Ch 6 The Business Plan: Visualizing the Dream

Expenses and costs that are useful in making projections are frequently classified as all of these EXCEPT: a. fixed costs. b. variable costs. c. semi-variable costs. d. floating costs.

d. floating costs.

________ projecting the company's sales, costs, and profits are usually contained in the financial plan. a. Pro forma statements b. Industry statistics c. Management capabilities d. Marketing potential of the competition

a. Pro forma statements

Which of the following statements most accurately describes the relationship between planning and doing in a business? a. They are both important and must be balanced intelligently. b. It is better to act than think too much. c. The more detailed the plan, the better. d. Planners never get anything done.

a. They are both important and must be balanced intelligently.

The _______ is usually at the beginning of the business plan and summarizes the total plan. a. executive summary b. products and/or service plan c. marketing plan d. management plan

a. executive summary

comprehensive plan

A complete business plan that provides an in-depth analysis of the critical factors that will determine a firm's success or failure, along with all the underlying assumptions.

business model risk

A component of the business model that identifies risks in the model and how the model can adjust to them.

revenue model

A component of the business model that identifies the nature and types of a company's sources of revenue.

Cost structures

A component of the business model that provides a framework for estimating a firm's cost of goods sold and operating expenses

key resource requirements

A component of the business model that provides estimates of the types and amounts of resources required to achieve positive profits and cash flows.

business plan

A document that outlines the basic concept underlying a business and describes how that concept will be realized.

executive summary (overview)

A section of the business plan that conveys a clear and concise overall picture of the proposed venture and creates interest in the venture.

executive summary, or overview

A section of the business plan that conveys a clear and concise overall picture of the proposed venture and creates interest in the venture.

management team

A section of the business plan that describes a new firm's organizational structure and the backgrounds of its key employees.

management team section

A section of the business plan that describes a new firm's organizational structure and the backgrounds of its key employees.

marketing plan

A section of the business plan that describes how the firm will reach and service customers within a given market.

product/service plan

A section of the business plan that describes the product and/or service to be provided and explains its merits.

exit strategy

A section of the business plan that focuses on options for cashing out of the investment.

exit strategy section

A section of the business plan that focuses on options for cashing out of the investment.

critical risks

A section of the business plan that identifies the potential risks that may be encountered by an investor.

critical risks section

A section of the business plan that identifies the potential risks that may be encountered by an investor.

offering

A section of the business plan that indicates to an investor how much money is needed, and when and how the money will be used.

operations and development plan

A section of the business plan that offers information on how a product will be produced or a service provided, including descriptions of the firm's facilities, labor, raw materials, and processing requirements.

financial plan

A section of the business plan that projects the company's financial position based on well-substantiated assumptions and explains how the figures have been determined.

pitch

A verbal presentation of the business idea to investors.

short plan

An abbreviated business plan that presents only the most important issues and projections for the business.

business model

An analysis of how a firm plans to create profits and cash flows given its revenue sources, its cost structures, the required size of investment, and sources of risk.

Generally, investors are more product-oriented than market-oriented. a. True b. False

False

Pro forma statements

Projections of a company's financial statements for up to five years, including balance sheets, income statements, and statements of cash flows, as well as cash budgets.

According to Frank Moyes, a successful entrepreneur and former teacher at the University of Colorado, the most important reason for business planning is that: a. It eliminates the need to market. b. It requires the entrepreneur to get the answers to some difficult questions. c. It solves problems before they occur. d. It eliminates surprises.

b. It requires the entrepreneur to get the answers to some difficult questions.

The best guide to use when deciding how long and detailed a plan should be is: a. Only write a summary—more detail just clouds the founding vision. b. Always hire someone to write your plan. c. Write the plan in accordance with what the particular audience will find helpful. d. Provide all the detail you possibly find, no matter how long this makes the plan.

c. Write the plan in accordance with what the particular audience will find helpful.

All of these elements must be evident from the feasibility analysis before you move on to the business plan EXCEPT: a. strong market potential. b. an attractive industry. c. agreeable banker. d. the right individual or team to execute the plan.

c. agreeable banker.

A more in-depth business plan that provides an analysis of the critical factors that will determine the success or failure of the business is called a(n)-- a. prospectus b. summary plan. c. comprehensive plan. d. executive summary.

c. comprehensive plan.

According to John Mullins, the author of The New Business Road Test, all of these key elements should be in every business plan EXCEPT: a. a logical statement of a problem and its solution. b. a significant amount of cold, hard evidence. c. candor about the risks, gaps, and assumptions that might be proved wrong. d. personal life descriptors of the entrepreneur.

d. personal life descriptors of the entrepreneur.