Risks Involved with Entrepreneurship - Introduction, Entrepreneurship & Small Businesses | Entrepreneurship & Small Businesses - B Com PDF Download

Risks Involved with Entrepreneurship

Entrepreneurship involves the following types of Risks.

1) Financial Risk : The entrepreneurship has to invest money in the enterprise on the expectation of getting in return sufficient profits along with the investment. He may get attractive income or he may get only limited income. Sometimes he may incur losses.

2) Personal Risk: Starting a new venture uses much of the entrepreneur’s energy and time .He or she has to sacrifice the pleasures attached to family and social life.

3) Carrier Risk: This Risk may be caused by a number of reasons such as leaving a successful career to start a new business or the potential of failure causing damage to professional reputation.

4) Psychological Risk: Psychological Risk is the mental agonies an entrepreneur bears while organizing and running a business venturesome entrepreneurs who have suffered financial catastrophes have been unable to bounce back.

Barriers to Entrepreneurship

Entrepreneurial development is very slow in under developed and developing countries.
This is due to the presence of several factors. Gunnar Myrdal pointed out that Asian societies lack entrepreneurship not because they lack money or raw material but because of their attitudes. These barriers to entrepreneurship are classified into three as follows:

A. Environmental Barriers

Following are the important environmental barriers to entrepreneurship:

1) Non-Availability of Raw Material: - Non- availability of raw materials especially during peak season is one of the obstacles inhibiting entrepreneurship. This leads to competition for raw material.

2) Lack of Skilled Labour: - This is the most important resource in any organization.
Unfortunately, desired manpower may not be available in an organization. This is either due to the lack of skilled labour or due to lack of committed or loyal employees in the organization.

3) Lack of Good Machinery: - Good machines are required for the production of goods, because of rapid technological developments, machines become obsolete very soon. Small entrepreneurs find it difficult to get large amount of cash for installing modern machinery.

4) Lack of Infrastructure: - Lack of infrastructure facilities is a major barrier to the growth of entrepreneurship particularly in under developed and developing economies. The infrastructural facilities include land and building, adequate and cheap power, proper transportation, water and drainage facilities etc.

5) Lack of Fund: - There are various methods by which an entrepreneur arranges for funds, e.g., own savings, borrowings from friends and relatives, banks and other financial institutions. Many people do not enter into entrepreneurial activities because of lack of funds.

6) Other Environmental Barriers: - Lack of business education, Lack of motivation from government, corruption in administration, high cost of production etc. are the other environmental barriers that inhibit the growth of entrepreneurship in underdeveloped countries.

B. Personal Barriers 

Personal barrier are those barriers that are caused by emotional blocks of an individual. Some of the personal barriers may be outlined as below:

1) Unwillingness to Invest Money: - Even though people have money, still they do not come in entrepreneurship. They are not willing to take the Risk of investing money in business.

2) Lack of Confidence: - Many people thing that they lack what it takes to become an entrepreneur. They feel that they could not master all the skills. Thus most people are reluctant to become entrepreneurs.

3) Lack of Motivation: - When an individual starts a new venture, he is filled with enthusiasm and drive to achieve success. But when he faces the challenges of real business or bears loss, or his ideas don’t work, he loses interest or motivation.

4) Lack of Patience: - The desire to achieve success in the first attempt or to become rich very soon is the prime motivating factor of modern youth. When such dreams do not come  true , they lose interest. This gradually drives to fail in business.

5) Inability to Dream: - Entrepreneurs, who are short on vision or become satisfied with what they achieve, sometimes lose interest in further expansion/growth of business.

C. Social Barriers 

The social attitude inhibits many people even from thinking of starting a business. The important social barriers are as follows.

1) Low Status: - The society things that entrepreneurs are the people who exploit the society. Thus the attitude of the society towards entrepreneurs is not positive.

2) Custom and Tradition of People: - Most people want a real job. Even parents who are entrepreneurs wouldn’t like their children to be entrepreneurs. Thus lack of support from society and family hinder the growth of entrepreneurs.