Entrepreneurship, Quiz 2

Secondary data

information already collected for some other purpose than the current problem

Succinct Message

Your key point in as few and as memorable words as possible

Money

a medium of exchange accepted by the community or what people buy things with and sell things for.

Inelastic product

product for which there are few substitutes and for which a change in price makes very little difference in quantity purchased

Optimum price

refers to the highest price that would produce your desired level of sales (or revenues) in your target market.

Private placement memorandum

A specialized legal form of business plan crafted by lawyers for the purpose of soliciting formal investments.

Balance sheet

A statement of what a business owns (assets), what it owes to others (liabilities), and how much value the owners have invested in it (equity).

Income statement

A statement that lists revenues and expenses and shows the amount of profit a business makes for a specified period of time.

Diversification

A strategy whose goal is growth, based on adding new products or services to the firm's existing collection of offerings.

Product expansion

A strategy whose goal is growth, based on selling existing customers a product or service they have never bought before.

Market expansion

A strategy whose goal is growth, based on selling in areas or to groups previously not served by the business.

Market penetration

A strategy whose goal is growth, based on selling more of the firm's product or service to the existing customer base.

Cash

Money that is immediately available to be spent.

Primary research

New information collected to solve a problem at hand or answer current questions.

Commercial paper

Notes issued by credit-worthy corporations.

The Organization: Key personnel

Sell the most important single element in the business plan - you! Who are your key personnel? Talk about accomplishments rather than just experience Do not limit yourself to business

Direct marketing

Selling your goods or services to consumers without intermediaries, typically to select customer groups and typically with tracking of the results.

Internal reference price

a consumer's mental image of what a product's price should be

Promotional Mix

how much of each message conveyance you will use to sell your product as well as your objective in using each one

Primary data

information is extremely current Take some more time and money to gather it Marketing research firms can do this for you

Overdraft

A negative balance in a depositor's bank account.

Born international

A new firm that opens a Web site immediately, thus being exposed to customers from around the world.

Perishability

service exhibits perishability in that if it is not used when offered, it cannot be saved for later use.

Tangibility

An item's capability of being touched, seen, tasted, or felt

Bundling

Combining two or more products in one unit and pricing it less than if the units were sold separately

Freight forwarders

Firms specializing in arranging international shipments—packaging, transportation, and paperwork.

Prestige or premium pricing

Setting a price above that of the competition so as to indicate a higher quality or that a product is a status symbol.

Skimming

Setting a price at the highest level the market will bear, usually because there is no competition at the time.

Odd-even pricing

Setting a price that ends in the number 5, 7, or 9

Partitioned pricing

Setting the price for a base item and then charging extra for each additional component

Captive pricing

Setting the price for an item relatively low and then charging much higher prices for the expendables it uses

Value proposition

Small business owners' unique selling points that will be used to differentiate their products and/ or services from those of the competition.

Written plan

Specific details about your target market Present and near-future situation, including competitors Identify differential advantage May include financial projections

Marketing plan

a systematic written plan of all phases of marketing for a business, including information on the product, price, and distribution and promotion strategy, as well as a clear identification of the target market and competition

The Elevator Pitch

A 30-second action-oriented description of a business designed to sell the idea of the business to another Leads with the hook, follows up with purpose of the service, ends with where business is now What makes firm unique or superior?

Master budget

A budget which consists of sets of budgets that detail all projected receipts and spending for the budgeted period.

Invention plan

A business plan that provides information to potential licensees. focuses on the details of an invention, including intellectual property rights.

Financial flexibility

A business's ability to manage cash flows in such a manner that the company can respond appropriately to unexpected opportunities and needs.

Cash budget

A cash budget identifies when, how, and why cash is expected to come into the business, and when, how, and why it is expected to leave.

Business Plan

A document designed to detail the major characteristics of a firm— its product or service, its industry, its market, its manner of operating (production, marketing, management), and its financial outcomes with an emphasis on the firm's present and future.

Letter of credit

A document issued by a bank that guarantees a buyer's payment for a specified period of time upon compliance with specified terms.

Documentary draft

A draft which can be exercised only when presented with specified shipping documents.

Growth trap

A financial crisis that is caused by a business growing faster than it can be financed.

Budget

A financial plan for the future, based on a single level of operations; a quantitative expression of the use of resources necessary to achieve a business's strategic goals.

New entrant business

A firm whose product or service is established elsewhere, but is new to this market.

Pioneering business

A firm whose product or service is new to the industry or is itself creating a new industry.

Sales promotion

A form of communication that encourages the customer to act immediately, such as coupons, sales, or contests.

Financial accounting

A formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators.

Concentrated strategy

A marketing strategy in which a marketer selects one specific group of consumers and designs a marketing mix specifically for that group.

Differentiated strategy

A marketing strategy in which a marketer selects two or more distinct groups of consumers and designs specific marketing mixes to meet their needs.

Undifferentiated strategy

A marketing strategy that uses no segmentation; assumes that all consumers have virtually identical needs and can be reached by the same marketing mix.

Executive summary

A one- to two-page (250-500 words) overview of the business, its business model, market, expectations, and immediate goals. Typically put at the start of a business plan and is the most popular summary form for a business plan.

Mission Statement

A paragraph that describes the firm's goals and competitive advantages Talks in terms of how it will make a difference in for the customer or the industry

Markup pricing

A price-setting method where an amount is added to the cost of a product to set the retail price and provide a profit.

Heterogeneity

A quality of a service in which each time it is provided it will be slightly different from the previous time.

Inseparability

A quality of a service in which the service being done cannot be disconnected from the provider of the service.

Discounts for prompt payment

A reduction in sales price provided to credit customers for paying outstanding amounts in a timely manner.

Charge back

A reduction in the bank account of a merchant by a credit card company.

Cash disbursements budget

A schedule of the amounts and timings of payments of cash out of a business.

Cash receipts budget

A schedule of the amounts and timings of the receipt of cash into a business.

Cost of goods sold budget

A schedule that shows the predicted cost of product actually sold during the accounting period.

Micro inventory

A set of goods or service that consists of only one or a few items.

Vision statement

A very simple 5-10 word sentence or tagline that expresses the fundamental idea or goal of the firm.

Press release

A written announcement intended to draw news media attention to a specific event.

Managerial accounting

Accounting methods that are specifically intended to be used by managers for planning, directing, and controlling a business.

Press relations

Activities used to establish and promote a favorable opinion by the media.

Public relations

Activities used to establish and promote a favorable opinion by the public.

Payables

Amounts owed to vendors for merchandise or services purchased on credit (see receivables).

Receivables

Amounts that are owed to a business for merchandise that was sold on credit (see payables).

Proof-of-concept Web site

An Internet-based type of business plan providing information or demonstration of a product or service designed to solicit information on customer interest.

Short-term debt

Any debt that must be paid in less than one year from the date of the financial statement on which it is reported.

Viral marketing

Any electronic equivalent of word-of- month advertising, in which the advertiser's message spreads quickly and widely via e-mail, website, blogs, and other online tools.

Bearer

Any person or business entity who possesses a security.

Cash equivalents

Assets that may be quickly converted to cash.

Public recognition

Being recognized or acknowledged by large numbers of people, similar to "fame."

Deposits and progress payments

Cash payments received before product is completed or delivered.

Off-peak pricing

Charging lower prices at certain times to encourage customers to come during slack periods

Multiple or bonus pack

Combining more than one unit of the same product and pricing it lower than if each unit were sold separately

Title Page

Company name Contact information Date this version of the plan was completed Proprietary statement to protect your ideas

Telemarketing

Contact via telephone for the express purpose of selling a product or service.

The Fundamentals of Pricing—Contextual Factors

Decide what is the right price Examine existing market prices for similar products and services Consider your business costs

Float

Delays in the movement of money among depositors and banks.

Key Factors for Determining Optimum Price

Demand for the product or service Value delivered to the customer Prices set by competing firms Your business strategy and product placement

The Company: Product/service and industry

Describe firm's product or service Explain how the customer uses the product Proprietary technology Industry descriptions

Direct exporting

Exporting using no intermediaries

Elasticity

From economics, the idea that the market's demand for a product or service is sensitive to changes in its price

Informational plans

Give potential customers or suppliers information about the company and its product or service.

Just-in-time inventory

Having just enough product on your shelves to meet the immediate purchases.

Publicity

Information about your company and its activities that is disseminated to the public in order to going their good opinion.

Secondary research

Information already collected for some other purpose than the current problem or questions.

The Organization: Legal and organization structures

Legal form of the business Organizational structure of the firm Makes clear how many employees there are and whether they are full time or part time, permanent or seasonal, family or non-family

Table of contents

Lists major section headings Boldface type Sections underneath major sections Normal type Put page numbers on every page of the business plan

Sales Forecasting

One of the most important pieces of marketing plan Companies often base sales forecasts on historical sales, but new companies cannot do that Products or services are tied to others Other products and services are not tied as neatly to others

Company background

Overall description of the company, the firm's current status, and the history of the business Vision statement / mission statement Specific goals, Business' competitive advantage

The Market: Marketing strategy

Overall strategy your firm pursues in the market Sales plan that shows specific ways you apply strategy to secure sales from your customers Longer-term competitive plan that shows how you protect your firm from efforts of the competition to unseat you

Sponsorships

Paying for a local organization's needs in exchange for recognition.

Key employee/partner plan

Provides information on the company, product/service, market, and critical risks to prospective business or marketing partners or to prospective key employees

Open-ended questions

Questions that allow respondents to express themselves as they choose; for example, "What do you like about this book?"

Categorical questions

Questions that are answered by selecting the proper category; for example, "What is your ethnicity? White, African American, Hispanic, Asian, American Indian, Other."

Scalar questions

Questions that are answered by some sort of scale; for example, "On a scale of 1 to 5, how do you like this book?"

Dichotomous questions

Questions that have only two possible choices; for example, "Have you shopped here before?"

Noncore projects

Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business.

Noncash incentives

Rewards that do not require payment of cash, such as stock options, compensating time off, or added vacation days.

Periodic or random discounting

Sales conducted at either predictable or non-predictable intervals

Test marketing

Selling your product or service in a limited area, for a limited time.

Marketable securities

Stocks and bonds that are traded on an open market.

Marketing research

Systematic collection and interpretation of data to support future marketing decisions.

Customer retention

Techniques that focus on efforts to promote satisfaction with and interest in the firm.

Keyword and description tags

Terms included in the hidden portion of a web page which are used by search engines such as Yahoo! and Google to describe your website and evaluate its focus and category placement.

Going concern concept

The accounting concept that a business is expected to continue in existence for the foreseeable future.

Markup

The amount an entrepreneur adds to costs to provide a profit

Margin

The amount of profit, usually stated as a percentage of the total price.

Currency (Paper Money)

The bills and coins printed by governments to represent money.

Differential advantage

The characteristic that separates one company from another in product, price, promotion, and/or distribution.

External legitimacy

The extent to which a small business is taken for granted, accepted, or treated as viable by organizations or people outside the small business or the owner's family.

Presenting Your Plan

The key things an influential person looks for in you are: Your passion for the business Your expertise about the business and the plan How professional you are in your work, How easy it would be to work with you.

Research and development

The part of a business that is focused on creating new products or services and preparing new technologies, ideas, products, or services for the firm's market.

Risks

The parts of a business or business plan that expose the firm to any kind of loss—profits, sales, reputation, assets, customers, and so on.

Multichannel marketing

The use of several different channels to reach your customers, for example, a Web site, direct mail, and traditional retailing.

The Fundamentals of Pricing: Value

The value delivered to the customer is second in order of importance to the pricing decision In addition to demand and value provided, you must consider the prices set by your competition

Public importance

Things that are considered important to large numbers of otherwise unrelated people

Public interest

Things that are generally considered to be beneficial to large numbers of people

The Market: Market and target customer

Total population of people or firms you plan to sell to Target customer section: focuses attention on who would buy Demographics' relation to the product, how often they buy, and past experience

Gaming the payment process

Using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided.

Impression

What it is called when someone notices a promotional effort

External reference price

an estimation of what a price should be based on advice, advertisements, or comparison shopping

Core product

basic description of what a product is

Augmented product

core product plus features that tend to differentiate it from the competition brand names, quality levels, packaging

Ethnographic research

data gathered by simple observation - seeing what consumers do, rather than asking them

Idea Evaluation

exhaustive process of specifying the details of each idea's technological feasibility, its cost, how it can be marketed, and its market potential Basic evaluation tool is the feasibility analysis

Internal understanding

extent to which employees, investors, and family members in the business know the business's purposes and operations

Focus group

form of data gathering from a small group led by a moderator

Screening plan (Mini Plan)

gives the basic overview of the firm and a detailed look at the financials

Segmentation

process of dividing the market into smaller portions of people who have certain common characteristics

Distribution

process of getting your product to your customers

Elastic product

product for which there are any number of substitutes and for which a change in price makes a difference in quantity purchased

Industry

tells the reader about the other firms producing this product or service—the competition. goal is to position your firm so that it looks like a potentially solid competitor in an industry with potential.

Fulfillment center

A company that will warehouse your products and fill your customers' orders for you.

Power

A concept in public importance which alludes to potential shifts in control or influence.

Currency

A concept in public importance which alludes to the degree to which the issue is immediate in its impact.

Issue recognition

A concept in public recognition which alludes to the extent to which the public is familiar with the issue or problem at hand.

Trendiness

A concept in public recognition which alludes to the fit of the topic to current fashion or public interest.

Proximity

A concept in public recognition which alludes to the impact level of the issue being discussed.

Survey

A data-collection method using a questionnaire—in person, on phone, on paper, or on the Internet.

Referral discount

A discount given to a customer who refers a friend to the business

Liquidity

A measure of how quickly a company can raise money through internal sources by converting assets to cash.

Timing purchases

A method of controlling the timing of cash outflows that is invisible to suppliers and vendors.

Direct mail

A method of selling in which catalogs, brochures, letters, videos, and other pieces of marketing materials are mailed directly to customers from which they can mail, call, or e-mail an order.

Wholesaler

A middleman business which buys (typically in large quantities) and sells (typically in smaller quantities) to businesses rather than consumers.

Agent

A middleman business which represents a manufacturer's product or service to other business-to-business middleman firms.

Retailer

A middleman business which sells to consumers or end-users of a product (typically in single or small quantities).

Nonsufficient funds

A situation that occurs when a check is returned to a depositor because the writer of the check did not have a bank available balance equal to or greater than the amount of the check.

strip shopping center

A small retail center located typically along a major road. The center has only small businesses and the center itself occupies only a small strip of land along a major street.

Tax accounting

An accounting approach based on specific accounting requirements set by governmental taxing agencies.

Activity-based cost estimates

An accounting method which assigns costs based on the different types of work a business does in order to sell a particular product or service.

Reconciling

An accounting process that identifies the causes of all differences between book and bank balances.

e-tailer

An electronic retailer; a store that exists only on the Internet.

Clearinghouse

An entity that processes checks and electronic fund transfers for banks and other financial organizations.

Factoring receivables

Borrowing money secured by a firm's accounts receivable.

Operational plan

Business plans designed to be used internally for management purposes.

The Organization: Location

Description of the facility How it meets strategic and sales goal of the business Own, lease, or rent the property Plan to expand the facilities

Cognitive dissonance

Doubt that occurs after a purchase has been made.

Indirect exporting

Exporting using intermediaries such as agents, export management companies, or export trading companies.

Preselling

Involves introducing your product to potential customers and taking orders for later delivery.

The Market: Competition and competitive advantage

Major competitors Competing product or service: market share, price, competitive advantages and disadvantages What makes product or service unique

anchor stores

Major retail stores, such as department stores in a mall. They serve as the anchor for the retail establishment.

Tagline (Slogan)

Memorable catchphrase that captures the key idea of a business, its service, product, or customer.

Free ink

Mentions of your company or products in the media for which your firm did not pay.

Direct sales

Methods of going directly to your customer in order to sell your product.

Donations

Monetary or other gifts to organizations or people who are in need.

Demand deposits

Money held in checking and savings accounts.

Some Risks

Overstated numbers Numbers that are wrong Inadequate cushion Inadequate payback Narrative and financials do not fit No direct customer connection Uncertain sales Overlooked competition Experience deficits "What" problems Deadly aggravations

Channels

People and firms who connect producers of goods and services with customers.

Sales leads

People who receive a promotional impression and who give some thought to buying the product.

Trade discounts

Percentage discounts from gross invoice amounts provided to encourage prompt payment.

Direct response advertising

Placing an advertisement in a magazine or newspaper, on television or radio, or in any other media.

Me-too products

Products essentially similar to something already on the market

Areas for Idea Screening

Product—innovativeness and uniqueness Market—customer need and market size, and Intellectual property People behind the idea, Additional resources needed to bring the idea to market Profitability of the idea

Prospects

Sales leads who actually make some sort of effort to learn more about the product, service, or business in anticipation of a possible purchase.

Mail order

Sales made from ads in newspapers or magazines, with purchases made online or by phone as well as by mail.

Business entity concept

The concept that a business has an existence separate from that of its owners.

Total product

The entire bundle of products, services, and meanings of your offering; includes extras like service, warranty, or delivery, as well as what the product means to the customer.

Manufacturer

The entity which produces a product or service to be sold.

Consignment

The practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold.

Price lining

The practice of setting (usually) three price points: good quality, better quality, best quality

Barter

The practice of trading goods and services without the use of money.

Variance analysis

The process of determining the effect of price and quantity changes on revenues and expenses.

Market segmentation

The process of dividing the market into groups that have somewhat homogeneous needs for a product or service.

Personal selling

The process of selling your products and service

Customer relationship management (CRM)

The process of tracking the customer's different contacts with the firm, and using this data to help improve sales as well as the customer's experience.

Retained earnings

The sum of all profits and losses, less all dividends paid since the beginning of the business.

Company book balance

The sum of cash inflows and cash outflows recorded in the firm's accounting records.

Bank ledger balance

The sum of deposits and withdrawals recorded in a bank's accounting records.

Bank available balance

The sum of money that has actually been received and paid out of a depositor's account.

Cash-to-cash cycle

The time that is required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale.

Guerilla marketing

The use of creative and relatively inexpensive ways to reach your customer.

The Appendices

one-page version of owner's resume Product or service pictures or specifications Copies of signed contracts Results from marketing studies or pilot sales efforts Industry reports