MHR 322 Test 2

The basic equation for breakeven analysis is: Break even revenue = Fixed costs / (Sales price per unit - Variable cost per unit) Break even quantity = (Total costs x number of months) / (Sales price per unit - Variable cost per unit) Break even quantity = Fixed costs / (Sales price per unit - Variable cost per unit) Break even months = Total costs / (Sales price per unit - Variable cost per unit)

Break even quantity = Fixed costs / (Sales price per unit - Variable cost per unit)

The author of Disciplined Entrepreneurship describes "A Decision-Making Unit" as being made up of: Children, Parents, and Government Champion, Economic Buyer, and Influencers Sales, Marketing, and Management Buyers, Sellers, and Regulators

Champion, Economic Buyer, and Influencers

Think about a large insurance company, such as American Family (or State Farm, or Zurich, etc.). Where on the business model (or lean) canvas does internet advertising belong? Revenue Key resources Channels Customer relationships

Channels

As described in the MindTools media on Porter's Generic Strategy, when a firm seeks advantage by minimizing the cost to the organization of delivering products and services, it is using the: First to market strategy Focus strategy Cost leadership strategy Differentiation strategy

Cost leadership strategy

Which part of the Business Model Canvas describes all costs incurred to operate a business model? Products and services Key resources Cost structures Key activities

Cost structures

Assume you have completed a CoCA / LV analysis for your startup company. You have found that your cost of customer acquisition is greater than the lifetime value of a customer. Based on this finding what should you focus on? Decreasing the cost of customer acquisition Increasing the cost of customer acquisition Increasing the number of customers you acquire Decreasing the lifetime value of customer

Decreasing the cost of customer acquisition

In Geoffrey Moore's "Crossing the Chasm" framework, the customers who are pragmatic about purchasing new products and represent the group that will determine whether you can scale your venture are: Early adopters Late majority Technological enthusiasts Laggards (skeptics) Early majority

Early majority

Selecting your pricing framework is especially important because you should plan to keep it constant as you complete the process of researching and launching your venture. True False

False

The most common short term sales processes for new ventures are direct sales using salespeople and indirect sales using partners or distributors. True False

False

To generate a high-level specification of your product, you should start with a detailed written description that identifies key features and functions. True False

False

Venture capital firms only invest in ventures that have the potential to generate very high returns.

False

When you are trying to sell a new product or service, you usually only have to convince one key person to make the sale. True False

False

In "There are Only Two Ways to Compete," Martin argues that when customers think there is something about the firm's offering that is distinct from other firms' offerings, competitive advantage comes from: Generating profits by using social media for advertising Generating profits by operating at a lower cost than competitors Generating profits by entering more markets than competitors Generating profits by charging a higher price for that perceived value

Generating profits by charging a higher price for that perceived value

Which part of the Business Model Canvas describes the most important things a company must do to make its business model work? Products and services Key activities Channels Key resources

Key activities

Which of the following is NOT one of the 9 building blocks of the Business Model Canvas? Revenue streams Products and services Customer relationships Key resources

Products and services

In Disciplined Entrepreneurship (and this course), the "Core" is: The most important product or service feature that your customers need and will pay for. The center or group of customers that most need the product or service that your venture will offer. The critical customer need that your product or service addresses. Something that allows you to deliver benefits to the customer with much greater effectiveness than any other competitor.

Something that allows you to deliver benefits to the customer with much greater effectiveness than any other competitor.

Calculate the breakeven point for the following example: Dr. Bock's book on business models costs $25 The publisher spent $100 to prepare the book for printing (fixed cost) The publisher spends $15 to print each copy of the book The breakeven point is 4 books The breakeven point is approximately 1.33 The breakeven point is 1 book, since there will be a $10 profit immediately The breakeven point is 10 books

The breakeven point is 10 books

Once a new venture starts to see demand (sales) that it did not directly generate, it can switch to medium term selling processes such as distributors or value added resellers. True False

True

One of the most important reasons to map out the process to acquire a paying customer is to understand the length of the sales cycle. True False

True

Which business model charges customer for the products or services actually used or consumed? Parking meter or penalty charges Shared savings Usage-based "Cell phone" plan

Usage-based

What is the contribution margin per unit for the following example: Dr. Bock's book on business models is priced at $25 The total cost to produce the books is $20 The variable cost to produce the book is $10 $15 $35 $5 2.5

$15

The basic equation for calculating LTV (lifetime value) of a customer is: (Average Value of a Sale) X (Number of Repeat Transactions) / (Average Retention Time in Months or Years for a Typical Customer) (Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer) (Average Price of a Sale) X (Number of Repeat Transactions) / (Average Retention Time in Months or Years for a Typical Customer) (Average Price of a Sale) X (Number of Repeat Transactions) X (Average Time To Acquire a Typical Customer)

(Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer)

The basic formula for Cost of Customer Acquisition (or Customer Acquisition Cost) is: (Cost of sales and marketing to acquire new customers) / (number of new customers acquired) (Total cost of all the company's sales and marketing) / (number of new customers acquired) (Total cost of all the company's sales and marketing) / (total number of company's customers) (Cost of sales and marketing to acquire new customers) X (number of new customers acquired)

(Cost of sales and marketing to acquire new customers) / (number of new customers acquired)

According to Strategyzer's Value Proposition video, what ratio of new innovations / products fail to succeed? About 3 out of 10 About 9 out of 10 About 7 out of 10 About 5 out of 10

About 7 out of 10

All of the following are considered additional or secondary roles in the decision-making unit EXCEPT: Purchasing department Champion Influencers People (or organizations) with veto power

Champion

According to The Partnership Charter by Gage, the potential costs of partnership conflict include all of the following EXCEPT: Personal emotional toll on the partners and their families The loss from underperformance at the business Costs associated with departures of employees or the partner Costs associated with buying equipment or systems to relieve the work burden on a partner

Costs associated with buying equipment or systems to relieve the work burden on a partner

Which part of the Business Model Canvas describes the types of relationships a company establishes with specific customer segments? Channels Customer relationships Value proposition Revenue streams

Customer relationships

Think about a McDonald's Happy Meal. Which of the following customer types is the most accurate for a parent? Champion Economic buyer End-user Influencer

Economic buyer

A good starting point for figuring out COCA (cost of customer acquisition) is to figure out how long it will take one salesperson to sell product to one customer. The proportion of the salesperson's annual salary required to make the sale is the COCA. True False

False

A quantifiable value proposition goes into detail on technology, features, and functions. True False

False

According to the Founder's Dilemmas by Wasserman, one of the best options for a student entrepreneur is to select classmates to be cofounders based on their demonstrated work in a course or program of study. True False

False

An example of a 'Consumables' business model would be a free website that sells your information to advertisers. True False

False

Calculating total addressable market for follow-on markets is essential relatively early in the venturing process because you need to be prepared to pivot if your beachhead market does not develop as expected. True False

False

Competitive position is another way to describe the venture's core. True False

False

First-mover advantage is a common example of a core advantage. True False

False

Giving away your product or service for free can be a viable business model as long as you sort out how to monetize it later. True False

False

It is always easier to raise prices than to lower prices. True False

False

Long-term sales processes are focused almost entirely on word of mouth and advertising. True False

False

Once you have identified your beachhead market, you should identify 10-12 adjacent markets and calculate TAM for each. True False

False

he power of the Value Proposition Canvas is that it helps ensure that your product features and capabilities target all of a customer's potential pains and gains. True False

False

In her article criticizing Porter's strategy model, Nilofer argues that success in the emerging social era requires firms to be all of the following EXCEPT: Fast First to market Flexible Fluid

First to market

In his article defending Porter's strategy framework, Martin argues that the demand curve for nearly all products and services must be: Determined by a complex interplay of economic factors, market trends, industry characteristics, and customer needs Flat (the same number of customers buy regardless of price) or downward-sloping (as price increases, fewer customers will buy) Upward-sloping (as price increases, fewer customers will buy) or downward-sloping (as price increases, fewer customers will buy) Flat (the same number of customers buy regardless of price) or upward-sloping (as price increases, more customers will buy)

Flat (the same number of customers buy regardless of price) or downward-sloping (as price increases, fewer customers will buy)

All of the following are good ways to reduce COCA (cost of customer acquisition) EXCEPT: Automate as much as possible Decrease the cost of new leads (people who might be interested) Focus on one customer at a time until you close that customer Use direct sales judiciously because it is expensive

Focus on one customer at a time until you close that customer

All of the following are good ways to reduce COCA (cost of customer acquisition) EXCEPT: Automate as much as possible Focus on one customer at a time until you close that customer Decrease the cost of new leads (people who might be interested) Use direct sales judiciously because it is expensive

Focus on one customer at a time until you close that customer

As described in the MindTools media on Porter's Generic Strategy, when a firm seeks advantage by concentrating on particular niche markets and the unique needs of customers within those markets, it is using the: First to market strategy Focus strategy Cost leadership strategy Differentiation strategy

Focus strategy

Assuming a venture raises external capital to successfully fund growth, the most common order of funding events would be:

Friends & Family, Angels, Venture Capital, Public market via IPO

Which business model is the most common for service firms because it rewards short-term activity rather than scaling up? Licensing Hourly rates Subscription or leasing model Cost plus

Hourly rates

A competitive positioning chart should show: How your competitors are likely to position themselves to respond once you launch your product. How your venture compares to competitors across geography and customer type. How your product compares to competitors on the two priorities that are most important to your target customers How your venture compares to competitors based on cost and differentiation.

How your product compares to competitors on the two priorities that are most important to your target customers

According to the Founder's Dilemmas by Wasserman, when an entrepreneur is trying to decide whether to bring on co-founders, she should carefully evaluate the venture's need for the following three types of capital: Human capital, social capital, and political capital Social capital, financial capital, and technological capital Human capital, social capital, and financial capital Financial capital, political capital, and technological capital

Human capital, social capital, and financial capital

In "A Broken Place," the article about Better Place and entrepreneur Shai Agassi, a key lesson about building a viable business model for a new venture is that: The most critical element of bringing a new technology to market is a charismatic founder who can tell a compelling story. If you don't have a good distribution strategy, your business model probably won't work. If you are bringing a new technology to market you will need a lot of outside capital. It is very difficult to get consumers to change their behavior

It is very difficult to get consumers to change their behavior

In Geoffrey Moore's "Crossing the Chasm" framework, the customers who make conservative decisions requiring well-defined and proven information are the: Laggards (skeptics) Early adopters Technological enthusiasts Early majority Late majority

Late majority

If you find out that another company is launching a product similar to your venture idea, you should: Immediately change the feature set of your product to more clearly distinguish the benefits to customers. Immediately move on to another venture idea; the real value comes from first-to-market advantage. Start with the assumption that you can still defeat the other company with a strong core and competitive position. Start with the assumption that both companies can win big because the bigger share of TAM comes from getting people to change what they are doing.

Start with the assumption that both companies can win big because the bigger share of TAM comes from getting people to change what they are doing.

According to The Partnership Charter by Gage, if your business partnership has ambiguities or doesn't feel good working together, take the time to address the issues while you are still getting along. T or F

T

In the Value Proposition Canvas, customer "jobs" can be functional, social, or emotional. True False

T

All of the following are good ways to reduce COCA (cost of customer acquisition) EXCEPT: Improve conversion rates in the selling process Stay focused on the target market Use word of mouth Target the largest customer segments first to reduce the effective cost on a per customer basis

Target the largest customer segments first to reduce the effective cost on a per customer basis

Which of the following is NOT one of the 9 building blocks of the Business Model Canvas? Cost structure Key partnerships Key activities Team

Team

In Geoffrey Moore's "Crossing the Chasm" framework, the customers who want to have a product right away before anyone else are: Laggards (skeptics) Technological enthusiasts Late majority Early adopters Early majority

Technological enthusiasts

In "A Broken Place," the article about Better Place and entrepreneur Shai Agassi, the business model began to fall apart when: The actual car produced by the company was lower-end than planned, with less travel range, and a higher price. Agassi began spending money on non-essential things like a visitor center The company's Board of Directors ran into problems managing Agassi. The company did not get an opportunity to buy General Motors after GM went bankrupt.

The actual car produced by the company was lower-end than planned, with less travel range, and a higher price.

In her talk on why business models matter, Ann Miura-ko of Floodgate Ventures says that the business model helps show whether: It is possible to generate a software model for how the business will actually run. The venture's technology actually works the way the entrepreneur believes The combination of elements leads to "dollars in" being greater than "dollars out" or not. Customers will actually buy the product that the company wants to sell

The combination of elements leads to "dollars in" being greater than "dollars out" or not.

According to The Partnership Charter by Gage, the potential costs of partnership conflict include all of the following EXCEPT: Job dissatisfaction, high absenteeism, and lost productivity among employees who get swept up in owners' battles The cost of bringing in additional partners to better balance the team Mediation, arbitration, or litigation costs The expense of buying out a partner's interest

The cost of bringing in additional partners to better balance the team

The Value Proposition Canvas is composed of two parts: The revenue proposition and the value map The customer profile and the value map The customer profile and the business model The buyers and the sellers

The customer profile and the value map

In the decision-making unit, an influencer is: The person or department who handles the logistics of the purchase An individual or organization with the ability to reject a purchase for any reason The person who wants the customer to purchase the product The person with depth of experience whose opinion can affect the rest of the decision-making unit

The person with depth of experience whose opinion can affect the rest of the decision-making unit

What is the best definition for the Primary Economic Buyer? The end-user An individual, or team, that can invent and sell new products The person with the authority to spend money to purchase the product A person who has veto power over the preferences of the end user

The person with the authority to spend money to purchase the product

Which of the following is the best definition of a business model? A map of the activities of the organization A program or calculation that estimates the value the company generates based on a set of inputs A short narrative that tells the story of the organization, including why it was founded The rationale of how an organization creates, delivers, and captures value.

The rationale of how an organization creates, delivers, and captures value.

Which of the following is the best definition of a business model? The rationale of how an organization creates, delivers, and captures value. A program or calculation that estimates the value the company generates based on a set of inputs A short narrative that tells the story of the organization, including why it was founded A map of the activities of the organization

The rationale of how an organization creates, delivers, and captures value.

All of the following are key factors when designing a business model EXCEPT: The strategy or core you will implement How much value your product provides to customers What your competition is doing The incentives for your distribution channel What the customer will be willing to do

The strategy or core you will implement

A key real world lesson of the stories told about the electric car company "Better Place" in your readings is: When the innovation is compelling enough, consumers will embrace new technology No matter how good the innovation is, the venture will still fail if it doesn't have the right team to drive implementation. There are limits of innovation and it is difficult to get consumers to embrace new technology. Getting consumers to embrace new innovation requires having the right technology at the right time in the right place.

There are limits of innovation and it is difficult to get consumers to embrace new technology.

In "There are Only Two Ways to Compete," Martin argues that when customers cannot distinguish products among various competitors, the only way to gain competitive advantage is: To be the differentiated competitor To be the low-cost competitor To have the largest geographic reach To be the most effective user of social media

To be the low-cost competitor

A business model is a framework by which you capture value from customers based on the product or service you sell. True False

True

A key part of the pricing process requires data collection and analysis on alternatives that provide similar benefits to customers. True False

True

A quantified value proposition identifies a tangible metric that aligns with the Persona's top priorities. True False

True

According to the Founder's Dilemmas by Wasserman, in the short-term, homogeneous founding teams often do well, but diverse founding teams tend to do better in the long-run. True False

True

According to the Founder's Dilemmas by Wasserman, one of the big disadvantages of founding a venture with friends, classmates, or family is the possibility that things will go badly at the venture which could then negatively impact those personal relationships. True False

True

According to the Founder's Dilemmas by Wasserman, tapping an inner circle (friends and family) for cofounders may result in a weaker team that builds less value at the venture. True False

True

Calculating the total addressable market size for follow-on markets helps you stay aware of the long-term potential of your business True False

True

Customer acquisition cost analysis should take into account all sales and marketing costs, including salaries of salespeople, printing of brochures, costs of trade show exhibits, advertising, and so on. True False

True

Different types of customers will pay different amounts for the same products or services, depending on how early or late they are buying compared to other customers. True False

True

During a life cycle use case analysis you must try to see the product through the customer's eyes rather than your own. True False

True

In "There are Only Two Ways to Compete," Martin argues that while many industries are more competitive and there are new "recipes" for how businesses operate, the Porter strategy framework is still the best way to explain how firms achieve competitive advantage. True False

True

In the Porter framework for competitive advantage, firms that use the Focus strategy must also compete based on cost leadership or differentiation. True False

True

It is important to carefully consider your new venture's business model because it you many options to choose from and it is difficult to change your business model later. True False

True

Locking up suppliers is not typically considered to be a core advantage. True False

True

More most new ventures, cost of customer acquisition will start very high and should decrease over time. True False

True

Most customers make purchasing decisions on a comparative basis to see which available option best fits their needs. True False

True

The best way to figure out the decision-making unit is to talk to your potential customers. True False

True

The business model you select and implement for your venture will have a significant impact on both whether you need to raise external capital as well as how you raise external capital. True False

True

The cost of customer acquisition (COCA) analysis begins with mapping the process to acquire a paying customer. True False

True

The primary goal of your short term sales process is to create demand for your product and fulfill those orders. True False

True

Which part of the Business Model Canvas describes the bundle of products and services that create value for a specific customer segment? Revenue streams Key partnership Value proposition Products and services

Value proposition

In the StartupSOS video on the Milkshake example, what key question informs assessing the Value Proposition? What gain does a fast-food restaurant customer buy a milkshake to achieve? What job does a fast-food restaurant customer hire a milkshake to do? What pain does a fast-food restaurant customer buy a milkshake to resolve? What need does a fast-food restaurant customer address by buying a milkshake?

What job does a fast-food restaurant customer hire a milkshake to do?

Identifying 10 high-potential customers (after your Persona) helps ensure that: You will be able to reach break-even volume. You have identified enough product features to convince any possible customer to buy your product. You have identified a scalable opportunity, not just a one-customer solution. You will be able to convince a private investor to invest equity capital in your venture.

You have identified a scalable opportunity, not just a one-customer solution.

At the break-even point, the business: makes enough profit to cover investment costs. does not make a profit or loss. makes enough profit to cover variable costs. matches marginal revenue to marginal costs.

does not make a profit or loss.

The Breakeven point in economics (and business) refers to: the point at which your product breaks and your customer has to buy a new one. the point at which your CoCA is equal to your LTV. the point at which your marginal cost and marginal revenue are equal. the point in which total cost and total revenue are equal.

the point in which total cost and total revenue are equal.

One possible result of interviewing 10 high-potential customers is discovering that there is a better Persona for your product than you previously identified. True False

true