business 7

small business economy advantages

Creating new jobs Fueling innovation Vitalizing inner cities Around the world Per capita income Opportunity costs Cultural/political environment

SBA benefits

Gain experience Learn from others Educate yourself Access SBA resources

characteristics of entrepreneurs

Greater financial success Independence Flexibility Challenge Survival A distinctive profile: a matter of attitude Entrepreneurial characteristics Vision Self-reliance Energy Confidence Tolerance of uncertainty Tolerance of failure Finding the money Personal resources Loans Alternate funding

threats

High risk of failure lack of knowledge and experience Too little money Bigger regulatory burden Higher health insurance costs

opportunities

Market niches Personal customer service Lower overhead costs Technology

market niches

Market niches: a small segment of a market with fewer competitors than the market as a whole. Market niches tend to be quite attractive to small firms

external locus of control

a deep seated sense that forces other than the individual are responsible for what happens in his or her life

internal locus of control

a deep seated sense that the individual is personally responsible for what happens in his or her life

business plan

a formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives

Small business administration

an agency of the federal government designed to maintain and strengthen the nation's economy by aiding, counseling, assisting, and protecting the interests of small businesses

service corps of retired executives (SCORE)

an organization- affiliated with SBA- that provides free, comprehensive business counseling for small business owners from qualified volunteers

An advantage that small businesses have is that: a. they face lower risks of failure. b. they have lower health insurance costs. c. they have lower overhead costs. d. they face minimal federal regulations.

c

People with an external locus of control: a. are more likely to take responsibility for their own failure. b. feel that they have complete control over their lives. c. feel buffeted by forces like random luck. d. are extremely self-reliant.

c

Small businesses: a. tend to avoid niche markets. b. are exempted from federal regulations. c. have higher health insurance costs than large businesses. d. tend to have higher overhead costs than large businesses.

c

venture capital firms

companies that invest in start-up businesses with high growth potential in exchange for a share of ownership

CorpLab and Natural Inc. are two start-up companies in need of funds. TechLink, an already established company, believes that CorpLab and Natural Inc. have a high growth potential. Therefore, it agrees to invest in the two start-ups in exchange for a share of ownership. TechLink is a_____. a. nonprofit organization b. credit union c. trade union d. venture capital firm

d

angel investors

individuals who invest in startup companies with high growth potential in exchange for a share of ownership

small business development centers

local offices- affiliated with the SBA- that provide comprehensive management assistance to current and prospective small business owners

entrepreneurs

people who risk their time, money, and other resources to start and manage a business

alternate lenders

typically private firms that charge very high interest rates, structure loans to be repaid in months rather than years, and often collect payments daily or weekly to reduce risk. They also tend to make decisions quickly and are more willing to overlook lower credit scores

Audrey has recently launched a start-up called Bailey Inc. Steven, her wealthy friend, believes that her company has a high growth potential. He invests in Bailey Inc. in exchange for a share of ownership. In this scenario, Steven is a(n) _____. a. angel investor b. venture capitalist c. corporate philanthropist d. alternative lender

a

Carmen has an internal locus of control. She is most likely to_____. a. attribute success and failure to her own actions b. believe that everything happens because of luck and coincidence c. believe that the actions of others play a major role in her fate d. have no confidence in her own abilities

a

Debra has envisioned a pub in the heart of the city. She decides to have a music band right next to the bar playing her favorite rock ballads. She also has creative ideas for the items on the menu. She already has the funds needed to start the pub. Which of the following suggestions is most likely to help Debra realize her dream? a. Debra should start from scratch as she can implement her own concepts, designs, and structures. b. Debra should buy a franchise of a well-known pub as she will have more opportunities for creativity. c. Debra should know that starting a small business will mean very high overhead costs. d. Debra should buy a pub that is already established as there are better chances of implementing her own ideas.

a

Lynn has started a new company called VivaCom and is in need of additional capital to establish the company in the market. Many reputable banks have turned down her request for funding. Her neighbor, Sam suggests that she approach a private firm called Wise Investments Inc. which offers loans to small businesses. He informs her that Wise Investments will require her to repay the loan in months rather than years. He warns her that though availing funds through this firm can be less time-consuming and easier, Lynn should keep in mind that it charges very high interest rates. Wise Investments Inc. is an example of a(n) _____. a. alternative lender b. small business development center c. angel investor d. small business administration

a

Small businesses are more likely to develop innovations because they: a. came into existence because of a new idea. b. have an established bureaucracy that promotes invention. c. employ the best scientists and innovators in the country. d. have easy access to research funds.

a

Which of the following firms, supported by Small Business Administration (SBA), provides free, comprehensive counseling for small businesses from qualified volunteers? a. The Service Corps of Retired Executives b. A Small Business Development Center c. A venture capital firm d. An angel investor

a

Which of the following is a disadvantage of buying an established business? a. The entrepreneur may inherit old mistakes that can range from poor employee relations to pending lawsuits. b. The entrepreneur can face challenges while securing permits to hiring employees. c. The entrepreneur will need to invest a lot of time, money, and sheer sweat equity to build a customer base. d. The relationships of the entrepreneur with customers, suppliers, and other stakeholders are not stabilized.

a

Which of the following is a primary reason for necessity entrepreneurs to launch their own business? a. They believe it is their only economic option. b. Starting a business offers them endless opportunities for learning. c. Starting a business provides them independence from managers. d. They have the ability to control their own schedule.

a

Which of the following statements is true of commercial loans? a. They require a lot of paperwork and often a fairly long waiting period. b. They provide 100% of the required start-up money. c. They are free of interest. d. They are easy to get

a

In the context of the U.S. economy, small businesses: a. contribute to a very small percentage of the gross domestic product. b. are often the first to contract when times are tough. c. have an insignificant impact on the state of the economy. d. do not create a significant percentage of new jobs.

b

Market niches are most likely to: a. be characterized by the presence of several competitors. b. offer potential for small, specialized companies. c. offer potential for large, high-profile companies. d. be characterized by the presence of monopolistic large companies

b

Which of the following is a disadvantage of buying a franchise? a. The franchisee is faced with the challenge of building a brand image. b. The franchisee is tied to the requirements of an agreement and has little scope for creativity. c. The franchisee receives no assistance in terms of management expertise and consulting. d. The franchisee faces the task of building a customer base.

b

Which of the following is an advantage of buying an established business? a. The entrepreneur gets to develop creative organizational structures and procedures. b. The entrepreneur faces fewer challenges when it comes to getting financing. c. The entrepreneur will not have to deal with the mistakes made by the previous owner. d. The entrepreneur gets to pursue his or her own business concepts.

b

Which of the following statements is true of entrepreneurship? a. It involves fewer risks compared to conventional employment. b. It offers individuals more flexibility to control their own schedules than conventional employment. c. It offers little independence and less scope for learning compared to conventional employment. d. It provides less scope for achieving financial success than conventional employment.

b

Which of the following statements is true of funding options for small businesses? a. Angel investors provide interest-free loans to help small businesses. b. The SBA partially guarantees loans from local commercial lenders to help small businesses. c. Venture capital firms are federal agencies that provide microloans to small businesses. d. Getting commercial loans from banks is the quickest way to get funds for small businesses.

b

_____ are individuals who put money in start-up companies with high growth potential in exchange for a share of ownership. a. Alternative lenders b. Angel investors c. Formal investors d. Venture capitalists

b

Tracey has recently opened a company called Handy Baskets, which offers its customers a diverse selection of hand-woven baskets. As it is a small business, Tracey is quite apprehensive about the potential of the company. She asks four of her friends for guidance, and they all enlighten her with their thoughts about small businesses. Which of the following opinions should Tracey believe to be correct? a. Marsha tells her that starting a new business involves very little risk and that her company will thrive even if she doesn't put in much effort. b. Belinda tells her that Handy Baskets, being a small business, will have lower health insurance costs making it easier to offer coverage to its employees. c. Julian tells her that Handy Baskets, being a small business, will have low overhead costs as she can hire only a few managers and specialized employees. d. Sylvester tells her not to worry about regulatory burdens as small businesses face minimal federal regulations.

c

Ida has recently finished her high school exams. When the results are announced, she finds out that she is one of the students with the least scores. Ida believes that the bad results are because of her lack of concentration in class. She has a(n) _____. a. external locus of control b. low tolerance of failure c. culture of silence d. internal locus of control

d

In low-income countries, a high percentage of entrepreneurs start their own business because: a. a low national income causes the business to have less financial risks. b. the required start-up money is less. c. the impact of federal regulations is less. d. they have no other economic options.

d

Lucia works as a programmer in a software firm. She has recently received a promotion and an annual bonus. She believes that this is a result of random luck as she had not given her best. Lucia has _____. a. a low tolerance of failure b. learned optimism c. entrepreneurial self-reliance d. an external locus of control

d

Which of the following acts as a source of funding for small businesses? a. Service Corps of Retired Executives b. Small Business Development Centers c. Nonprofit organizations d. Venture capital firms

d

Which of the following statements is true of the impact of federal regulations on entrepreneurship? a. Lack of regulations can stop entrepreneurship from thriving. b. Entrepreneurs owning small businesses are in favor of strict regulations. c. Regulations and entrepreneurship are not interdependent. d. Extensive regulations can impede entrepreneurship.

d

_____ are companies that invest in start-up businesses with high growth potential in exchange for a share of ownership. a. Nonprofit organizations b. Credit unions c. Trade unions d. Venture capital firms

d

_____ is an agency of the federal government designed to maintain and strengthen the nation's economy by aiding, counseling, assisting, and protecting the interests of small businesses. a. Small Business Funding Bank b. Fair Trade Federation c. Economic Development Corporation d. Small Business Administration

d

_____ refers to a deep-seated sense that forces other than the individual are responsible for what happens in his or her life. a. Tolerance of failure b. Learned optimism c. Entrepreneurial self-reliance d. External locus of control

d

_____ refers to a deep-seated sense that the individual is personally responsible for what happens in his or her life. a. Tolerance of uncertainty b. Learned helplessness c. Culture of silence d. Internal locus of control

d