Chapter 6: Entrepreneurship and Starting a Small Business

Venture capitalists may ask for a large stake in your small business - as much as _____ percent which could cause you to lose control of the business.

60

What two advantages do small businesses have over larger companies? [multiple] A. Able to respond quickly to opportunities B. More personal customer service C. Small failure rate D. Ability to pay higher wages

A. Able to respond quickly to opportunities B. More personal customer service

What is the best definition of entrepreneurship? A. Accepting the risk of starting and running a business. B. Working for others in order to build toward and early retirement. C. Developing innovative ideas for your employer in hopes of getting recognized. D. Tracking current trends in order to safely maintain a successful enterprise.

A. Accepting the risk of starting and running a business.

A good business plan is between 25 and 50 pages long and take many months to write. A comprehensive business plan will include which three items? [multiple] A. Cover letter B. Executive summary C. Bank analysis D. Company background E. List of all competitors

A. Cover letter B. Executive summary D. Company background

What two factors could be associated with small-business success? [multiple] A. Managerial competence B. Borrowing money without planning C. Forgetting about some costs of doing business D. Adequate financial planning

A. Managerial competence D. Adequate financial planning

Select the characteristics of an entrepreneurial team that will be developing and marketing a new product. [multiple] A. Members have complimentary skills and are creative. B. Each from different areas of business. C. A group of experienced people. D. Members compete with each other in order to receive individual credit for outputs.

A. Members have complementary skills and are creative. B. Each from different areas of business. C. A group of experienced people.

_____ want to maintain a balanced life style while doing the kind of work they want to do. A. Micropreneurs B. Managers C. Intrapreneurs D. Entrepreneurs

A. Micropreneurs

What is the outlook for online businesses? A. Online sales are projected to increase. B. Online sales are projected to decrease. C. Online sales are projected to remain steady.

A. Online sales are projected to increase.

What happens if a borrower takes out a loan from a community development financial institution (CDFI) and fails to repay the loan? A. The CDFI takes the hit and is stuck with the defaulted loan. B. The government intervenes to cover the loan. C. The CDFI and the borrower renegotiate the loan with more favorable terms. D. The borrower is subject to hefty penalties.

A. The CDFI takes the hit and is stuck with the defaulted loan.

What term is given to individuals or companies that invest in new businesses in exchange for partial ownership in those businesses? A. Venture capitalists B. White knights C. Investment advisers D. Finance brokers

A. Venture capitalists

Which of the following are good ways to learn how to run your own business? [multiple] A. Work for a successful entrepreneur B. Start the business immediately to speed up the learning process C. Run a small business during your off hours D. Talk to other business owners

A. Work for a successful entrepreneur C. Run a small business during your off hours D. Talk to other business owners

What advice is helpful for someone wanting to learn small-business management? A. You should become an apprentice or work for a successful entrepreneur. B. Don't be afraid to fail; everyone makes mistakes, but they can easily be corrected. C. Each business is unique; jump in, head-first, and learn as you go. D. You should not start a business unless you have an advanced degree in business.

A. You should become an apprentice or work for a successful entrepreneur.

Small businesses should seek the advice of ______ to help with leases, contracts, partnership agreements, and protection against liabilities. A. a lawyer B. an established business owner C. a marketing expert D. a commercial banker

A. a lawyer

To keep track of daily sales, expenses, profits, inventory control, customer records, and payroll, a small business needs a good: A. accounting system B. CRM system C. inventory system

A. accounting system

Which of the following characteristics are needed to become a successful entrepreneur? [multiple] A. action-oriented B. bachelor's degree in business C. tolerant of uncertainty D. initiative

A. action-oriented C. tolerant of uncertainty D. initiative

What three items are included in the "Management Team" section of a business plan? [multiple] A. an organizational chart B. salary requirements for all team members C. job descriptions of listed positions D. resumes of current and proposed executives E. goals and objectives the team must carry out

A. an organizational chart C. job descriptions of listed positions D. resumes of current and proposed executives

What two tasks are important to complete when writing a business plan? [multiple] A. analyze the competition B. calculate how much money you need to start C. develop a vision that sets a cultural tone D. develop a Gantt chart

A. analyze the competition B. calculate how much money you need to start

What four items are addressed in a business plan? [multiple] A. any competitive advantages the business has B. the nature of the business C. detailed production process D. qualifications of owners E. listing of potential investors F. the target market

A. any competitive advantages the business has B. the nature of the business D. qualifications of owners F. the target market

The executive summary is part of the _____ plan that consists of a two or three page management summary of the proposed venture, including a short description of the business, and discusses major goals and objectives. A. business B. financial C. operational D. marketing

A. business

Adam hopes to show the bank lending manager he is meeting with that he is aware of who the target market is, who the competition is, how much money he needs, and exactly how he intends to turn a profit by supplying him with a(n) _____.

A. business plan

Jason has prepared a comprehensive _____ which includes a cover letter, executive summary, company background, management team, financial plan, capital required, marketing plan, location analysis, manufacturing plan, and an appendix. A. business plan B. statement of operations C. vision statement D. action plan

A. business plan

One of the most difficult tasks is raising money for a start-up. To raise money, entrepreneurs talk with bankers and other potential investors, and try to sell their ideas. In order to have a chance, most of the time, entrepreneurs have to present a(n) _____. A. business plan B. marketing plan C. financial statement D. annual report

A. business plan

The _____ section of a business plan describes company operations to date (if any), potential legal considerations, and areas of risk and opportunity. This portion also summarizes the firm's financial condition, and includes past and current balance sheets, income and cash flow statements. A. company background B. marketing plan C. financial plan D. executive summary

A. company background

Among the hurdles small businesses must overcome in starting to operate globally are: [multiple] A. difficulty finding financing B. many shippers available to start shipping more quickly C. bureaucratic paperwork D. understanding cultural differences

A. difficulty finding financing C. bureaucratic paperwork D. understanding cultural differences

Included in the comprehensive business plan, the _____ plan provides five-year projections for income, expenses, and funding sources. A. financial B. marketing C. human resources D. operational

A. financial

In addition to good ideas, entrepreneurs must: [multiple] A. have a burning desire to realize and actualize their dream B. want to see their dream become reality C. be action oriented D. continually come up with new ideas

A. have a burning desire to realize and actualize their dream B. want to see their dream become reality C. be action-oriented

Select reasons why people become entrepreneurs. [multiple] A. independence B. opportunity C. regulations D. profit

A. independence B. opportunity D. profit

All organizations require the following: [multiple] A. information management B. capital C. planning D. many employees

A. information management B. capital C. planning

A necessary and invaluable aid to entrepreneurs is a competent, experienced _____ who knows and understands small business. This person can help with leases, contracts, partnership agreements, and protection against liabilities. A. lawyer B. business owner C. small business administrator D. venture capitalist

A. lawyer

A small business is defined as: [multiple] A. one that meets certain standards of size in terms of employees or receipts B. one that is independently owned and operated C. one whose stock is traded on the open stock market D. one that is not dominant in its field

A. one that meets certain standards of size in terms of employees or receipts B. one that is independently owned and operated D. one that is not dominant in its field

Micropreneurs are willing to accept the risk of starting an managing a business that: [multiple] A. remains small B. requires large investors known as "angels" to fund rapid growth C. offers them a balanced lifestyle D. lets them do the kind of work they want to do

A. remains small C. offers them a balanced lifestyle D. lets them do the kind of work they want to do

What is an important quality for entrepreneurs to possess? A. the ability to tolerate uncertainty B. an aversion to risk C. a strong desire for security D. fear of failure

A. the ability to tolerate uncertainty

What two items are described in a business plan? [multiple] A. the target market B. the resources and qualifications of its owner(s) C. a demand forecast of employees D. the advantages of using a chosen bank

A. the target market B. the resources and qualifications of its owner(s)

Naomi invests in new businesses in exchange for partial ownership in those businesses. Naomi is a(n) _____. A. venture capitalist B. white knight C. business incubator D. peer-to-peer lender

A. venture capitalist

An inexpensive marketing research study may help you determine which of the following? [multiple] A. where to locate B. how to lower the cost of your product or service C. what is an effective strategy for reaching your target market D. whom to select as your target market

A. where to locate C. what is an effective strategy for reaching your target market D. whom to select as your target market

Which section of the comprehensive business plan indicates the amount of capital needed to commence or continue operations, and describes how these funds are to be used? A. Cover letter B. Capital required C. Financial plan D. Executive summary

B. Capital required

What section of a business plan is intended to catch the readers interest quickly and convince them to read it further and not throw it away? A. Company Background B. Executive Summary C. Sales Pitch D. Capital Required

B. Executive Summary

Chris spent his own money on marketing research, and consulted his sister Kara, who is an accountant. They spent the next few months writing a business plan. Which of the following are some business functions Chris would have addressed? [multiple] A. Production controls B. Financing C. Planning D. Marketing

B. Financing C. Planning D. Marketing

There are a few hurdles that prevent many small businesses from engaging in the global market. What are two examples of such problems? [multiple] A. There are too few customers in global markets. B. Financing is often difficult to find. C. Would-be exporters do not know how to get started. D. Technology has not advanced enough to aid in overseas marketing.

B. Financing is often difficult to find. C. Would-be exporters do not know how to get started.

_____ are creative people who work as entrepreneurs within corporations. A. Micropreneurs B. Intrapreneurs C. Entrepreneurs D. Extrapreneurs

B. Intrapreneurs

Which of the following are true of entrepreneurs? [multiple] A. They do not like uncertainty. B. They will take calculated risks. C. Entrepreneurs are afraid to fail. D. They tolerate uncertainty well.

B. They will take calculated risks. D. They tolerate uncertainty well.

What two questions do entrepreneurs often ask themselves? [multiple] A. What would I least likely be willing to pay for? B. What really irritates me, and what product or service would help? C. What product or service do I never use? D. What do I want, but can never find?

B. What really irritates me, and what product or service would help? D. What do I want, but can never find?

Select the characteristics of an intrapreneur. [multiple] A. a person who assumes the risk of starting a business. B. a creative person who works within a corporation. C. someone who uses company's resources to launch new products. D. he or she generates profits by leveraging a firm's human financial and physical resources.

B. a creative person who works within a corporation. C. someone who uses company's resources to launch new products. D. he or she generates profits by leveraging a firm's human financial and physical resources.

What are three attributes of successful entrepreneurs? [multiple] A. above average wealth B. action-oriented C. tolerant of uncertainty D. highly energetic

B. action-ordinated C. tolerant of uncertainty D. highly energetic

What is included in a business plan? A. a public relations plan B. an analysis of the competition C. a listing of all potential funding contacts D. the trade secrets of the business operation

B. an analysis of the competition

A market consists of consumers with unsatisfied wants and needs who have both resources and the willingness to: A. sell B. buy C. supply D. demand

B. buy

When starting a small business, government agencies such as the Small Business Administration (SBA), the Farmers Home Administration, the Economic Development Authority, and the Minority Business Development Agency are possible sources of: [multiple] A. customers B. capital C. interest free loans D. information

B. capital D. information

_____ refers to accepting the risk of starting and running a business. A. intrapreneurship B. entrepreneurship C. incubators D. innovators

B. entrepreneurship

Most entrepreneurs get ideas for products and services _____. A. without even thinking about it B. from looking around and asking questions C. from already established products in the market D. only from a flash of inspiration

B. from looking around and asking questions

The expansion and development of the Internet has sprouted a world of small web-based businesses. This, among other reasons, may explain why online sales are rapidly: A. stagnating B. increasing C. decreasing D. shifting abroad

B. increasing

Since entrepreneurs can't compete with larger firms' pay and benefits, what are three ways they can motivate employees? [multiple] A. reduce employee empowerment B. maintain good employee relations C. provide more challenging opportunities to learn D. increase employees' workload E. be respectful of employees' opinions

B. maintain good employee relations C. provide more challenging opportunities to learn E. be respectful of employees' opinions

Community Development Financial Institutions (CDFI) have been successful because they: [multiple] A. offer more funding than is actually needed B. maintained financial discipline other lenders lack C. provide counseling on improving cash flow D. offer counseling on marketing strategies

B. maintained financial discipline other lenders lack C. provide counseling on improving cash flow D. offer counseling on marketing strategies

Managing a small business became relatively easy with the advent of inexpensive personal computers. Inexpensive computer systems and off-the-shelf or even free, open-source software make it easy for the small business manager to ______. [multiple] A. travel to other area businesses B. manage customer records C. lengthen their daily working hours D. follow the daily sales and expenses

B. manage customer records D. follow the daily sales and expenses

Classes on small business and entrepreneurship offered at a local community college offer prospective business owners the chance to _____. A. form a network of students who might be willing to invest in your business B. meet with experienced entrepreneurs to get advice and form support networks C. present business ideas to an instructor to see if it is worth pursuing D. recruit instructors who will help write your business plan

B. meet with experienced entrepreneurs to get advice and form support networks

Started by the Small Business Administration in 1991, the _____ program provides very small loans (up to $50,000) and technical assistance to small-business owners. A. finance B. microloan C. start-up D. help

B. microloan

Two advantages small firms have over large firms include more personal customer service and the ability to respond quickly to _____. A. employee requests for higher wages B. opportunities C. large increases in demand D. employee benefits needs for better benefits

B. opportunities

Kayla wanted to open her dress design business. She spent a few hours putting together a marketing plan, then selecting an award-winning dress she designed and wore it to the meeting with the bank. The most likely reason she did not receive a loan was _____. A. she did not have a good idea for a business B. she did not develop a thorough business plan C. she already had all of the capital needed to start D. the bank officer did not like her dress

B. she did not develop a thorough business plan

Some common causes of small business failure include: [multiple] A. overestimating time needed to build the business B. starting with too little capital C. no experience in that business or industry D. underpricing or overpricing goods or services

B. starting with too little capital C. no experience in that business or industry D. underpricing or overpricing goods or services

What is the maximum amount a business owner may borrow with a Small Business Administration microloan? A. $5,000 B. $10,000 C. $50,000 D. $100,000

C. $50,000

What is the "Executive Summary" component of a business plan? A. An outline of major objections to the plan. B. A list of the company officers who will review the proposal. C. A short description of the business along with major goals and objectives. D. A detailed background of all the executives hired to run the business.

C. A short description of the business along with major goals and objectives.

Identify the principle characteristic of an entrepreneur. A. A relaxed approach to running a business. B. An intolerance for uncertainty. C. A tendency toward self-discipline. D. A desire to prioritize personal goals over business goals.

C. A tendency toward self-discipline.

Which part of the business plan summarizes the most attractive points of your project in as few words as possible? A. company background B. marketing plan C. cover letter D. operations plan

C. Cover letter

What advice would established entrepreneurs likely tell a new, would-be business owner? A. Employees are plentiful; focus on your product instead. B. Location isn't as important as everyone says. C. Make sure your business is not undercapitalized. D. You don't need to hire an accountant if you can balance a checkbook.

C. Make sure your business is not undercapitalized.

Venture capitalists try to safeguard their investment by taking some control over the business. What could happen if a venture capitalist takes too large a stake in your company? A. You could destroy employee morale. B. You could gain control of the business. C. You could lose control of the business. D. You could run out of money.

C. You could lose control of the business.

What type of business relationship benefits both a trainee and a business owner and occurs when a trainee is hired to learn small-business management while assisting the owner in getting daily work done? A. incubator B. enterprise zone C. apprenticeship D. sponsorship

C. apprenticeship

A(n) _____ is a detailed written statement that describes the nature of the business. the target market, the advantages the business will have over competition, and the resources and the qualifications of the owner(s). A. executive summary B. cover letter C. business plan D. strategy plan

C. business plan

If you want bankers or other investors to provide capital for your business venture, it is essential that you have a(n) _____ before you talk with them. A. payback strategy B. listing of your other sources of financing C. business plan D. letter of recommendation

C. business plan

Although there are many functions that are important in both the start-up and management phases of the business, what two functions are considered to be primary concerns? A. production and sales B. hiring and human resource development C. planning and financing D. accounting and marketing

C. planning and financing

A business that is independently owned and operated, is not dominant in its field of operation, and meets certain standards of size in terms of employees or annual receipts is a(n): A. independent business B. corporate business C. small business D. big business

C. small business

Which of these are centers that offer new businesses in the critical stage of early development low-cost offices with basic services such as accounting, legal advice, and secretarial help? A. Small Business Administration offices B. Affiliates C. Enterprises D. Business incubators

D. Business incubators

The most important things investors want to know are what makes the product more desirable than what's already available and whether or not the product can be patented,. in which section of the business plan should investors look to find this information? A. Capital required B. Financial plan C. Operational plan D. Marketing plan

D. Marketing plan

_____ are entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the kind of work they want to do, and offers them a balance lifestyle. A. Entrepreneurs B. Intrapreneurs C. Extrapreneurs D. Micropreneurs

D. Micropreneurs

The U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans is called the: A. Government Entrepreneurship Assistance B. Small Business Investment Company C. Government Business Development Center D. Small Business Administration

D. Small Business Administration

All consumers with unsatisfied wants and needs who have both resources and the willingness to buy are: A. located in a specific region B. a country's population C. customers D. a market

D. a market

Understanding where to locate your business, who your target market is, and how to reach them, can be accomplished through: A. a comprehensive financial plan B. an experiences management team C. a comprehensive production schedule D. an inexpensive market research study

D. an inexpensive market research study

David opened his own bicycle shop 30 years ago, and although he enjoyed his work, he needed more free time. When Josie requested to work as an apprentice, David was very willing. Before long, Josie was able to run the store without any help. This is an example of how _____. A. having your own business allows one to take long vacations B. business owners can save money by hiring an apprentice C. all apprenticeships work well D. apprenticeships can benefit both the business owner and the apprentice

D. apprenticeships can benefit both the business owner and the apprentice

What is a good tactic for entrepreneurs to implement in order to keep a new company growing? A. do the work yourself rather than rely on employees B. continually bring in new employees rather than promote from within C. wait until the business is well established before giving employees additional pay or benefits D. delegate authority to employees

D. delegate authority to employees

A(n) _____ team is a group of experienced people from different areas of business who join together to form a managerial team with the skills needed to develop, make, and market a new product. A. franchise B. business C. creative D. entrepreneurial

D. entrepreneurial

Some causes of small-business _____ include underpricing or overpricing goods or services, starting with too little capital, going into business without first learning something about the industry or market, and underestimating how much time it will take to build a market. A. growth B. creation C. success D. failure

D. failure

Daniel wanted to start his own small business. After spending his own money on marketing research, Daniel asked his friend Chase to be his accountant. They spent a few months writing a business plan, which then they presented to a bank. Daniel: A. is riding the coat tails of his uncle B. does not understand what it takes to start a small business C. took the wrong initiatives D. understands the steps needed to start a small business

D. understands the steps needed to start a small business

After working for a large auto manufacturing company for over 20 years, Silvia decided to start her own auto accessory store. While facing new challenges every day, Silvia enjoys being free to manage her company as she desires. This example illustrates: A. the difficulties of working for a large corporation B. the costs of entrepreneurship outweigh the benefits C. that Silvia was wealthy enough to open a business D. why people take the risk of entrepreneurship

D. why people take the risks of entrepreneurship

_____ zones are specific geographic areas to which governments attract private business investment by offering lower taxes and other government support.

Enterprise or Empowerment

Another way to encourage entrepreneurship is to create specific geographic areas called _____ _____ in which governments offer lower taxes to attract private business.

Enterprise zones

Match the goals with the type of business person. Entrepreneur Micropreneur Desire to remain small and balance lifestyle with work. Desire to grow the business and generate wealth.

Entrepreneur --> Desire to grow the business and generate wealth. Micropreneur --> Desire to remain small and balance lifestyle with work.

True or False: Addressing the cover letter on your business plan "To whom it may concern" is considered preferable.

False (specific person)

According to a recent study, offering lower-cost offices with basic services to new businesses in the early stages of development results in an 87% success rate of _____ graduates.

Incubator

Wayne is starting a small business, but needs help with management training, financial advice, and loans. He should contact the _____ _____ _____.

Small Business Administration

True or False: Most entrepreneurs do not get their ideas from a flash or inspiration; they come more from their passions or looking at problems.

True

True or False: Personal savings, venture capitalists, and government agencies such as the Small Business Administration (SBA) are possible sources of capital or information when starting a small business.

True

True or False: The owner of McDonald's, Ray Kroc, turned to his business associates - his suppliers - for funds to keep the business going.

True

True or False: The principles of management are similar for a small neighborhood business and a giant global firm.

True

Totals that are shown in the Capital Required portion of a business plan should be the same as the ones shown in the _____ _____ statement.

cash flow

A good business plan takes a lot of time to write, but you have only a few minutes to convince readers not to throw it away. This is why your _____ summary is very important.

executive

The Financial Plan part of a business plan should show how you plan to fund the business at various stages of the company's _____.

growth

Business ______ are centers that offer businesses in the critical stage of early development low-cost offices and access to basic services such as accounting, legal advice, and secretarial help.

incubators

Because investors want to be protected against any possible mishaps, it is also a good idea to include a description _____ coverage in the Company Background portion of the business plan.

insurance

The part of a business plan that includes an organization chart, job descriptions of listed positions, and detailed resumes of the current and proposed executives is called the _____ _____ section.

management team

The most common source of funding for small businesses after friends and family is _____ savings.

personal

Factors like the customer needing a lot of personal attention, the product not being easily made, and sales not being large enough to appeal to a larger firm all create opportunities for _____ business success.

small