Ch. 07 Quiz: Small Business and Entrepreneurship: Economic Rocket Fuel

Clara opened a nail salon last year. She originally started with four employees, but now she anticipates that she will need ten full-time employees and two part-time employees. Her business is next to a small café that recently opened with ten employees. Clara's nail salon and the adjoining café are examples of how small businesses __________.

create new jobs

Mark set out to open a coffee shop that would double as a small music venue. He quit his job and used his savings to start renovating a small building that he had rented. During the renovation, Mark realized that he would have to completely reconfigure the space to pass inspection as a commercial kitchen. His original plan was to finish the renovation and open the coffee shop within three months so that he could rely on sales revenues to sustain the business and himself. Unfortunately, the new renovations would push out his opening date by another six months. As a small business owner, what prevented Mark from achieving his goals?

Too little money

Alain's friends and family have always known him to be ambitious, so they were not surprised to hear that he was quitting his job with the federal government to open his own accounting firm. Alain told them that he needed a modest amount of money to rent office space and get the word out about his new firm. While most of his network didn't have the ability to help fund his business, Alain was able to raise $10,000 thanks to a generous aunt and a few small gifts from friends, which was more than enough to get started. Which resource did Alain use to fund his business?

Personal resources

Tomasz recently left his job as a research and development associate at a large corporation where he felt that his skillset was underutilized. He now works for a small business that specializes in the development of eco-friendly packaging. His boss has given him a lot of leeway to experiment with new materials and encourages him to fail because "you can't learn unless you fail." Tomasz is motivated to work harder than ever and even hopes to secure his first patent while at this company. This is an example of how small businesses are better at ___________ than larger corporations.

fueling innovation

Rebekah wants to expand her financial consulting firm across state lines. She currently operates as an LLC, so she needs advice on the most efficient way to expand while complying with differing state laws. She knows that there are different options for small businesses seeking advice and assistance, but in the end, she decides to work with ____________, where she is matched with a former executive who previously completed a similar multistate expansion in her own business.

the Service Corps of Retired Executives (SCORE)

Aisha started working as a cashier at The Gap, a popular clothing retailer, when she was in high school. She gradually worked her way up to the role of store manager, learning how to run a successful retail store through her on-the-job experiences and the mentorship of her bosses. Although she enjoyed the retail environment, Aisha realized after ten years that no matter how hard she worked, her pay would always be limited to a set salary and bonus structure. She believed that her effort was worth more, so she decided to use her knowledge of retail operations to open her own store. Aisha was most likely motivated by the desire for _______ when she decided to open her own business.

greater financial success

Shelbey started an online book club focusing on books written by authors from underrepresented communities. This proved to be a popular concept, and Shelbey soon had a substantial online following. She decided to leverage the support of her online community to help fund a brick-and-mortar bookstore, which she had been dreaming of opening for years. In exchange for their support, Shelbey promised her online backers that they would receive discounts on her merchandise. Which resource did Shelbey use to fund her business?

Crowdfunding

Ravi opened a boutique real estate firm specializing in investment properties that can be used for both primary residences and short-term rentals through services like Airbnb. The town where he lives has been very supportive of short-term rentals, but a new city council member is asking for a review of the current policy. There is a chance that new taxes and regulations will be introduced that make this kind of property less attractive to buyers. Ravi must demonstrate __________ in the face of potential changes that could affect his business's ability to succeed.

a high tolerance of uncertainty

Anwar opened a small barber shop that offers quick haircuts and styling, straight-razor shaving, and what he calls "no nonsense" nail care. Anwar differentiates his business from other barber shops by targeting busy professionals who need to come in for a quick refresh before work or important meetings, so he opens his shop at 6:00 a.m.—much earlier than the competition. His shop is located in a busy financial district, and he only operates during the work week. As a small business, what advantage does Anwar have over larger chains like Hair Cuttery and Sports Clips?

A market niche

Darya is launching a financial technology company that she believes will compete with the likes of Venmo and Zelle. She expects that the company will be worth hundreds of millions of dollars within the first five years, so she needs substantial investment to get things started. She was accepted into a start-up "incubator" program that introduced her to high net-worth individuals who are interested in helping her fund her idea in exchange for an ownership stake in the company. What kind of funding is Darya seeking?

Angel investment

As the owner of an independent bookstore, Geoff is responsible for a number of tasks on any given day: marketing, bookkeeping, human resource management, and more. He may start the day off posting to the store's social media accounts, move on to cleaning the bathrooms, work a full shift at the cash register, and finish by calling a publisher to discuss the store's wholesale relationship. Although he does have a few employees, the majority of the store's operations are his responsibility, which he generally enjoys. Which entrepreneurial trait is Geoff demonstrating?

Self-reliance

Maya opened a café when she was in her mid-20s. Although she had worked in restaurants throughout high school and college, she quickly learned that she struggled with certain aspects of running a business: namely, cost control. She had to close that business after a few years because she wasn't able to consistently turn a profit. Yet she persisted in her dream to own a business, and using the lessons she learned from her café, she opened a food truck that was much more successful. Which entrepreneurial trait is Maya demonstrating?

Tolerance of failure

Ernesto has been working with a company that is interested in investing in his medical startup. In exchange for a share of ownership in Ernesto's company, the investors will provide him with funding that will help him move through his first product launch. The investors will also be involved in business operations to help ensure that their investment pays out. Which resource is Ernesto using to fund his business?

Venture capital

Nadezhda spent many years managing a restaurant that was owned by a corporation. She enjoyed the job and the benefits of working for a large business, but she had many ideas of her own on how to run a successful restaurant and was often frustrated with her company's cumbersome bureaucracy. After years of planning, Nadezhda finally quit her job so that she could open her own restaurant. She was excited to finally have control of all aspects of the restaurant's operations, even if it meant taking on more personal risk. Nadezhda was most likely motivated by the desire for _______ when she decided to open her own business.

independence

Werner moved to the United States from a country where entrepreneurship was rare: social safety nets ensured that anyone who could work would be able to find and retain steady employment. Now that he lives in the United States, Werner has noticed a much higher incentive to start his own business, specifically, the lack of employment opportunities for someone with his specific skillset: clock-making and repair. Now he is considering opening his own clock repair shop. Werner's experience demonstrates the importance of ______ in determining an individual's motivation for becoming an entrepreneur.

opportunity costs

Edith decided that she wanted to finance her mobile veterinary clinic in a way that would allow her to retain 100% ownership in her company. She was also realistic about the total market potential for her business given that she would operate in a small geographic area. Given these two factors, she decided to work with a community credit union to raise money. As part of her application, she had to submit a thorough business plan and a list of collateral. Which resource did Edith use to fund her business?

Loans

Jonas quit his job as a marketer to pursue his dream of owning a professional photography studio. Although Jonas was an excellent photographer and was able to leverage his experience as a marketer to attract new customers, he struggled with tasks like inventory management, bookkeeping, and accounting. He even forgot to pay his taxes a few times. Jonas realized that running his own business was much more stressful than he had anticipated because of all of the additional responsibilities he had. As a small business owner, what caused Jonas the most stress?

A lack of knowledge and experience

Agnes owns a contracting company that specializes in high-end kitchen remodels. She has always been proactive in her career: when working for others, she was quick to volunteer for more work and advocate for herself when it came to promotions. Now that she owns her own company, she knows that every job reflects her ability to lead. She even takes personal responsibility for any mistakes her team may make while they are on the job. She rationalizes this because she ultimately signs off on all kitchen designs and plans before the jobs begin. Which entrepreneurial trait is Agnes demonstrating?

An internal locus of control

Raul is undeterred in his pursuit to develop the largest suite of online learning programs for budding musicians. He started his company, Music For All, LLC, in 2018 because he believed then, as he does now, that he has the skills, motivation, and business-savvy to achieve his goals. He has never questioned his ability to be successful in his pursuits. Which entrepreneurial trait is Raul demonstrating?

Confidence

Adrian's Bed & Breakfast (B&B) has had better occupancy rates than a nearby chain hotel. In fact, Adrian's B&B is often fully booked six months in advance, often with repeat customers. One reason travelers prefer to stay at Adrian's B&B over the chain hotel is that Adrian takes the time to get to know his customers so that he can customize their experience: he can offer special menus that accommodate their dietary preferences, create itineraries based on their interests, and even stock their favorite brand of toiletries with enough notice. As a small business, what advantage does Adrian have over the larger hotel chain?

The ability to provide personal customer service

Halima just returned to work after completing parental leave. Although she loved her job, she felt frustrated trying to balance work and family life. After weeks of feeling overwhelmed, she went to lunch with a former coworker who shared her experience starting her own business. As they chatted, Halima learned that she could have a lot more control over her schedule if she worked for herself. She was inspired to leave her job and start her own consulting service so that she could determine her work hours and dedicate more time with her growing family. Halima was most likely motivated by the desire for _______ when she decided to open her own business.

flexibility

Maria grew up in a rural town in Guatemala. She and her parents sold the fruit that they grew on their property at an outdoor market. They chose to operate their fruit stand because there were few employment opportunities in their small town. Many of their neighbors started similar businesses selling livestock, produce, handmade goods, and offering variety of services to their community like transportation, home and car repair, and personal care. This is an example of how a country's _______ can influence the rate of entrepreneurship among its citizens.

per capita income

During the 2008 financial crisis, Paolo lost his job at a large bank. He spent some time applying for similar jobs at other banks, but the banking industry had been hit hard by the crisis, and most banks were not in a position to hire. After a few months, Paolo realized that he was facing difficult odds in the banking industry considering the challenging business environment, and that he would quickly run out of money if he didn't find something soon. Paolo decided to start his own financial advising business so that he would be able to continue to pay his bills. Paolo was most likely motivated by the need for _______ when he decided to open his own business.

survival

Trang owns a small boutique that sells locally-made pottery, jewelry, and handbags. Her business is doing well, and she is able to cover the business's costs and pay herself and one employee a modest salary. She needs advice on how to grow her operations to the point where she can afford to hire even more employees and eventually offer those employees benefits, like health insurance coverage. Trang decides to seek help from _________ so that she can learn from someone who was once in her position.

the Service Corps of Retired Executives (SCORE)

Sport Equipment, Inc., started in a garage in Idaho where two brothers decided to buy gently used baseball bats, gloves, and helmets, refurbish them, and then resell them for a profit. The two brothers quickly realized that they would like to move into a larger space, but they would need additional funding to help with the upfront moving costs. They knew that they would likely struggle to get approved for a loan because they didn't have much equity in their business. Luckily, they were able to work with __________ to create a business plan that they could use in applying for a small business loan.

the Small Business Development Center (SBDC)