cover her costs. Which means that she will lose her entire person sells /type of
investment, therefore leading to the failure of Roast & Go and business the person
leaving Sarah with no guaranteed salary or financial security.
owns?
A second financial risk of starting a business is the complete
lack of financial security and guaranteed personal income.
This is because Sarah’s brand-new startup, Roast & Go, does not
have an established customer base yet and must compete
directly with a nearby Costa Coffee during its initial months of
trading.
Which means that if train station commuters continue buying
their morning drinks from the established rival, Sarah cannot
draw a regular, guaranteed monthly wage or salary from the
mobile coffee van business account to support her young
family.
If you are about to write this generic STOP and "inject" these specific context clues instead!
phrase...
"The business" or "The startup" Use the actual name: Roast & Go or describe it as the mobile coffee van.
"Upfront costs / investment" Be specific: The £20,000 of her own wedding savings spent on high-end
espresso machinery.
"The customers" Describe exactly who they are: The daily train station commuters.
"The competition" Name the real rival: The nearby established Costa Coffee.
"The entrepreneur" or "The owner" Use her name and personal situation: Sarah, who is trying to support her
young family.
"Raw materials / stock" Name what a coffee van actually buys: Milk, coffee beans, and takeaway
cups.
Using the table above rewrite the sentence so it is now using
context
The startup might fail if customers go to the competition
Analyse the benefits to Sarah of leaving her secure job to start Roast & Go (6)
Sentence Starters
AO1- Knowledge
AO1b - Understanding W1 One benefit to Sarah is...
AO2- Application
AO3a- Analyse This is because... which means that.
AO3b- Evaluation
W2
W3 This would lead to them …business objective
WWW
[ ] Paragraph 1: Focus on the reward of Independence / Control
(Use W1, W2, W3)
W1 Point – Identify one benefit to Sarah of starting her
own business. [ ] Paragraph 2: Focus on the reward of Business Success /
W2 Cause- Why does this help her achieve this? Personal Satisfaction (Use W1, W2, W3)
⚠ Crucial Exam Tip: te examiner must know the nature of the
W3 Consequence – Explain the impact/ effect this will business by reading your answer - CONTEXT
have on the business (Business Objective)
💡 W3 Ending Ideas: - Challenge to add context
W4 Context - Reading through your answer is it clear
thatyou are speaking about a coffee shop
When finishing your paragraph, your chain must link back to one
of these business goals:
Challenge: Why might an entrepreneur choose to face ● Survival (Keeping the doors open)
extreme risks and leave a high-paying job, even if they ● Potential Sales (Bringing in revenue)
know the business has a high chance of failing initially ● Potential Profit (Making money after costs)
● Market Share (Beating out rivals)
Apply &
`
Practice 1.1.2 Risk & Reward
In 2018 Jamal Acharya left the IT consultancy firm he had worked for over the
past eight years to setup his own company. Jamal registered Web Horizons Ltd
Fluency
in September 2018; his own website development business.
Risk / Reward Example from the case study
To start Web Horizons Ltd, Jamal invested £3000 of his own savings and took out
a small business loan from the bank. As Jamal established his business in the first
few months he sacrificed paying himself a salary to keep costs as low as
possible and worked late into the evening to ensure his business was a success.
By April 2019, Jamal had a growing customer base and began to benefit from
positive reviews of his web design services from satisfied customers.
By the summer of 2019, Web Horizons Ltd had signed several contracts with
large companies. Due to the increased demand for Web Horizon Ltd.'s services
Jamal took the opportunity to employ two web development graduates and
moved his business into rented office space. Jamal had previously operated his
business from home. As his business continued to grow, Jamal decided to
reduce his working hours to 4 days per week. Something he had hoped to do
for a long time in order to spend more time with his family.
Probing State Success Criteria
W1 Point – Identify one risk, in the context of the case study. You can use the fluency
1. State one risk Jamal faced when setting up Web questions to help.
Horizons Ltd. (1)
Outline Success Criteria
2. Outline one impact on Web Horizons Ltd of the positive
reviews from its customers. (2) W1 Point – Identify one advantage or disadvantage in the context of the case study.
You can use the fluency questions to help
W2 Consequence - Explain the effect of this happening on the business
Apply & Analyse the impact on Web Horizons Ltd of employing two graduate web developers. (6)
`
Practice
Analyse Success Criteria
AO1- Knowledge
AO1b - Understanding W1 Point – Identify one risk of employing two graduates
AO2- Application
AO3a- Analyse W2 Cause- Can you explain using an example what they could
AO3b- Evaluation that might create a risk
W3 Cause- What might customers do if they see this
Planning your answer W4 Consequence – Explain the effect of this happening on the
business – (You must link to business objectives)
What is the risks involved in hiring What is the rewards involved in
W5 Reading through your answer is it clear you are talking about a
two graduates (This means they hiring two graduates (This means
children's toothpaste company
just left university) they just left university
W6 Repeat W1 -5 Using an advantage (reward) of hiring two
graduates
What could these risks mean? What could these benefits mean?
Exit
`
Ticket
Which of the following is a Which is a following is a risk of Which is a following is a risk of
reward of being an being and entrepreneur? being and entrepreneur?
entrepreneur?
A. Ability to pursue an interest A. Independence
A. Ability to pursue loss
B. Flexible working hours
B. Flexible working hours
B. A lot of work C. Possible financial loss
C. Possible financial loss
C. Possible financial loss D. Being your own boss
D. Not being your own boss
D. Being your own boss
Review &
`
Feedback
∙ Risk - Jamal left a secure job to setup his own business meaning
a lack of security
∙ Risk - Jamal invested £3000 of his own money which he could
have lost
∙ Risk - Jamal sacrificed paying himself a salary in order to keep his
business costs low in the first few months
∙ Reward - As Web Horizons Ltd grew, so did its revenue and
potentially profit.
∙ Reward - Jamal took the opportunity to spend more time with his
family by working 4 days per week.