What does an entrepreneur do, and why do people start their own business?
The role of business enterprise and entrepreneurship, the characteristics and objectives of an entrepreneur, the reasons for starting a business, and the risks and rewards involved.
A focused answer to AQA GCSE Business 3.1.1, covering the role of enterprise, the characteristics and objectives of an entrepreneur, why people start businesses, and the risks and rewards of doing so.
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What this dot point is asking
AQA wants you to explain what an entrepreneur does, list the qualities that help an entrepreneur succeed, give reasons why people start a business, and weigh the risks against the rewards of running your own enterprise.
The role of the entrepreneur
An entrepreneur comes up with the business idea, organises resources such as money, staff and equipment, makes decisions and takes the financial risk of the venture. In economic terms, enterprise is the fourth factor of production: the entrepreneur is the person who brings together land, labour and capital and turns them into a working business. Without that organising role, the other resources sit idle. The entrepreneur also bears the uncertainty: if the venture fails, it is their money and time that is lost, which is why the reward of profit is seen as payment for taking that risk.
Enterprise is not only about brand-new start-ups. Established businesses also need an enterprising, or intrapreneurial, mindset to spot new opportunities, launch new products and stay ahead of rivals. AQA expects you to see enterprise as an ongoing activity, not a one-off launch event.
Characteristics of a successful entrepreneur
These qualities matter because they reduce, though never remove, the chance of failure. Determination keeps the owner going through the difficult early months when profit is thin. Creativity lets them spot a gap in the market that rivals have missed. Good decision-making and organisation keep cash, stock and staff under control, which is where many start-ups fail. Confidence helps when persuading a bank to lend or a supplier to offer credit. The point AQA rewards is linking a quality to its effect on the business, not just listing traits.
Reasons for starting a business
People set up businesses for many reasons:
- Profit: the chance to earn more than they would as an employee.
- Independence: being their own boss and making their own decisions.
- Passion or interest: turning a hobby or skill into a living.
- A gap in the market: spotting an unmet customer need.
- Flexibility: controlling their own working hours.
Risks and rewards
Running a business is a balance of risk and reward.
The trade-off is personal: a salaried employee swaps a steady wage for security, while an entrepreneur swaps security for the chance of a larger reward and control. The size of the risk depends partly on the ownership type chosen (a sole trader has unlimited liability, so personal assets are exposed) and partly on how well the idea is researched and planned. This is why entrepreneurs are described as taking calculated risks: market research, a business plan and a realistic cash-flow forecast all shrink the risk without removing it.
Try this
Q1. State two characteristics of a successful entrepreneur. [2 marks]
- Cue. For example, willingness to take risks and determination.
Q2. Explain one reward of starting your own business. [2 marks]
- Cue. Profit, independence, or the satisfaction of building your own venture, with a brief reason.
Exam-style practice questions
Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AQA 20183 marksExplain one reason why a person might choose to start their own business. (Paper 1, Section B)Show worked answer →
A 3-mark explain question rewards one reason developed with a consequence (point, why, effect).
For example: a person may start a business to gain independence. This means they can make their own decisions about what to sell, when to work and how to run things, rather than following an employer's instructions. The consequence is greater control and job satisfaction, which motivates many people to accept the risk of self-employment.
Markers reward a single reason extended through a clear chain. Other valid reasons: profit, pursuing a passion, spotting a gap in the market, or flexible hours. A bare list of reasons with no development caps at one mark.
AQA 20229 marksAn entrepreneur is considering leaving a salaried job to launch a mobile coffee van. Analyse the risks and rewards the entrepreneur should weigh before doing so. (Paper 1, Section C)Show worked answer →
A 9-mark analyse question rewarding two developed chains applied to the coffee van.
Reward chain: the main reward is profit and independence. If the van succeeds, the entrepreneur keeps the profit and controls the business, which can pay more than a salary over time and offers flexible hours. Application: a coffee van has low fixed costs, so a good pitch could be profitable quickly.
Risk chain: the main risk is loss of a guaranteed income and the money invested. The entrepreneur gives up a reliable salary for uncertain takings that depend on weather, location and footfall, and unlimited liability (if a sole trader) puts personal savings at risk. The analysis should conclude that the decision hinges on the strength of market research and the entrepreneur's financial cushion. Markers reward developed reasoning applied to the context, not a two-column list.
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Sources & how we know this
- AQA GCSE Business (8132) specification — AQA (2017)