When it comes to managing a successful business, expert traders can teach entrepreneurs a thing or two about how to gain from a competitive market. It may not be too obvious, but trading and entrepreneurship have much in common. In fact, some of the most successful investors and traders have started their own profitable companies, such as Warren Buffett who believes that entrepreneurs can learn a lot from investing.
All external risks are considered uncontrollable or limited in control by the owner of a small business. External risks include regulatory issues such as changes in the law or in compliance requirements for your business. Others include acts of God, competition and costs of capital.
A third factor in determining a fair profit percentage is risk. Risk is divided into two types. The first is insurable and the second is uninsurable risks. Insurable risks are mitigated and have very little to no effect on the profit formula due to transferring the risk to a third party known as the insurance underwriter. Uninsurable risks are non-transferable and therefore the profit must be adjusted to compensate for this type of risk.