Taking the Risk

When Michael Dell started selling computer systems from his dorm room in the mid-1980s, he had no idea his company would become so successful that it would go public. He simply used his interests and skills in computer technology to meet a customer need — custom-built PCs at affordable prices.

How much risk was it for Michael to build a custom PC? Not much. He worked from his dorm room, so he didn’t have to rent a shop or workspace. He ordered his computer components from wholesalers and found that he could build a system for $700. So his actual financial risk was approximately $700 for parts and possibly some money for advertising.

The risk Michael took was very small compared to the worth of the company today. But remember — at the time, Michael had no guarantees that his company would ever grow beyond a dorm-room enterprise. So spending the $700 to buy those parts to build his first PC was a very real risk for Michael.

What about the risk related to your business idea?  Look at the Entrepreneurial Discovery Sheet you filled out earlier in this lesson. On Question 5, you were asked to write your favorite business idea — something you would most enjoy doing if you decided to start a business.