Quiz 2

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.

Pros to startups

Begin with a clean slate Use the most up-to-date technologies Provide new, unique products or services Can be kept small deliberately to limit the magnitude of possible losses

In the _____ section of a classic business plan, sales plan, competitive plan, and growth plan are discussed.

Market

Cons to startups

No initial name recognition Require significant time Very difficult to finance Cannot easily gain revolving credit May not have experienced managers and workers

Elastic product

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

Inelastic product

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

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

Business Plan

A document designed to detail the major characteristics of a firm

Stages of product development

1. idea generation/source of business ideas 2. idea screening 3. idea evaluation/feasibility study 4. product development 5. commercialization

indicator of successful start-ups

1. start business in business incubator 2. Take part in mentoring program 3. have a detailed start-up budget 4. produce product/service for where there is demand 5. Secure outside investment 6. Start with more than one founder 7. have experience managing small firms 8. have industry experience 9. previous start-up experience 10. choose a business that produces high margins 11. established customers 12. build trust in your "story"

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?

Franchising

A legal agreement that allows a business to be operated using the name and business procedures of another firm

Vision statement

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

Internal understanding

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

"rule of the thumb" ratio for getting a loan

to determine the value of sales banks will look at comparable sales, financial rations, and industry heuristics

Revolving Credit

A credit agreement that allows the borrower to pay all or part of the balance at any time. As the loan balance is paid off, it becomes available to be borrowed again.

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.