MHR 322 Exam 2
Identify LTV based on the following information for a co-working space: Price / month: $500 Cost / month to the co-working management company: $100 Average tenant use: 25 months -$15,000 -It can't be determined from the information provided -$12,500 -$10,000
$10,000
Calculate Cost of Customer Acquisition (CoCA) based on the following information for a co-working space: Total sales & marketing budget: $1,000 Sales & marketing associated with bringing in new customers: $500 Number of new customers acquired: 5 -$100 -$200 -$2500 -$5000
$100
You have invented a new treatment for sick cows that will save farmers $1000/treatment. The cost of producing each treatment is $20. Assume you are following a 'value-based pricing' strategy. Which of the following is your best pricing option for maximizing your profits? -$19.99 -$30 -$300 -$1100
$300
Use the following information: A new startup called DanO.com has launched a website where you can subscribe on a monthly basis to receive inspirational quotes and cartoons on the topic of entrepreneurship via email. The business has the following attributes: Monthly subscription sells for $15/customer/month Cost of sending out the email is $5/customer/month The average customer subscribes for 10 months and then drops the service Placing 1,000 Google ads will cost $200. 5% who see the ad go to the website to request more info. Customers that request more information receive a personal sales call that costs $20/call. 60% of those who receive a call become a customer. What is The Cost of Customer Acquisition at DanO.com? -$24 -$50 -$40 -$1200
$40
The basic equation for calculating LTV (lifetime value) of a customer is: -(Average Price of a Sale) X (Number of Repeat Transactions) X (Average Time To Acquire 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 Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer) -(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)
You run a t-shirt printing store. You estimate the cost of a single blank shirt + ink to be $12, and your selling price will be $18. The cost in time and materials to set up the printer for a new design is $60. What is your break-even quantity on a specific design? -$6 -3.33 shirts -10 shirts -5 shirts
10 shirts
When considering raising capital for a company, the "Syndicate" refers to: -The group of managing partners at a venture capital firm that ultimately select the start-up companies to invest in. -A shadowy entity related to the Hoofer Sailing Club that always seems to determine the winner of Commodore's Cup. -A group of decision-makers at a financial institution (like a bank or mutual fund) that determine which investments to make. -A group of people or institutions who participate in the investment together.
A group of people or institutions who participate in the investment together.
What is the primary difference between angel investors and a venture capital firm? -Angel investors are generally nice and friendly; venture capitalists are hard-headed -Angel investors are investing their own money; a venture capital firm makes investments out of a managed fund of money raised from other people and organizations -Angel investors make investments out of a managed fund of money raised from other people and organizations; a venture capital firm invests its own money
Angel investors are investing their own money; a venture capital firm makes investments out of a managed fund of money raised from other people and organizations
Companies engage in prototyping and experimentation in order to: -Determine the strategic direction of the overall organization. -Develop peer-reviewed journal articles. -Develop peer-reviewed journal articles. -Assess the viability of new products and services quickly.
Assess the viability of new products and services quickly.
Which part of the Business Model Canvas describes how a company communicates with and reaches its customer segments to deliver a value proposition? -Revenue streams -Channels -Key activities -Value proposition
Channels
In the "Build, Measure, Learn" (lean startup) framework, the key lesson is: -Perseverance, creative genius, and hard work are the key to success. -It's good to have construction toys, like LEGO, around for people to use at a startup company to encourage creativity -Create something to show customers and get their feedback as quickly as possible -The first critical step towards success is to build a working prototype of the fully functional product
Create something to show customers and get their feedback as quickly as possible
Which part of the Business Model Canvas describes the different groups of people or organizations an enterprise aims to reach and serve? -Markets -Channels -Customer segments -Key resources
Customer segments
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? -Increasing the cost of customer acquisition -Decreasing the cost of customer acquisition -Decreasing the lifetime value of customer -Increasing the number of customers you acquire
Decreasing the cost of customer acquisition
Testing key assumptions about your venture requires: -Designing and performing experiments -Pitching your first 10 customers to see how many buy the product -Setting up a focus group of industry experts -Reviewing your market data to ensure it is still relevant
Designing and performing experiments
If your MVBP (minimum viable business product) appears to be successful, then the next step is to: -Focus on dominating the current target market with the MVBP until your venture achieves profitability. -Reduce COCA (cost of customer acquisition) to ensure that the MVBP becomes the dominant product in the market segment. -Expand sales of the MVBP to as many additional market segments as possible. -Develop a Product Plan that identifies which features should be added to the next iteration of your product and targeted at the next market segment.
Develop a Product Plan that identifies which features should be added to the next iteration of your product and targeted at the next market segment.
A debt investor cannot lose the entire value of the investment. (T/F)
False
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. (T/F)
False
An asset-based business loan requires that the company identify a specific asset that the company will utilize to generate funds in the event that the company cannot make interest or principal payments on the loan. (T/F)
False
Because they could lose the full value of the investment if the company defaults on the loan, debt investors generally expect a higher return than equity investors. (T/F)
False
In The Use of Knowledge in Society paper, Hayek argued that Centralized planning was a superior economic system because it allowed government experts with data to determine the price and production levels instead of leaving those decisions to a large number of individuals and businesses. (T/F)
False
The persona for your product is also the primary economic buyer. (T/F)
False
To develop an effective map for the process of acquiring a paying customer, it is important to: -Figure out exactly who will make the final purchasing decision -Figure out whether the target customer fits your persona or not -Figure out how much it will cost, in total, to acquire a customer -Figure out whether the various decision-making units have the budgeting authority to make purchases
Figure out whether the various decision-making units have the budgeting authority to make purchases
Which business model is the most common for service firms because it rewards short-term activity rather than scaling up? -Cost plus -Subscription or leasing model -Licensing -Hourly rates
Hourly rates
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: -If you don't have a good distribution strategy, your business model probably won't work. -It is very difficult to get consumers to change their behavior -The most critical element of bringing a new technology to market is a charismatic founder who can tell a compelling story. -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
According to Disciplined Entrepreneurship, the correct order of steps to bring an innovation to market is: -Quantify the Value Proposition, Build an End User Profile, Market Segmentation -Market Segmentation, Quantify the Value Proposition, Build an End User Profile -Market Segmentation, Build an End User Profile, Quantify the Value Proposition -Build an End User Profile, Market Segmentation, Quantify the Value Proposition
Market Segmentation, Build an End User Profile, Quantify the Value Proposition
In "A Broken Place," the follow-up article about entrepreneur Shai Agassi, it turns out that the "strategy" didn't work. "A Broken Place" looks more carefully at the business model of the venture, which was based on the idea that: -People wanted to buy a transportation service, not a specific car as a product. -People wanted their car to accelerate as fast as possible. -People wanted to pay the lowest possible price for their car and transportation. -People wanted to ensure that their transportation had the least environmental impact possible.
People wanted to buy a transportation service, not a specific car as a product.
In the decision-making unit, the most important role determining whether your product sells is: -Primary economic buyer -Influencer -Purchasing department -End-user
Primary economic buyer
After your beachhead market, follow-on markets include: -Selling add-on services associated with your product to the same customers and selling your initial product to markets that are similar to your beachhead. -Selling more of your initial products to the same customers and selling your initial product to markets that are similar to your beachhead. -Selling new versions of your product to the same customers and selling your initial product to markets that are similar to your beachhead
Selling new versions of your product to the same customers and selling your initial product to markets that are similar to your beachhead.
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.
Lifetime value of a customer should take all of the following into account EXCEPT: -Recurring revenue -The cost of acquiring the customer -One-time revenue -Costs of serving the customer
The cost of acquiring the customer
The primary economic buyer is: -The person who will actually use the product -The person with depth of experience who can influence the rest of the decision-making unit -The person or department who handles the logistics of the purchase -The decision maker who will sign off on spending money
The decision maker who will sign off on spending money
In the decision-making unit, a champion is: -The decision maker who will sign off on spending money -The person with depth of experience whose opinion can affect the rest of the decision-making unit -The person who will actually use the product -The person who wants the customer to purchase the product
The person who wants the customer to purchase the product
In the decision-making unit, an influencer is: -The person or department who handles the logistics of the purchase -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 -An individual or organization with the ability to reject a purchase for any reason
The person with depth of experience whose opinion can affect the rest of the decision-making unit
All of the following are conditions for a Minimum Viable Business Product EXCEPT: -The product generates profit for the venture -The product is sufficient to start the customer feedback loop -The customer gets value out of the product -The customer pays for the product
The product generates profit for the venture
A business loan is substantively no different than other types of debt such as student loans or a home mortgage. (T/F)
True
Calculating the total addressable market size for follow-on markets helps you stay aware of the long-term potential of your business (T/F)
True
Crowdfunding is a financing strategy where an entrepreneur uses an online platform to raise capital to fund the development or production of a new product or artistic creation. (T/F)
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. (T/F)
True
Generally speaking equity investors are willing to take higher risks than debt investors. (T/F)
True
Hayek argued that knowledge of time and place is more important than scientific knowledge in The Use of Knowledge in Society paper. (T/F)
True
In the 'Fake It- Chapter 13' reading from "Sprint," creating a facade of a product can quickly get you 90% of the way to something that you can test with customers. (T/F)
True
In the Lean Startup framework, the products a start-up builds are really just experiments. (T/F)
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. (T/F)
True
Mapping the process to acquire a paying customer can help you identify hidden obstacles that inhibit your ability to sell your product. (T/F)
True
Pricing should be based primarily on the value your customer gets rather than the cost to produce the product or service. (T/F)
True
Valuation of an early stage company is usually at least as much art as science. (T/F)
True
Venture capital firms are primarily driven by financial returns; angel investors may have a personal interest in a specific technology or venture in addition to wanting a financial return. (T/F)
True
When a company uses equity financing, it gives up partial ownership of the company in exchange for investor capital. (T/F)
True
When identifying key assumptions about your venture, you should carefully review your "next 10 customers" list. (T/F)
True
When mapping the process to acquire a paying customer, you should note whether payment will come from the customer's yearly operating budget or from the customer's long-term capital budget. (T/F)
True
When testing assumptions, the initial price of the product is not as important as showing that target customers will pay to acquire the product. (T/F)
True
Which business model sells product at a very low margin but incorporates high-margin add-on products? -Upsell with high-margin products -Transaction fee -One-time upfront charge plus maintenance -Consumables
Upsell with high-margin products
In Disciplined Entrepreneurship, a "customer" is not always just a customer. Which of the following is an example of a more complex customer situation? -When your business model calls for both a primary customer and an economic customer -When there are network effects that connect your customers via multiple channels -When a single market includes multiple customer segments -When you have a two-sided market where multiple target customer types are needed
When you have a two-sided market where multiple target customer types are needed
According to the Art of Startups by Bhide, savvy bootstrappers will build relationships with potential banking partners: -before the venture is actually creditworthy enough to justify a bank loan. -as soon as it realizes it needs outside capital. -only after it has exhausted all other potential sources of capital, such as angel investors and venture capital firms. -by sending promotional materials about the venture to every local bank.
before the venture is actually creditworthy enough to justify a bank loan.
In the video on "Debunking the Myths of Entrepreneurship," Eric Ries argues that the goal of entrepreneurship is to: -advance society to the benefit of all people. -build an organization that will outlive the founders. -create value to reward the people who generate innovations. -bring innovations to market as quickly as possible.
build an organization that will outlive the founders.
According to the Mullins article on customer cash, the model that connects buyers and sellers is -social media platform model. -deposit model -subscription model. -matchmaker model.
matchmaker model.
According to the Art of Startups by Bhide, successful bootstrappers should grow the venture: -based on a complex formula that matches interest rates to the venture's accounts receivables ratio. -only as fast as they can afford and control. -as fast as possible to attract outside capital investors. -faster than competitors to ensure that it continuously increases market share.
only as fast as they can afford and control.
In her video on bootstrapping, Heidi Roizen comments that bootstrapping used to be the standard way to finance growth, but more entrepreneurs began relying on outside capital when: -venture capital became cheap (because there was more of it). -more entrepreneurs decided they were willing to give up more -ownership of their companies sooner. -more ventures wanted to scale globally more quickly -online platforms made it possible to access venture capital much more easily
venture capital became cheap (because there was more of it).
According to the 'Fake It- Chapter 13' reading from "Sprint," it's not a good idea to invest a lot of time in untested product development because: -it is too expensive to maintain long-term product development processes. -people at your company will get bored if they don't have something new to work on. -you'll become attached to the product and unable to take negative test results to heart. -competitors will beat you to the market.
you'll become attached to the product and unable to take negative test results to heart.