Q4 — Explain risks of starting a business (6 marks)

Explain two risks an entrepreneur faces when starting a new business. (6 marks)

Mark scheme (Levels-based, 1–6):

• Level 1 (1–2): Identifies risks with limited explanation.
• Level 2 (3–4): Explains risks with some development / link to consequence.
• Level 3 (5–6): Two risks fully explained with chains of analysis showing impact on the entrepreneur/business.

Indicative content:

1. Financial loss — sole traders have unlimited liability so personal assets (home, savings) can be seized to pay debts. This may lead to bankruptcy if the business fails.
2. Business failure — around 60% of UK start-ups fail in three years; this causes loss of investment, damage to reputation and potential personal stress.
3. Lack of income security — no guaranteed wage, sick pay or pension, so cash-flow problems can affect the entrepreneur's standard of living.