Entrepreneurship Test 2

True of False? If you don't see quick results from your marketing plan, it's important that you revisit it and change direction so as to not waste time.

False

True or False? A nonprofit corporation is not permitted to make a profit.

False

True or False? In the rapid growth stage, you will probably not need extra capital as your business is generating revenue

False

True or False? Investor money can be used to pay off the debts you have incurred to date.

False

True or False? Nonprofit corporations are always tax exempt, so donors can get a tax write-off.

False

True or False? Once you believe you know your customer, you can safely spend money on marketing.

False

True or False? Once you choose the correct legal form of organization, it should not be change.

False

True or False? Social media is, for the most part, harmless.

False

True or False? With enough money, you can make any business concept a success.

False

True or False? IF you want to retain earnings for an expansion, an S-Corp will enable you to do that.

False (It's passthrough)

True or False? The Technology Readiness Level is useful to investors know that you are using computers and data in your business.

False - it just shows where your technology is in the development process

True or False? Raising money will be quick if you tap the right people.

False - it's a very time consuming process

True or False? The strongest proof of concept is a prototype.

False - it's customer sales

Tue or False? Brand image is about how you convey the effectiveness of your brand in the market.

False - it's how your customer perceives your brand

True or False? Social media is necessary to success in the 21st century.

False - it's not

True or False? In a lean startup, we assume we know the customer.

False - never make assumptions about your customer

True or False? Pricing should be designed to cover total costs.

False - pricing should be done in a way that maximizes total contribution

True or False? Customers perceive value in and make purchase decisions based on your product's features.

False - they buy based on benefits

True or False? After validating the market, you should prepare financial staments.

False - you would need some type of proforma statement

True or False? A sole proprietorship is a legal entity that has a sole owner who is responsible for all profits and losses.

False--a sole proprietorship is not a legal entity

True or False? You are most likely to write a business plan because a banker or investor asked you to.

True

True or False? You should be able to condense your marketing plan into one paragraph.

True

True or False? You should not discuss what you think your business is worth in your business plan.

True

True or False? In stage one of the growth funding stages, you are typically looking for friendly money.

True.

Choose the best answer to complete the following sentence. The purpose of a business process map is to: a. map the business process. b. detail how information flows through the business. c. understand your business activities.

b. detail how information flows through the business

Cal Newport describes social media as a: a. great networking tool. b. great source of entertainment. c. necessary evil.

b. great source of entertainment

This group will adopt once they're sure the product has real benefits. a. Innovators b. Early adopters c. Early majority d. Late majority e. Laggards

c. Early majority

What is the first step in the process of preparing to write a business plan? a. Develop a timeline based on tasks identified. b. Identify strategic partner interests. c. Identify who is responsible for what. d. Build a prototype.

c. Identify who is responsible for what.

Startup resources consist of: a. cash, investor capital, savings, and loans. b. financial assets, people, and equipment. c. intellectual property, physical assets, and inventory. d. All the above.

d. All of the above

To rightly consider that you have captured the mass market, which group of adopters would you want to have adopt your product? a. Laggards b. Late majority c. Early adopters d. Early majority e. Innovators

d. Early majority

Which of the following is NOT a possible stakeholder in a new venture? a. Bankers b. Investors c. Strategic partners d. Government

d. Government

Those who are reluctant to adopt until peer pressure gets them to adopt. a. Innovators b. Early adopters c. Early majority d. Late majority e. Laggards

d. Late majority

The business plan preparation process includes: a. working diligently to get the job done. b. identifying who is responsible for what. c. developing a timeline and tasks. d. All the above. e. None of the above.

d. all of the above

All of the following are elements of a one-paragraph marketing plan EXCEPT the: a. market niche. b. marketing budget as a percentage of sales. c. purpose. d. broad market and industry. e. company's convictions and identity. Hide Feedback

d. broad market and industry

Before starting a business you should: a. raise money. b. write a business plan. c. hire employees. d. do feasibility analysis. e. develop a product.

d. do feasibility analysis

This group is highly resistant to change. a. Innovators b. Early adopters c. Early majority d. Late majority e. Laggards

e. Laggards

True or False? When raising money, you should always have a backup plan even if the investor looks promising.

True

True or False? When you successfully acquire customers, it's easy to sell them more products.

True

True or False? The original marketing plan focuses on introducing the company and creating awareness for its products and services.

True

Remember these following:

- Absent an agreement otherwise, the company dissolves on the death of the principal --> general partnership, limited partnership, and sole proprietorship - Pass-through tax structure where you pay at your own personal rate --> general partnership, limited partnership, and sole proprietorship - only person responsible for all losses and profits --> sole proprietorship - Liable of all loses --> sole proprietorship and general partnership - Can only lose what you invested --> limited partnership - Specific property rights --> general partnership

Put the following executive summary items in the correct order. Can the founding team make this happen? What do you need from investors? Why is this the time to do this venture? Can your business make money? Your business' competitive advantage The pain being addressed and who has it Elevator pitch How your business is solving the customer's problem

1. Elevator Pitch 2. The pain being addressed and who has it 3. How your business is solving the customer's problem 4. Your business' competitive advantage 5. Can your business make money? 6. Can the founding team make this happen? 7. Why is this the time to do this venture? 8. What do you need from investors?

Remember the following:

B-corp: - A legal entity that can enter into contracts, sue, and be sued without the signature of the owners - Has a social mission - offers limited liability - must pay taxes on profits C-Corp - A legal entity that can enter into contracts, sue, and be sued without the signature of the owners - offers limited liability - company must pay taxes on profits S-Corp - Profits and losses pass through to shareholders in proportion to their interest - Offers limited liability Nonprofit Corp - A legal entity that can enter into contracts, sue, and be sued without the signature of the owners - May apply for tax-exempt status - Offers limited liability - Shareholders give up proprietary interest in the corporation

Match the metric in the first column with the type of business in the second column.

Gross margins--shoe manufacturer Occupancy--apartments Inventory turns--shoe store in a shopping mall Qualified leads--online retailers

Remember these definitions

Post money valuation: The amount being invested divided by the investor's ownership percentage Liquidation preferences: The distribution of preferred and common stock after the company have been satisfied Investors' initial percentage of ownership: The percentage of full-dilution share that investors own at the time of investment Pre-money valuation: the value of a company prior to investment Fully-diluted shares: The total number of shares outstanding

True or False? The importance of the lifetime value of a customer is that it tells you how much you can spend on acquisition.

True

True or False? The more money you have, the more mistakes you make.

True

True or False? An Iowa State College study found that most farmers waited to see whether the first new-product trials were successful.

True

True or False? Before you do your marketing plan, you need to make sure you have segmented your customer base.

True

True or False? Corporations account about 62 percent of all business receipts.

True

True or False? Every company experiences seasonality.

True

True or False? In a partnership, a partner is personally liable for the business debts and obligations of the other partners.

True

True or False? It's important to understand every possible aspect of the customer's life.

True

True or False? Ratios are used to compare changes in a business from period to period and to analyze a company's performance.

True

At the feasibility stage, what are the three most important financial questions? (Select all three.) a. Can we keep overhead to a minimum? b. Can we get a loan from a bank? c. Can we make money? d. Can we secure investment capital? e. How long will it take to be self-sustaining?

a. Can we keep overhead to a minimum? b. Can we make money? e. How long will it take to be self-sustaining?

Corporations are different from all other forms in what ways? (Select all that apply.) a. Corporations require the establishment of a board of directors. b. A corporation is a legal entity. c. A corporation can sue and be sued, acquire and sell real property, and lend money. d. A corporation provides limited liability.

a. Corporations require the establishment of a board of directors b. A corporation is a legal entity c. A corporation can sue and be sued, acquire and sell real property, and lend money

Which of the following metrics would be important to a startup business that produces self-improvement videos for sale direct to consumers online? (Select all that apply.) a. Customer acquisition costs b. Revenues per salesperson c. Monthly burn rate d. Average order size e. Viral coefficient

a. Customer acquisition costs c. Monthly burn rate d. Average order size e. Viral coefficient

What are consumers' expectations going forward? (Select all that apply.) a. Consumers want experiences targeted to their precise needs. b. They want experiences with no learning curve. c. Young consumers want to find what they need through Facebook. d. Consumers want to interact with anyone, anytime, anywhere as easily as possible. e. They do not want to do new things in new ways.

a. Customers want experiences targeted to their precise needs. b. They want experiences with not learning curve d. Consumers want to interact with anyone, anytime, anywhere as easily as possible

An LLC exhibits which characteristics of a corporation? (Select all that apply.) a. Free transferability of interests b. A legal entity c. Continuity of life d. Centralized management e. Limited liability

a. Free transferability of interests c. Continuity of life d. Centralized management. e. Limited liability

We study the adoption-diffusion curve because: (Select all that apply.) a. It tells us who adopts technology and when. b. It explains how disruptive technologies evolve. c. We want to know how long it will take to mainstream our product. d. We must manage supply and demand. e. We can be more competitive.

a. It tells us who adopts technology and when c. We want to know how long it will take to mainstream our product. d. We must manage supply and demand. e. We can be more competitive

Which of the following is a startup resource? (Select all that apply)'' a. People b. Value chains c. Financial resources d. Business processes e. Intellectual resources f. Physical assets

a. People c. Financial resources e. Intellectual resources f. Physical assets

Which of the following is one of the top funding sources that entrepreneurs tap in the beginning? (Select all that apply.) a. Personal savings b. Credit cards c. Venture capital d. Friends and family

a. Personal savings b. Credit cards d. Friends and family

Marketing has been described by the "5 Ps". What are they? (Select all five.) a. Product b. Pressure c. Promotion d. People e. Place f. Price g. Passion

a. Product c. Promotion d. People e. Place f. Price

What are the three broad types of risk that an entrepreneur faces and can manage? (Select all three.) a. Risks that are easy and cheap to overcome but which can produce large rewards b. Risks that result from decisions that take you down the wrong path—sunk costs c. Deal-killer risks that might prevent the launch of the business d. Unknown risks, also known as "Black Swans"

a. Risks that are easy and cheap to overcome but which can produce large rewards. b. Risks that results from decision that take you down the wrong path--sunk costs. c. Deal-killer risks that might prevent the launch of the business.

If the company has an established product and a good market fit with a customer base that is growing fast, which investment stage is the company in? a. Series A b. Series B c. Series C

a. Series A

What are some sources of sales for startups? (select all that apply? a. Subscriptions b. Products c. Services d. Leads

a. Subscriptions b. Products c. Services

Which of the following is sales growth a function of? (Select all that apply) a. Technological innovations b. Expenditures c. Market growth d. Product/service innovations

a. Technological innovations c. Market growth d. Product/service innovations

For startups that receive venture capital investment, which of the following is true? (Select all that apply.) a. The benefits outweigh the risks. b. There appears to be a large market potential. c. The company has not yet sold any products but the future looks bright. d. Three out of four startups fail

a. The benefits outweigh the risks. b. There appears to be a large market potential d. Three out of four startups fail

Which of the following are lenders' interests in the business? (Select all that apply.) a. The company's margins b. Return on investment c. Risk protection d. Collateral

a. The company's margins c. Risk protection d. Collateral

What happens in the chasm? (Select all that apply.) a. The early adopters stop buying. b. The innovators stop buying. c. The early majority isn't ready to buy the product. d. The late majority is watching the price.

a. The early adopters stop buying. c. The early majority isn't ready to buy the product

True of False? Both investors and lenders want to understand the risks the business faces and how their investment will be protected. a. True b. False

a. True

True or False? Both investors and lenders expect that the entrepreneur has invested capital in the new venture. a. True b. False

a. True

True or False? Communication is what the listener does. a. True b. False

a. True

True or False? When preparing your pitch, write fast first to get your ideas down, then organize and refine. a. True b. False

a. True

Which of the following are components of a customer journey map? (Select all that apply.) a. Whether interactions reinforce the customer's expectations. b. What customers need. c. How customers view the company. d. Points where the customer does not interact with the company. e. Points where the company does not use the data collected.

a. Whether interactions reinforce the customer's expectations. b. what customers need c. how customers view the company e. point where the company does not use the data collected

Which of the following is determined by where your business lies in the value chain? (Select all that apply.) a. Whether your company is a manufacturer, distributor, or retailer. b. What your company's profit margins will be. c. How valuable your company is. d. How much risk you will need to take. e. Who your customers are.

a. Whether your company is a manufacturer, distributor, or retailer. b. What your company's profit margins will be d. How much risk you will need to take e. Who your customers are

At the beginning of your executive summary, you want to answer which three questions? (Select all three.) a. Why is this idea compelling? b. What is your competitive advantage? c. Who is on your team? d. What problem are you solving?

a. Why is this idea compelling? b. What is your competitive advantage? d. What problem are you solving?

To help you make decisions that might bring down the cost of starting your business, you should break out cash needs into types of capital resources. Which of the following are these types of capital? a. Working capital b. Startup expenses c. Capital expenditures d. Sales forecast e. Safety margin

a. Working capital b. Startup expenses c. Capital expenditures e. Safety margin

Sales reports alone will not provide the required information to make a decision about customer value. Your business is experiencing the following: Annual sales are increasing The number of orders is increasing The number of customers is increasing Which of the following will be the result for the company? (Select all that apply.) a. You will have reduced lifetime customer value. b. You will have higher marketing costs. c. You will have higher accounting costs.

a. You will have a reduce lifetime customer value b. You will have higher marketing costs.

What is the most important resource for new ventures? a. cash, investor capital, savings, and loans. b. financial assets, people, and equipment. c. intellectual property, physical assets, and inventory. d. All the above.

a. cash, investor capital, savings, and loans

A proven consequence of social media addiction is: (Select all that apply.) a. increasing depression. b. an ability to focus. c. a feeling of isolation. d. an increase in anxiety disorders. e. a sense of belonging.

a. increasing depression c. a feeling of isolation d. an increase in anxiety disorders

This group loves technology and is always the first to recognize the value of a technology. a. Innovators b. Early adopters c. Early majority d. Late majority e. Laggards

a. innovators

Which of the following allows you to prove your concept? (Select all that apply.) a. Writing an effective business plan b. Building a prototype website c. Selling product to customers d. Getting signed purchase orders Hide Feedback

b. Building a prototype website c. Selling product to customers d. Getting signed purchase orders

What should you NEVER do when answering a question from a potential investor? a. Ask the investor to repeat the question. b. Commit your company to a change in course. c. Restate the question to confirm your understanding. d. Admit that you don't have the answer.

b. Commit your company to a change in course.

Where do venture capitalists usually get the money to invest? (Select all that apply) a. Their own money b. Corporations c. Pension funds d. Wealthy people e. The government

b. Corporations d. Wealthy people

Which of the following is one of the four key activities for which resource decisions must be made? a. Intellectual property b. Distribution channels c. Physical assets d. Financial assets

b. Distribution channels

True of False? Investors always require a business plan before investing. a. True b. False

b. False

True or False? Do not provide a call to action but do finish on time. a. True b. False

b. False

True or False? It's ok to present in a casual style that doesn't sound like you prepared. a. True b. False

b. False

True or False? What you put into your pitch is more important than what you take out. a. True b. False

b. False

What serious mistake did the entrepreneur described in the text with a software-as-service startup make that cost him a lot of money? a. He didn't raise enough money. b. He didn't understand the needs of his customers and employees. c. He didn't charge enough for his service. d. None of the above.

b. He didn't understand the needs of his customers and employees.

If the company is in revenue and looking to expand operations, which investment stage is the company in? a. Series A b. Series B c. Series C

b. Series B

True or False? Say what you say with certainty so the audience has confidence in you. a. True b. False

b. True

What are the CRITICAL factors that enter into a decision about the legal form of organization--that is, factors that dictate the form you must use? (select all that apply.) a. Your ability to self-fund the company and not seek outside capital. b. Your inability to assume personal liability for claims against the business. c. You have co-founders and expect initial losses for the first two years. d. You intend to grow the business to a substantial size.

b. Your inability to assume personal liability for claims against the business c. You have co-founders and expect initial losses for the first two years d. You intend to grow the business to a substantial size

Sales reports alone will not provide the required information to make a decision about customer value. Your business is experiencing the following: Annual sales are increasing The number of orders is increasing The number of customers is increasing Consider what these mean for your business. Based on the facts given, why are the number of orders per customer declining significantly? a. You miscounted the number of orders. b. The number of customers is actually going down. c. More customers are purchasing less frequently.

c. More customers are purchasing less frequently

What is the accounting term for your business' sources of income? a. Sales b. Income c. Revenue d. Cash

c. Revenue

If the company is rapidly growing in multiple markets, which investment stage is the company in? a. Series A b. Series B c. Series C

c. Series C

What does Newport believe the market values in the 21st century? a. Things that are easy to replicate and can go viral b. Things that are entertaining c. Things that are rare

c. Things that are rare

All of the following are metrics to measure the effectiveness of social media tools EXCEPT: a. economic value. b. amplification level. c. cost per click. d. applause frequency. e. conversion rate.

c. cost per click

Promotion is price-focused and is a ______ strategy while advertising focuses on customer benefits that are non-price focused and is a ______ strategy. a. pull; brand b. brand; push c. push; pull d. pull; push

c. push; pull

Customers typically recognize three types of price: The price normally paid, which is the ____; the price compared to a substitute produce, which is the ____; and the price paid for special which is the ______. a. relative price; sale price; standard price b. sale price, standard price; relative price c. standard price; relative price; sale price d. sale price; relative price, standard price Hide Feedback

c. standard price; relative price; sale price