entrepreneurship Quizzes 7-13
you can work on your startup as long as you dont have a contract with your other employers
false, just bc you dont have a contract, doesn't give you full authority to do something that harms employer. solution> get an attorney to represent you
delegation is essentially dropping responsibilities you dot like on your managers
false, may feel that way but effective needs to be more deliberate and specific
during early stages of startup, performance tracking systems should be elaborate and extensive so you dont waste resources on the wrong thing
false, should be simple in early stages, and grow more complex as the stakes are raised, start simple, expand as you grow
if you think of an idea first, that gives you the rights to it as intellectual property?
false, you need to take action to protect it
taking a loan against your investment is risky
false. Not necessarily, it can be, but it is a viable option to solve a short term cash crunch and may be preferable to other forms of fund raising
you should be creative when you write your business plan
false. Not the time to be creative, follow the common structure and formant, read is supposed to be easy on the reader
cash flow is a direct measure of a company's performance
false. an income statement is but poor cash management can lead to the quick demise of a growing company
sole proprietorship is the simplest and cleanest form, this makes the most sense for startups
false. every startup is different, form must fit strategy "simple does not mean best"
factoring > borrow $ from finance company using inventory as collateral
false. factoring - selling receivables for % of face value. They become property of finance company
selling products on credit will not impact your cash flow
false. when you sell credit, you essentially are allowing your customers to pay you at a later date. This hurts your cash flow
venture captalist
financial station that specializes in funding targeted startup firms with a potential for a high rate of return
four Fs of informal financing
founder family foolhardy friends
as a franchise of a local mcdonals you benefit from a decentralized structure
generally true, you are responsible for your own profit/loss (results) but have to live within strict guidelines for how you will operate
selling on credit
get it now, pay later (good for them, but puts a burden on you) but can be a good thing, it improves income statement, making sales!```
what is the bigger part of performance tracking
high level KPI, bball team wins and losses
burn rate
how fast you use the $; 100,000/month
runway
how much cash you have to last you a certain amount of time; "we have enough cash to last us 6 months)
what are the questions you need to be able to answer at the bank applying for a loan
how much your company needs how much $ will you use how will you repay it when will you repay it
loans against inventory
inv can be a companys largest assets, ties up cash, doesn't generate revenue, have a warehouse full of money but can't use it for essential purposes
top down forecasting
it is projecting revenue based on acquiring a percentage of a market; common mistake, not good, lose credibility
As an entrepreneur, you usually want to keep your inventory low because: - it preserves cash - it allows you to focus on strategic issues - it allows you to have an abundance of inventory to meet customer needs - reduces your accounts receivable collection time
it preserves cash
performance tracking
keeping score
action you take that leads to $ coming in the door
knowing your revenue drivers
legal form
legal structure of a company
It is always best to apoint a CEO from the employees who were with the company from the very start since they know the operations.
false
Sales via "cash" and sales via "credit" have the same impact on cash flow.
false
The majority of your performance tracking efforts should be focused on your competition during your initial growth stages.
false
When you leave your company to start you new venture, it is illegal to recruit former co-workers in most states.
false
With your startup, you should always hire an intellectual property attorney very early on.
false
You can use any information you gathered at your previous job as long as it is not patented or copyrighted.
false
if you hire a top notch accountant you dont have to worry about numbers
false
hiring a sales team in itself is a revenue driver
false! hiring a team is not a driver, the actions of the team such as sales calls and product demos ARE
Business plans are a waste of time and should not be given much attention
false! planning is still essential even though the plan isn't. the process of creating one is still planning
industry data is hard to find
false, SO much info out there, job is to find relevant data to your business
most small business attorneys can handle all your legal needs
false, dont expect them to be experts in all areas
family gets % of their investment back
1 times
friends gets % of their investment back
1 times
the foolhardy get % of their investment back
1.5 times
what ratio of businesses get VC
1/10,000
of 10 investments, how many flops, meh, and homeruns
2 flops, 6 meh, 2 hr
what % of investments come from foolhardy
24.2%
what % of investments come from friends
26.4%
what % of investors expect to receive nothing back
34%
what % of investments come from family
49.4%
what % of informal investors expect to receive 20x their investment
5%
what % of investments come from the founders themselves
65.8%
To truly understand your customers, you MUST ___ -tell them why they need your product -hire the best marketing research firm available -listen carefully and adapt based upon what they say -all the above
listen carefully and adapt based upon what they say
what should you do if you need a large infusion of capital
loans from a commercial bank
non compete agreement
lot of insight that would benefit competitor use to defeat them
pivot
major shift in strategy regarding one of the 9 building blocks of a business plan; have to be ready to do so; you NEED to adjust business plans to change
What skills become increasingly important at later stages of development for a company? marketing managerial technical entrepreneurial
managerial
When you are in need of operating cash, loans against your inventory are: -a bad thing and should be avoided at all costs since they put your inventory at risk -a good thing and should be your first option -a good thing if you can find a reputable bank to loan money against the inventory -neither good nor bad, but must be evaluated in context of the business situation and the level of urgency regarding your need for cash.
neither good nor bad, but must be evaluated in context of the business situation and the level of urgency regarding your need for cash.
The bottom line of the income statement states the company's _______. - net size - net income - revenue less expenses - gross profit margin
net income
is getting $ from the bank an easy process
no it will be difficult bc they want to protect themselves; plenty of restrictions
control system
policies and procedures established to ensure the company operates within predetermined boundaries
other forms of raising funds
presales discounts for early payment loans against inventory factoring accounts receivable
decentralization
prices of moving decision making authority further away from a central body of people to those more closely responsible for execution and those closest to the customer
Intellectual property includes all of the following except: copyrights trade secrets product pricing patents
product pricing
sales person/sales call google ad campaign fb post newspaper ad coupon sponsorships "kids eat free night" are all examples of what
revenue drivers
know your numbers inside and out. What numbers?
revenue drivers key costs time to generate revenue comparables break even point "runway"
factoring
sell accounts receivable t a collection company in exchange for a reduced "factor" of their value; can provide immediate cash to run your business, but you lose the full value of receivables > have $100,000 in act receivables, get $70,000 immediately
Which form of business entity is the easiest to understand from the viewpoint of tax issues? limited liability company sole proprietorship limited partnership s-corporation
sole proprietorship
What should an entrepreneur focus on during early growth? strategy expansion operations talent acquisition
strategy
personal debt
student loans car loans mortgage loan from family CC
control system the point is to ______ and _______
take action and intercede when necessary
In most businesses, revenues are predictably consistent throughout the year.
false
how much $ is demanded by startups
$18,000
how much $/startup is out there for supply
$24,000/startup
business plan
(1 doc) prepared by the entrepreneur with a thorough analysis of the opportunity, the background of the entrepreneur, required resources, financial projections and plan for sucess
Considering competitor actions and reactions, which of the following would be most dangerous for entrepreneurs? -Assuming that competitors will be the same tomorrow as they are today - Identifying future competitors that might enter the market -Considering when and how your technology might become obsolete -none
Assuming that competitors will be the same tomorrow as they are today
business debt
CC 4 Fs home equity bank/loan- most prominent supplier of cash when you need a lot of it or need it quickly
TF? most of the time, informal investors dont get their money back
FALSE
income statement kills businesses faster
FALSE, cash flow statements do. you run out of money before it comes in CASH ONLY
TF? angels provide a large % of needed investment
FALSE. fund a tiny %
income statement shows cash items
FALSE. shows non cash items (revenue - expenses; profit and loss) depreciations, interest expense, accruals
It is better to let your accountant articulate the numbers of your business idea to potential investors.
False
top down forecasting is appropriate if you know your revenue drivers
False. Developing your pro forma using a top down method is vague at best and should not be considered an adequate method of projecting financials.
Three critical components of entrepreneurial growth are control systems, performance tracking and being employee owned?
False. Employee-owned is not necessarily relevant. But, you must have control systems, performance tracking systems and leadership.
a common statement is "no one is investing money in startups"
False. the money is there, but the investors have to be satisfied. sometimes the number of high quality/viable startups isn't where it needs to be
When writing a business plan it is best to: -Use a creative format to capture the investor's attention -Lead the plan with the TEAM section because investors often focus on the team members, rather than the idea -Follow a common outline because it helps spot reading. -Avoid appendices because no one reads them.
Follow a common outline because it helps spot reading.
Which of the following categories of informal investors expects the highest rate of return on his or her investment? Friends Family Foolhardy investors Founders
Foolhardy investors
TF? the number of startups looking for cash far exceeds the # of available investments
TRUE
about 1/3 of all startup funds come from someone other than the founder
TRUE
roughly half of all informal investments have a zero or negative return on investment?
TRUE. with a median of 1 times the investment, that means a large share of informal investments dont pay off. again, love over money, a large number doesn't pay off
What is the relationship between informal investing and entrepreneurship? -Informal investment facilitates entrepreneurship. -Entrepreneurship brings about a need for informal investment. -They depend on each other. -Any relationship between the two is perceived and not real.
They depend on each other
An important end result of the business planning process is that it allows the entrepreneur to articulate the business opportunity to various stakeholders in the most effective manner.
True
Competitive profile matrices can aid in identifying undeserved or vulnerable parts of the market susceptible to a new entrant.
True
The appendices of a business plan can include anything and everything that you think adds further validation to your concept, but does not fit in the main parts of the plan.
True
The chapter takes the view that the self-examination required to develop a tight, well written business plan is more important than the plan itself.
True
Your business plan should be designed to be flexible, to allow for rapid adjustments as more information becomes available
True
In most cases, it's considered ok to work on your startup while at your employer's office or facility.
false
If you are seeking a loan from a bank, they will want to know all of the following except: - How much money you need - How the money will be used - How you will repay the funds - Your current inventory level
Your current inventory level
An effective control system includes all of the following except: accounts payable policies accounts receivable and collection policies an inventory management system a risk assessment ratios tracking
a risk assessment ratios tracking
When an entrepreneur understands who his customers are, he can assess - what compels them to make purchases. - how his company can sell to them. - how his company can retain customers -all
all
The amount of capital that entrepeneurs need to start their ventures depends mainly on ______. the type of business the ambitions of the entrepreneur the location of the business all of the above
all the above
Which of the following can be used to strengthen your assumptions? -Industry research -competitor analysis -Your own observations -All of the above
all the above
Which of the following is a common mistake of entrepreneurs? -Underestimating costs -Finding a lack of comparable companies -Expecting to generate revenues within too short of a timeframe -all of the above
all the above
Which of the following is not a valid reason that business planning can help entrepreneurs to articulate the business opportunity to stakeholders? -The plan provides background information that enables the entrepreneur to communicate the upside potential to investors -It provides the validation needed to convince potential employees to leave their current jobs for the uncertain future of a new venture. - It can help secure a strategic partner -all the above are valid
all the above
entrepreneurial execution
an ability to get things done in the face of uncertainty, adversity, and seemly insurmountable challenges
why do we plan
anticipate, mitigate, win!
when does planning start
as soon as you start thinking about your business
Which of the following may be a common error when an entrepreneur tries to transition to an entrepreneurial leader? - leaders the venture through changes in both the organization and the competitive landscape. - sets a vision and empowers others to carry it out. - avoids hiring managers whose domain experience exceeds his/hers. - leverages the core business to grow in-line with critical capabilities.
avoids hiring managers whose domain experience exceeds his/hers.
what statement is a snapshot of financial position
balance sheet asset and liabilities
"how much money to get someone in the store" "they will spend $ each visit" "we will have X customers/day" "this gives us XXX cust/yr for a projected rev of xxx examples of what
build up methods, this is the way to do your pro forma
Which legal form provides you with the greatest protection against personal liability? sole proprietorship partnership non-profit c-corporation
c corp
inventory management accounts payable policies time card tracking sales quotas are all examples of what
control systems
three critical components of enrepreneurial growth
control systems performance tracking leadership
Which of the following is NOT one of the Five Cs of credit? character capacity capital customers
customers
The build up method drills down revenue projections to a typical _________. -hour -day -month -quarter
day
what is the smaller part, more micro of performance trackign
departmental, managerial, specific statistics, specific member of the bball team, free throw % points/game,
delegation
distribution of decision making authority and responsibility the outcomes of those decisions
corporate opportunity doctrine
doing something at work that will benefit your own company
what are some cash management strategies to preserve cash?
eliminate sales on credit bootstrapping slowing down accts payable (wait till due date to stretch cash) lease instead of purchase barter
leadership opportunity recognition the entrepreneur execution
execution
As an organization grows, managerial skills emergeout of entrepreneurial skills.
false
One of the important concepts of double taxation is: - that you can double the size of your federal tax return if you are strategic in how you set up your company - that you might be subject to double taxation, depending on how you set up your company. - you can avoid double taxation if you set your company up as a c-corporation. - should be avoided at all costs.
that you might be subject to double taxation, depending on how you set up your company.
If an employee causes damage while on the job, - the employer is responsible for it - the employer is responsible for it if they were aware of the potential damage ahead of time - the employer is not responsible if the employee was not following instructions or procedures - the employer is not responsible if the employee caused the damage on purpose
the employer is responsible for it
competitive landscape
the environment in which you operate and the companies also vying for the same customer dollar
why do you delegate as an entrepreneur
the volume of decisions can be overwhelming; decisions become more complex/higher stakes things fall between the cracks
The ____________ of receivables collection and payment of accounts payable are key determinants in whetyher a firm is cash rich or cash poor. quantity cost difference timing
timing
"i will get 50% of college students to use my app" "if we can get 3% of the market, we can be successful" examples of what
top down forecasting you DONT know your revenues, you dont know your costs to acquire a customer, it is naive and poor planning
Angel investment frequently precedes formal venture capital.
true
Credit cards and home equity loans are common financial resources used by startups.
true
Friends and family are a comon source of startup money.
true
If an entrepreneur wants more credit and would like to stretch out her payables, she can negotiate with her suppliers for more generous terms.
true
If you receive a cease and desist letter, you should contact an attorney as soon as possible.
true
In every nation, there is far more informal than formal investment from venture capitalists.
true
In general, venture capital is invested in companies that are already in business.
true
In the comparable method, you look at how your company compares to industry averages and benchmark companies.
true
It is possible to have negative earnings on the income statement and a positive statement of cash flows.
true
It is very difficult for entrepreneurs to raise debt financing from conventional banks they they require as many as three years of actual financial statements to cover the loan.
true
Performance measures for a growing firm should be simple and inexpensive to track.
true
Revenue projections help you to understand the company's revenue drivers.
true
Self-funding by entrepreneurs, along with funding from informal investors, is the lifeblood of an entrepreneurial society.
true
TF? as business grows, your need for more extension control system grows
true
The four "f"s of financing are founders, friends, family and the foolhardy.
true
The term factoring, refers to selling accounts receivable at a discount to a finance company know as the factor.
true
Tracking performance is necessary to support quality decision making.
true
decentralization is critical for later stages of growth TF?
true
different informal investors have different expectations and different outcomes
true!
control systems are usually very minimal during startups early period
true! they need to be more flexible and nimble early on but without adequate control systems the growth of an entrepreneurial firm can be put at risk
TF? most venture capitalist profits come from an IPO (initial public offering)
true! this is where the real $ is made (venture capitalists take a firm public($60,000 overnight)) unfortunately, these are even more rare than VC funding
planning is an iterative process
true, you are never done planning
commercial bank loans provide the bulk of small businesses financing during short term cash needs
true. most common source, can be challenging bc they want to protect themselves
An entrepreneur must be able to ____________, if her income statement does not match the industry average. -remove any information that deviates from the average -adjust and refine your metrics accordingly -understand and explan the differences -rewrite your projections
understand and explan the differences
pledging
using accounts receivable as collateral for a loan; borrow $, I will pledge/give you my A.R. in the event that I cannot pay you, I will give you my A,R.
comparable method
using industry and market data line up your financials to compare and see how you stack up how does your business "compare" to others compare industry rates to your rates (Cogs, labor,overhead, profit)
proprietary info
vendor lists belong to your employer, anything you have access to in your employer now you cannot use for yours
The rarest source of capital for nascent entrepreneurs is _________. friends family venture capitalists foolhardy investors
venture capitalists