Ch. 7

As part of a business plan for a new venture, an entrepreneur reviews industry trends and competitive strategies. This is termed a(n) ________ ________.

industry analysis

By controlling ________, the firm can ensure maximum service to the customer.

inventory

A requirement for the executive summary of a business plan for a new venture is that it should _____.

stimulate a potential investor's interest

Which of the following sections of a business plan for a new venture contains backup material that is not necessary in the text of the document?

the appendix

In an organizational context, the final part of a business plan's industry analysis section should place emphasis on _____.

the specific market

The business plan is designed to guide the entrepreneur:

through the first year of operations.

To assess the potential profitability of a venture, the entrepreneur needs to ascertain expected sales and expense figures for the first:

year.

The section of a business plan for a new venture named description of the venture should _____.

start with the mission statement or company mission

The entrepreneur's perspective

The entrepreneur should precisely articulate what the business is all about.

Typically, business plan projections are made in a 36-month schedule. T/F?

False

Which of the following is an example of a poorly prepared business plan? A business plan created by an entrepreneur who is well informed about the type of business A business plan created by an entrepreneur who makes a total commitment to the business A business plan with objectives that are specific and not so mundane as to lack any basis of control A business plan that lacks an establishment of customer needs for the proposed product or service

A business plan that lacks an establishment of customer needs for the proposed product or service

An entrepreneur should be prepared for sudden changes or disasters that can affect the implementation of a business plan. In this context, which of the following are true about contingency plans? (Check all that apply.) The process of creating a contingency plan is independent of the nature of the business. A generalized contingency plan is more effective than a specific one. A contingency plan should be a step-by-step plan. A contingency plan should be implemented immediately if there is a crisis.

A contingency plan should be a step-by-step plan. A contingency plan should be implemented immediately if there is a crisis.

Identify five of the nine skill areas an entrepreneur should review in order to determine whether or not they need help writing parts of the business plan.

Accounting/taxes Planning Forecasting Marketing research Sales People management Product design Legal issues Technology

Identify the reasons why a business plan for a new venture fails. (Check all that apply.) An entrepreneur consults a lawyer while creating the business plan. An entrepreneur sets unreasonable goals. An entrepreneur sets goals that are measurable. An entrepreneur lacks sense of potential threats or weaknesses to the business.

An entrepreneur sets unreasonable goals. An entrepreneur lacks sense of potential threats or weaknesses to the business.

What are the perspectives an entrepreneur should consider in preparing a business plan for a new venture? (Check all that apply.) An investor's perspective Competitors' perspective An employee's perspective His or her own perspective The marketing perspective

An investor's perspective His or her own perspective The marketing perspective

Legislation

Any future restrictions that may affect the product or service, channel of distribution, price, or promotion strategy

How should an entrepreneur decide whether to hire a consultant or to make use of other resources when preparing a business plan for a new venture?

By assessing his or her own skills objectively

Entrepreneurs can present their business plans for new ventures in colleges and universities or locally sponsored business meetings in a competitive and structured setting. How should an entrepreneur make use of this designated period of time? (Check all that apply.) By mentioning the recognized risks and how he or she plans to address them By making a presentation excluding the aspects of marketing By asking selected people from the audience to modify the plan By giving audiences an overview of the marketing program

By mentioning the recognized risks and how he or she plans to address them By giving audiences an overview of the marketing program

Production control

Controlling machine time, worker hours, process time, delay time, and downtime cost

Identify an implication of starting a new business without good planning.

Employees will not understand the business goals.

What do lenders, as the potential suppliers of business capital for a new venture, typically focus on? (Check all that apply.) Equity contribution Personnel Collateral Character Cash flow A cookie-cutter approach

Equity contribution Collateral Character Cash flow

An evaluation of cultural changes is irrelevant to the venture and should not be included in the business plan. T/F?

False

Discussing an exit strategy in the executive summary is not a good idea under any circumstances. T/F?

False

In an organizational plan as part of a business plan for a new venture, it is important to detail the shares of stock authorized and share options if the venture is a partnership. T/F?

False

In building a marketing plan, the entrepreneur should use a process designed as a pyramid, starting with narrow data and working down to broader-based information. T/F?

False

Investors of a new business venture often place less emphasis on an entrepreneur's character than lenders do. T/F?

False

It is recommended that an entrepreneur avoid using the Internet as a resource for finding information to write a business plan because the information found there is often incorrect and unreliable. T/F?

False

Pro forma financial statements should be prepared semi-monthly for the first year of the venture. T/F?

False

The best way to address the concerns of all potential audiences when writing the business plan is to rely exclusively on a computer software package. T/F?

False

The digital age is only relevant to new ventures if they sell items online. T/F?

False

The entrepreneur need not concentrate on environmental analysis since most of the external factors are generally uncontrollable. T/F?

False

Fatima, an entrepreneur, plans to start a retail store in her neighborhood. She plans to use an upside-down pyramid approach to gathering market information. Arrange the groups of trends that she needs to analyze as part of using this approach in the order in which they should be analyzed. (Place the group of trends that needs to be analyzed first at the top.) Local environmental and demographic trends Local retail industry trends General environmental and demographic trends National retail industry trends Local competition strengths and weaknesses

General environmental and demographic trends National retail industry trends Local environmental and demographic trends Local retail industry trends Local competition strengths and weaknesses

Which of the following make a business plan for a new venture difficult to control and implement? (Check all that apply.) Goals and objectives that are not feasible Goals and objectives that are feasible Goals and objectives that are too general Goals and objectives that are not too general

Goals and objectives that are not feasible Goals and objectives that are too general

Liam plans to open a bakery in his town. He decides to use an upside-down pyramid approach to gathering market information. Arrange the steps that should be taken by Liam when using this approach in the correct order of occurrence. (Place the first step at the top). He should evaluate the general environmental and demographic trends. He should assess the environmental and demographic trends in the town. He should analyze the trends in the baking industry in his country. He should analyze the strengths and weaknesses of other bakeries in the town.

He should evaluate the general environmental and demographic trends. He should analyze the trends in the baking industry in his country. He should assess the environmental and demographic trends in the town. He should analyze the strengths and weaknesses of other bakeries in the town.

Summary of the forecasted sales and the appropriate expenses for at least the first three years

Includes estimated sales, cost of goods sold, and the general and administrative expenses

Cash flow figures for at least three years

Includes the demands on money on a monthly basis, especially in the first year

Competition

Involves preparing for potential threats from larger corporations and being aware of who the competitors are and what their strengths and weaknesses are

Industry demand

Involves recognizing whether the market is growing or declining, the number of new competitors, and possible changes in consumer needs

Culture

Shifts in the population by demographics and shifts in attitudes

Identify the true statements about the introductory page of a business plan for a new venture. (Check all that apply.) It is prepared after the total plan is written. It establishes the basic concept that an entrepreneur is trying to develop. It is of least interest to the investors of the business. It gives a brief summary of the business plan's contents.

It establishes the basic concept that an entrepreneur is trying to develop. It gives a brief summary of the business plan's contents.

Why is a firm's business plan important to the entrepreneur, potential investors, and/or new personnel? (Check all that apply.) It primarily acts as a document of marketing activities such as sales promotion. It guides the entrepreneur in organizing his or her planning activities. It helps the entrepreneur reduce employee retention. It acts as a significant tool in helping to obtain financing.

It guides the entrepreneur in organizing his or her planning activities. It acts as a significant tool in helping to obtain financing.

Which of the following is true about the importance of updating an existing business plan for an entrepreneur? Its main purpose is to attract potential employees and investors from other countries. It ensures that the goals of the business plan remain unchanged. It helps in being responsive to changes in the company, industry, and market. It ensures that the business plan is available to only the entrepreneur.

It helps in being responsive to changes in the company, industry, and market.

Explain the purpose and content of the executive summary of the business plan.

It is two to three pages in length and should highlight in a concise and persuasive manner the key points of the business plan including: What is the business concept or model? How is this business concept or model unique? Who are the individuals starting this business? How will they make money and how much? An exit strategy (when appropriate). Key supportive evidence (key contracts obtained for example or individuals involved).

Identify a true statement about the preparation of a business plan for a new venture. It should be created by an entrepreneur. It should be created by marketing consultants. When creating the plan, an entrepreneur should avoid assessing his or her own skills. When creating the plan, an entrepreneur should avoid consulting lawyers.

It should be created by an entrepreneur.

Identify a guideline to be followed when preparing the executive summary of a business plan for a new venture.

It should emphasize in a concise and convincing manner the key points in the business plan.

Lenders are considered the potential suppliers of business capital for a new venture. According to lenders, what are the requirements for a business plan? (Check all that apply). It should indicate the amount of personal equity invested by an entrepreneur. It should establish an entrepreneur's personal perspective. It should show the collateral or tangible assets being secured for a loan. It should have clauses that consider the needs of accountants and engineers. It should mirror an entrepreneur's credit history.

It should indicate the amount of personal equity invested by an entrepreneur. It should show the collateral or tangible assets being secured for a loan. It should mirror an entrepreneur's credit history.

Identify the areas in which an entrepreneur requires information when conducting a feasibility study of the manufacturing operations of a new venture. (Check all that apply.) Labor skills Employee engagement Equipment Location Profit gains Raw materials

Location Raw materials Equipment Labor Skills

Quality control

Making sure that a product performs satisfactorily

Inventory control

Making sure that maximum service is provided to customers

Arrange the steps that should be taken by an entrepreneur when creating the section named assessment of risk in a business plan for a new venture in the correct order of occurrence.

Mention the potential risks to the new venture Discuss what might happen if the identified risks become reality Discuss the plan that will be executed to prevent, minimize, or respond to the identified risks

Technology

Powerful technological developments determined from resources committed by major industries or the U.S. government

Which of the following documents is not usually included in the Financial Plan? Income statement Statement of cash flows Projected balance sheet Price lists from suppliers

Price lists from suppliers

Which of the following are examples of information that should be included in the appendix of a business plan for a new venture? (Check all that apply.) Secondary research data Letters from distributors A description of the venture An environmental analysis

Secondary research data Letters from distributors

Projected balance sheet

Summarizes the assets of a business, its liabilities (what is owed), the investment of an entrepreneur and any partners, and retained earnings (or cumulative losses)

Which of the following sections of a business plan for a new venture identifies potential hazards and alternative strategies to meet business plan goals and objectives?

The assessment of risk

Which of the following statements is true? Most business plan resources on the Internet are too complex and expensive to be of use to the new venture. The business plan describes both internal and external elements. The preliminary business plan should be prepared by a lawyer. Once made, a business plan should not be changed.

The business plan describes both internal and external elements.

The marketing perspective

The entrepreneur should view his or her business through the eyes of the customer.

Arrange the contents that should be included in the introductory page of a business plan for a new venture starting from the information that should appear at the beginning to the information that should appear at the end. The name of the entrepreneur(s), telephone number, fax number, e-mail address, and Web site address if available A statement of the confidentiality of the report The amount of financing needed The company's name and address A paragraph explaining the company and the nature of the business

The company's name and address The name of the entrepreneur(s), telephone number, fax number, e-mail address, and Web site address if available A paragraph explaining the company and the nature of the business The amount of financing needed A statement of the confidentiality of the report

Which of the following should be primarily covered in the final part of a business plan's industry analysis section? (Check all that apply.) Who the potential investors are The condition of the business environment in the specific market The assessment of operations and marketing strategies Who the customers are

The condition of the business environment in the specific market Who the customers are

Which of the following sections of a business plan for a new venture provides complete overview of its product(s), service(s), and operations?

The description of the venture

How should an entrepreneur respond to changes in the company, industry, and market?

The entrepreneur should determine what revisions are needed in the current business plan.

An investor's perspective

The entrepreneur should ensure that there are sound financial projections.

An entrepreneur should be prepared for sudden changes or disasters that can affect the implementation of a business plan. In this context, identify the issues that need to be addressed by an entrepreneur to have a contingency plan. (Check all that apply.) The entrepreneur should make a list of any factors that can impact his or her venture. The entrepreneur should ensure that the contingency plan specifies that databases are stored in a single place rather than in multiple places. The entrepreneur should ensure that the contingency plan includes details of who should be contacted and how in event of a disaster. The entrepreneur should provide the employees responsible for carrying out the contingency plan with a generalized plan rather than a specific plan.

The entrepreneur should make a list of any factors that can impact his or her venture. The entrepreneur should ensure that the contingency plan includes details of who should be contacted and how in event of a disaster.

Which of the following sections of a business plan for a new venture goes beyond the manufacturing process (when the venture involves manufacturing) and describes the flow of goods and services from production to the customer? The financial plan The executive summary The assessment of risk The operations plan

The operations plan

Which of the following is part of a business plan for a new venture that describes a venture's form of ownership—proprietorship, partnership, or corporation?

The organizational plan

If the manufacturing is to be carried out in whole or in part by an entrepreneur

The plan should explain the physical plant layout; the machinery and equipment needed to perform the manufacturing operations; raw materials and suppliers' names, addresses, and terms; costs of manufacturing; and any future capital equipment needs.

If some or all of the manufacturing process is to be subcontracted

The plan should mention the subcontractor(s), including location, reasons for selection, costs, and any contracts that have been completed.

Which of the following are true about a firm's business plan? (Check all that apply.) The thinking process necessary to complete the plan is a beneficial experience for the entrepreneur. None of the information in the business plan should be based on assumptions. The process of writing the plan provides a self-assessment by the entrepreneur. The preparation of a business plan ensures that the venture will not be terminated.

The thinking process necessary to complete the plan is a beneficial experience for the entrepreneur. The process of writing the plan provides a self-assessment by the entrepreneur.

What are the needs of investors, particularly venture capitalists, from a new business venture? (Check all that apply.) They want an entrepreneur to be compliant and willing to accept their involvement in the actual management of the business. They demand high rates of return from the business. They want an entrepreneur to disregard the needs of other resources such as employees. They shift focus from the market and financial projections during the first five- to seven-year period of the business.

They want an entrepreneur to be compliant and willing to accept their involvement in the actual management of the business. They demand high rates of return from the business.

Economy

Trends in the GNP, unemployment by geographic area, disposable income, and so on

All businesses should create an operations plan as part of their business plan. T/F?

True

Planning is a process that never ends and is extremely important in the early stages of any new venture. T/F?

True

Potential investors regard a marketing plan described in a business plan as critical to the success of a new venture. T/F?

True

Standard & Poor's and the U.S. government are good sources of industry and market data. T/F?

True

The process of writing the business plan provides a self-assessment for the entrepreneur. T/F?

True

The significance of a feasibility study of the manufacturing operations by an entrepreneur of a new venture depends on the nature of the business. T/F?

True

When gathering financial information, the entrepreneur should develop a budget that includes expected sales and expense figures for the first year. T/F?

True

A true statement about a business plan for a new venture is that it is usually _____. created to address only short-term decision making for the first three years of operation a combination of functional plans like marketing, finance, manufacturing, and human resources a road map prepared by the employees of a firm framed by investors, suppliers, and potential customers

a combination of functional plans like marketing, finance, manufacturing, and human resources

The executive summary section should:

be about two to three pages in length.

A written document prepared by an entrepreneur that describes all the relevant external and internal elements involved in starting a new venture is known as a(n) ________ ________.

business plan

All of the following are reasons to enact a contingency plan, except: a technology breach. changes in fashion. a tornado or hurricane. changes in regulations.

changes in fashion

Investors often place more emphasis on the entrepreneur's ________ than lenders do.

character

Before preparing the financial section of a business plan for a new venture, an entrepreneur should _____.

create a budget including lists of possible expenditures in the first year and revenue sources

Assessment of external uncontrollable variables that may impact a business plan of a new venture is known as a(n) ________ ________.

environmental analysis

If a new business venture has a strong growth plan and in five years expects to be positioned for an initial public offering (IPO), the executive summary of its business plan should _____.

explain about an exit strategy

Before beginning the business plan, the entrepreneur should define the venture's goals and objectives. These goals should be:

feasible.

In a business plan for a new venture, a section projects key financial data that determine economic feasibility and necessary financial investment commitment. This section is known as the ________ ________.

financial plan

The organization plan describes the business':

form of ownership.

A(n) ________ ________, which is part of a business plan for a new venture, describes market conditions and strategy related to how the product(s) and service(s) will be distributed, priced, and promoted.

marketing plan

If a new venture does not have a strong growth plan and does not expect to be positioned for an initial public offering (IPO) in five years, the executive summary of its business plan should _____.

not include any discussion of an exit strategy

Before conducting a quick feasibility study of the business concept of a new venture, an entrepreneur should _____.

precisely state the goals and objectives of the business

As part of measuring the progress of a business plan, an entrepreneur should compare the cost figures estimated in the business plan with day-to-day operation costs. This process is part of the control element called _____.

production control

A(n) ________ ________, which is part of a business plan for a new venture, details how the product(s) will be manufactured.

production plan

A business plan is primarily designed to _____.

provide guidance to an entrepreneur through the first year of operations

To prepare the actual budget as part of a business plan for a new venture, an entrepreneur should _____.

recognize benchmarks in the industry that can be used to form the final pro forma statements in the financial plan

Entrepreneurs can present their business plans for new ventures in colleges and universities or locally sponsored business meetings in a competitive and structured setting. In this designated period of time, an entrepreneur is expected to _____.

sell his or her business concept to the audiences