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Brainy Fact
Ritesh Agarwal is one of the youngest entrepreneur in India. He is the founder of OYO rooms.
Some Important Terms in Entrepreneurship
Entrepreneurs take risks to make a profit. Let us now try to understand the meaning of the word profit and risk
used frequently in entrepreneurship:
• Profit: The term "profit" refers to the financial gain that an entrepreneur gets or a positive difference between total
income earned and total costs invested in running a business. Profit is the main indicator of a business's financial
success or failure. For example, Nisha has recently started running her own flower shop. She made her quarterly
report and found that her income is little more than her total expense. This brought confidence in her and she
planned to keep a close watch to bring up the profit margins for future growth of her business.
• Risk: The term "risk" refers to a situation where the result is not known and could lead to a loss. Entrepreneurs
often face a variety of risks as they initiate, develop, and operate their business. Understanding and managing
risks are essential components of successful entrepreneurship. These risks can sometimes bring failures also
in a business. For example, in the above situation where Nisha, a florist, has established her business well in a
span of one year. She now wants to expand her business by opening another branch in a nearby city where the
competition is very high and the cost of investment is also more but she is quiet confident and wants to take
the risk because she feels risk is an integral part of entrepreneurship, and successful entrepreneurs understand
the importance of identifying, assessing, and managing risks effectively.
• Wage Employment: It exists as a partnership between two entities : the employer and the employee. In this
type of employment, an employee receives compensation for their work in the form of wages or salary. It does
not involve risks and the amount paid is fixed with certain incentives irrespective whether an employer is having
loss or profit in his business. The continuity of the service in case of wage employment depends on the terms
and conditions laid down in the contract between the two parties, as well as the relationship between the
employer and the employee.
Let us understand the difference between Wage Employment and Entrepreneurship
Factors Wage employment Entrepreneurship
Individuals work for an employer or a Initiate and operate their own
Nature of Work company and receive a fixed wage or businesses. Responsible for their own
salary in exchange for their labour. profits and losses.
Entrepreneurship involves a higher
The level of risk is comparatively lower
Risk and Responsibility level of risk-taking. It has uncertainties,
with stable income and job security.
financial risks, and market fluctuations.
Employees receive a regular and Entrepreneurs' income is often variable
Income Structure predictable income in the form of and depends on the success of their
wages or salaries. business.
Employees typically enjoy job security Entrepreneurs face the risk of business
Job Security as long as they adhere to the terms and failure, which may result in financial losses
conditions of their employment contracts. and sometimes closing of the business.
Entrepreneurial Skills-I 77

