Risks of ownership
The success of a business depends greatly on managerial effectiveness. If a business is well managed, an adequate income will likely be earned. From an adequate income, it is possible to pay all expenses and to earn a profit as well. If a business does not earn a profit, it cannot continue for long. An entrepreneur assumes the risk of success or failure.
Risk—the possibility of failure—is one of the characteristics of business that all entrepreneurs must face. Risk—which involves competition from other businesses, changes in prices, changes in style, competition from new products, and changes that arise from economic conditions. Whenever risks are high, the risk of failure is also high.
Businesses dose for a number of reasons. Thousands fail yearly for financial reasons. According to popular statistics, one out of every four to five businesses fails within three years, and about half cease operations within six to seven years. However, those figures indude firms that unaril1 go out of business, such as by selling to someone else or by adding more owners.