Question

Alfred is interested in opening his own business, so he pays a visit to the local Small Business Administration (SBA) to learn more about the potential risks. He learns that about _____ percent of all small businesses fail within two years of opening.

Answer 1

The U.S. Small Business Administration data reveals that a significant percentage of small businesses fail within a few years. Entrepreneurs often fund their startups personally or with help from angel investors, but they must weigh the risks and potential losses against their current financial situation.

Step-by-step explanation:

Understanding the risks involved in starting a new business is crucial for any entrepreneur. The U.S. Small Business Administration provides statistics that indicate the harsh realities of business sustainability. A significant percentage of small businesses fail within a short period after opening.

According to SBA data from 2009–2010, a large proportion of these businesses are small firms with fewer than 20 employees, showcasing the fragility of new ventures in the challenging business landscape.

For someone like Alfred who is interested in opening his own business, knowing the source of initial funding is equally important. Many business owners personally finance their ventures or seek loans using personal assets as collateral. Angel investors are also a common source of capital for new startups, providing funding in exchange for equity.

However, one must consider the opportunity cost, like in the case of Fred, who would be earning $10,000 less than his corporate job if he ventured into his own business. This monetary loss signifies the risk and potential financial sacrifice involved in entrepreneurship.