Page 5 - Entrepreneurship

How Employees and Entrepreneurs Differ

When an entrepreneur starts a new business, it involves risk. Risk is
the chance of losing something. An entrepreneur makes an investment
of money, time, and energy in the hope of getting greater rewards, or
benefits. The saying, “No risk, no reward,” relates to this concept.
Because employees work for someone else, but entrepreneurs work
for themselves, entrepreneurs risk more than employees. Employees may
risk losing a job if they do not perform the job well, but they are paid
for their work. Entrepreneurs risk not being able to pay themselves if
business is “slow.” A failed business might also mean losing the money
the entrepreneur invested into it.

The rewards that employees and entrepreneurs get from their work
can also be different. A reward can involve money, but it can also be
something such as personal satisfaction or independence. As a business
owner, an entrepreneur is in control of the money made by his or her
business. He or she also has the “final say” in all business decisions.
As a result, entrepreneurs are ultimately responsible for the success or
failure of their businesses.

Consider this example to understand the risks and rewards for an
entrepreneur vs. her employee. Carla Hernandez decides to start a fruit
“smoothie” drink shop in her neighborhood. Carla invests a lot of money,
time, and effort to get the business started. Tony Bertelli, one of her
employees, creates a new juice combination that Carla decides to put on
the menu. By doing so, she risks the money spent on ingredients. She
also risks a drop in sales if customers don’t like the drink. As it turns
out, the new drink is a great hit with customers, and sales dramatically
increase. Tony receives a small raise as a reward. Carla will benefit the
most because she owns the business and took the bigger overall risk.
Risks involve making choices, and entrepreneurs need to weigh their
choices carefully to achieve their goals for their businesses.

Figure 1-1
Small Business Owners.
When you own a business, you
are your own boss.

Applying Concepts.
Do you know someone who
owns a “small business” in your
town? Is there a “big business”
that is in competition with
them?

Importance of Entrepreneurship 5