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Lesson plan · Understanding Businesses · Lesson 10

Business Risk

Competition, debt, concentration, and other things that go wrong.

  • 45 minutes
  • Grades 9–12
  • Intermediate
  • Activity: small groups
Present slidesWorksheet + keyStudent lesson

Objectives

Students will be able to:

  • Identify common risks a business faces
  • Explain how debt (leverage) magnifies results
  • Recognize concentration risk

Materials

  • Slide deck and a projector
  • Worksheet (one per student)
  • Exit ticket slips (bottom of the worksheet)

Key vocabulary

Leverage
Using borrowed money. Debt magnifies results: profits look bigger in good times, but fixed interest payments can crush a business when sales fall.
Concentration risk
Depending heavily on one customer, supplier, or product. If that one relationship ends, a big part of the business goes with it.

45-minute agenda

  1. 0–5 min

    Warm-up

    Post: “What's the biggest thing that could go wrong for your favorite local business?”

  2. 5–17 min

    Direct instruction

    Present the lesson slides. Make sure students leave with these points:

    • Name the risks honestly — every business has them.
    • Debt magnifies good and bad results.
    • Concentration = too much riding on one customer, supplier, or product.
    • Read the Risk Factors in a company's 10-K.

    Use the “See it” slide (Common business risks) to make the idea visual.

  3. 17–22 min

    Worked example

    Walk through “One customer, 60% of sales” on the slides. Pause before the result and ask students to predict it.

  4. 22–32 min

    Risk Radar

    Format: small groups · 10 minutes

    1. Case: a bakery gets 60% of its sales from one café, owes a large bank loan, and buys all its flour from a single supplier.
    2. Groups list every risk they can find and rate each one: likely/unlikely and minor/serious.
    3. Groups propose one fix for the two most serious risks.
    4. Share and compare risk ratings.

    What to look for: Key risks: customer concentration (the café), leverage (the loan payments stay even if sales fall), and supplier concentration. Fixes: add customers, pay down debt, find a second supplier.

  5. 32–37 min

    Check for understanding

    Use the question slides — or run them as a Four Corners game. Answers:

    1. What's the biggest risk? — A. Concentration: losing that one customer would wipe out most sales.
    2. Borrowing money magnifies both good and bad results for a business. — True
    3. Where do public U.S. companies describe their major risks? — A. In the "Risk Factors" section of their annual report
  6. 37–42 min

    Discussion

    • Which risk would worry you most if you owned a small business? Why?
    • How could a company reduce dependence on one big customer?
  7. 42–45 min

    Exit ticket

    Prompt: What does leverage do to a business's results?

    Answer: It magnifies them — better returns in good times, bigger losses in bad times.

Differentiation

Common misconception

“Debt is always bad for a business.” Used carefully it can boost returns — but it adds risk.

Support

Walk through the leverage example at 10% on the board before students try 2%.

Extension

Read the “Risk Factors” section of a real company's 10-K and summarize its top three risks in plain language.

Homework or make-up work

Students can complete the full interactive lesson — including its knowledge check — at learnwithflc.org/courses/understanding-businesses/business-risk. No account needed; progress saves on their device.