Why do people start businesses, and what do entrepreneurs and business resources do?
Entrepreneurs and enterprise: the reasons people start a business, the characteristics and role of an entrepreneur, the rewards and risks, and the resources (the factors of production) a new business needs.
A CCEA GCSE Business Studies guide to enterprise and entrepreneurship. Covers why people start a business, the characteristics and role of an entrepreneur, the rewards and risks of self-employment, and the business resources, the factors of production, that a new business needs to begin trading.
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What this dot point is asking
You need to explain why people start a business, what an entrepreneur is and does, the rewards and risks of enterprise, and the business resources a new firm needs to begin trading. CCEA examiners reward precise terms, developed reasons rather than lists, and the ability to apply ideas to a business in the stimulus. This dot point is the foundation of the whole Creating a Business section, because everything that follows, ownership, aims, marketing and operations, begins with an entrepreneur deciding to take a risk.
Why people start a business
An enterprise is the act of identifying an opportunity and taking the risk of setting up a business to meet it. People become entrepreneurs, the people who take that risk, for a mix of reasons.
The role and characteristics of an entrepreneur
An entrepreneur does three things: they come up with the business idea, they organise the resources needed to start, and they take the risk that the business might fail. To do this well, certain characteristics help.
- Risk-taking - willing to invest money and time with no guarantee of return.
- Determination - persistent enough to keep going when early problems arise.
- Creativity - able to spot opportunities and think of new products or ways of working.
- Organisation - able to plan and bring together money, people and equipment.
- Confidence and leadership - able to make decisions and, later, to manage staff.
No entrepreneur has every quality, and many learn skills as they go, but the willingness to take a calculated risk is the one that defines enterprise.
The rewards and risks of enterprise
Becoming an entrepreneur is a trade-off, and CCEA often asks you to weigh the two sides.
The size of the risk depends partly on how the business is owned, which is the next dot point: a sole trader carries unlimited liability, while a private limited company gives the owners limited liability and so reduces personal risk.
Business resources: the factors of production
To turn an idea into a trading business, an entrepreneur must bring together resources, known in economics as the factors of production.
For example, a person opening a small bakery needs land (the shop unit), labour (themselves and perhaps an assistant), capital (ovens, a counter, and start-up money) and enterprise (their own decision to set up and run it). If any factor is missing, for instance there is no money for the ovens, the business cannot start, which is why arranging finance and resources is part of the entrepreneur's job.
Worked example: classifying a start-up's resources
A common exam task is to identify the resources a described business needs and classify them.
Why this matters
Enterprise is the starting point of the whole specification. Understanding why people take the risk, what an entrepreneur does, and what resources a business needs explains the decisions that follow about ownership, aims and finance. It also connects to the wider economy, because new businesses create jobs, offer choice to customers and generate wealth, which is why governments encourage enterprise. In the exam, the skill is to move beyond listing qualities or resources to explaining how they help a particular business start and survive.
Try this
Q1. Define the term entrepreneur. [2 marks]
- Cue. A person who comes up with a business idea, organises the resources to start it, and takes the risk that it may fail.
Q2. State the four factors of production. [2 marks]
- Cue. Land, labour, capital and enterprise.
Q3. Give one reward and one risk of starting your own business. [2 marks]
- Cue. Reward: independence, profit or satisfaction. Risk: losing money invested, uncertain income or long hours.
Exam-style practice questions
Practice questions written in the style of CCEA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
CCEA Unit 1 (style)4 marksExplain two characteristics an entrepreneur needs to start a successful business.Show worked answer →
A short explain question testing AO1 and AO2. Name a characteristic, then say why it matters, for two marks each.
Risk-taking: an entrepreneur invests their own money and time with no guarantee of success, so the willingness to take a calculated risk is needed to start at all.
Determination: setting up a business is hard and early problems are common, so the persistence to keep going when things go wrong helps the business survive.
Other valid answers include creativity to spot a gap in the market, organisation, and confidence. The mark is for the characteristic plus a developed reason, not a bare list.
CCEA Unit 1 (style)6 marksDiscuss the rewards and risks of becoming an entrepreneur.Show worked answer →
An extended question testing AO2 and AO3. Give both sides, then judge.
Rewards: independence and being your own boss, the chance to keep the profit, doing work you enjoy, and the satisfaction of building something of your own.
Risks: you may lose the money you invest, income is uncertain, the hours are long, and a sole trader has unlimited liability, so personal assets are at risk if the business fails.
Judgement: argue that the rewards can be large but the risks are real, so success depends on planning, finance and the entrepreneur's own skills. A supported judgement, not just a two-sided list, reaches the top band.
Related dot points
- Types of business ownership: sole trader, partnership, private limited company and public limited company, with their advantages and disadvantages, and the meaning of limited and unlimited liability.
A CCEA GCSE Business Studies guide to types of business ownership. Covers the sole trader, partnership, private limited company and public limited company, the meaning of limited and unlimited liability, and the advantages and disadvantages of each so you can recommend the right structure for a business.
- The public sector and social enterprises: the difference between the private and public sectors, what the public sector provides, and the aims and features of social enterprises, including not-for-profit organisations.
A CCEA GCSE Business Studies guide to the public sector and social enterprises. Covers the difference between the private and public sectors, the goods and services the public sector provides, and the aims and features of social enterprises and not-for-profit organisations whose main goal is a social or environmental one.
- Business aims and objectives: the difference between an aim and an objective, common objectives such as survival, profit, growth, market share and providing a service, and why objectives differ between businesses and change over time.
A CCEA GCSE Business Studies guide to business aims and objectives. Covers the difference between an aim and an objective, common objectives such as survival, profit, growth, market share and providing a service, why objectives differ between businesses, and why they change over the life of a business.
- Stakeholders: the groups that have an interest in a business (owners, employees, customers, suppliers, the local community and the government), what each wants from the business, and how stakeholder interests can conflict.
A CCEA GCSE Business Studies guide to stakeholders. Covers who the stakeholders of a business are, owners, employees, customers, suppliers, the local community and the government, what each group wants from the business, and how their interests can conflict, with worked exam technique.
- Business location: the factors that influence where a business locates, including nearness to the market, costs, labour, suppliers and transport, and how the best location depends on the type of business.
A CCEA GCSE Business Studies guide to business location. Covers the main factors that influence where a business locates, nearness to the market, costs of premises, availability of labour, nearness to suppliers and good transport links, and how the best location depends on the type of business.
Sources & how we know this
- CCEA GCSE Business Studies specification — CCEA (2017)
- CCEA GCSE Business Studies microsite — CCEA (2017)