Ch. 10 - Creating Revenue Models, CH 11- Learning from Failure, CH 12- Bootstrapping for Resources, CH 13- Financing for Startups, CH 15- Navigating Legal and IP Issues, CH 16- Marketing and Pitching Your Idea

This pricing strategy packages goods together at a lower price than if they were sold separately: a. bundled pricing b. discount pricing c. fair pricing d. introductory offer

a. bundled pricing

Cost-led pricing refers to which of the following pricing calculations: a. calculating the cost of manufacturing and delivering the product and adding a profit margin b. calculating the cost based on how much profit you have targeted in your business plan c. calculating the price based on the maximum price a customer will pay d. calculating the price based on competitive products

a. calculating the cost of manufacturing and delivering the product and adding a profit margin

What are the two types of costs that should be taken into consideration when understanding cost drivers? a. cost of goods sold and operating expenses b. cost of startup and cost of operations c. cost of pre-startup and cost of operations d. employee costs and infrastructure costs

a. cost of goods sold and operating expenses

The four elements of revenue are: a. customers, frequency, selling process, price b. profit, sales, employees, selling process c. selling process, price, employees, profit d. customers, revenue streams, frequency, price

a. customers, frequency, selling process, price

A popular restaurant offers a free meal. At the restaurant, it turns out that drinks are not included. The drinks sell for above market rates. This is an example of which of the following? a. direct cross-subsidies b. multiparty markets c. double whammy d. distributed pricing

a. direct cross-subsidies

Which of the following refers to pricing a product or service above its market value to cover the cost of giving a product away for free or for a marked discount? a. direct cross-subsidies b. price plus c. freemium plus d. BOGO pricing

a. direct cross-subsidies

According to the text, we don't always hear about the reasons for business failures because ______. a. expressing the emotions of failure are difficult so people do not talk about the failure b. people may be unaware of their role in the failure c. people blame external reasons for their failure d. no one is interested in hearing about failures

a. expressing the emotions of failure are difficult so people do not talk about the failure

How does Chicago Food Planet Food Tours and Food Tour Pros generate revenue? a. food tasting tours and business courses for entrepreneurs b. business courses and entrepreneur courses c. travel and food tasting d. food tasting tours and cooking lessons

a. food tasting tours and business courses for entrepreneurs

The component of revenue that is addressed when a company offers a frequent shopper award is: a. frequency b. selling price c. selling process d. customers

a. frequency

Which of these questions will not provide information for the revenue model? a. How will my service add value to my customer? b. How much will my customers be willing to pay? c. How many customers do I need? d. How much cash can be generated from sales?

a. how will my service add value to my customer

In which revenue model do third parties such as brokers generate money? a. intermediation revenue model b. licensing revenue model c. franchising revenue model d. professional revenue model

a. intermediation revenue model

In this pricing strategy, a new product is offered for a heavily discounted price (or free) to attract more customers: a. introductory offer b. skimming c. customer-led d. competition-led

a. introductory offer

Founding CEO Alison led a team of talented programmers. The company quickly grew. Alison eventually stepped down as CEO because while she had strong technical skills, she realized she lacked the vision and skillset a CEO needed to lead a large corporation. Which of the following would be the likely reason Alison stepped down? a. lack of ability b. process inadequacy c. uncertainty d. inattention

a. lack of ability

Pam developed an application for the iPhone that Apple sells to their customers. Through what revenue model does Pam get revenue? a. licensing revenue model b. intermediation c. copyright d. advertising revenue model

a. licensing revenue model

Another term for an income statement is: a. profit and loss statement b. income tax statement c. balance sheet d. credit report

a. profit and loss statement

The financial report that measures the financial performance of your business on a monthly or an annual basis is: a. profit and loss statement b. income tax statement c. balance sheet d. credit report

a. profit and loss statement

A local hardware store offers flashlights at "3 for a dollar." This action would indicate which of the following strategies? a. psychological pricing b. skimming c. value-based pricing d. fair pricing

a. psychological pricing

A company's plan for how it will earn income and generate profits is called the _____________. a. revenue model b. business model c. revenue stream d. business plan

a. revenue model

Why is it important for entrepreneurs to manage the negative emotions associated with failure? a. so they can begin the process of learning from failure b. so they can avoid all the consequences of failure c. so they can understand the external reasons for their failure d. so they can blame others for their failure

a. so they can begin the process of learning from failure

Depreciation can be thought of as: a. the cost of wear and tear on physical assets such as equipment b. a discount placed on aspects of your business c. the result of business losses d. the value of used goods

a. the cost of wear and tear on physical assets such as equipment

______ is caused by crossing an ethical boundary, leading to mismanagement of the venture. a. Inattention b. Deviance c. Lack of ability d. Uncertainty

b. Deviance

In which revenue model does an existing business allow another party to trade under the name of that business? a. an intermediation revenue model b. a franchising revenue model c. a brokerage model d. an advertising model

b. a franchising revenue model

Pedro just learned that a competitor to his fast-food restaurant is opening up. Pedro responds by revising his menu to include more ethnic specialties and starts a customer loyalty club that gives free drinks for every five visits. This is an example of which of the following? a. a marketing plan b. a pivot c. a small failure d. an over reaction

b. a pivot

Carol sells a downloadable product that uses bar codes to conduct comparison shopping. Carol's product is an example of a: a. tangible revenue model b. an intangible sale c. a data revenue model d. a licensing revenue model

b. an intangible sale

Profit will depend primarily on which of the following? a. the amount of revenue that your company can bring in b. both revenue and cost c. the value of the company d. the number of customers generated

b. both revenue and cost

What are the two revenue sources of Airbnb? a. air travel and gambling b. commission from the homeowner and a booking fee from visitors c. commission on the booking fee d. advertisement of the rooms

b. commission from the homeowner and a booking fee from visitors

Sasha developed a new technology for cordless charging of cellphones and other devices, but she misled her investors about the cost of producing the new chargers and the number of units she could supply. Which of the following would be the likely cause of failure? a. lack of ability b. deviance c. uncertainty d. inattention

b. deviance

A Las Vegas theater offers a free performance. There is a two-drink minimum. This is an example of what strategy? a. value-based pricing b. direct cross subsidies c. multiparty d. utility and usage

b. direct cross subsidies

A Las Vegas theater offers a free performance. There is a two-drink minimum. This is an example of what strategy? a. value-based pricing b. direct cross-subsidies c. multiparty d. utility and usage

b. direct cross-subsidies

A business model: a. means the same thing as a revenue model b. focuses on how the product or service will serve a market need c. determines how profits will be made d. determines how revenue will be earned

b. focuses on how the product or service will serve a market need

Clinton owns a popular coffee shop in downtown Seattle. Rather than open up a second shop, he allows another business owner to use his company name and follow the same operations. The second business owner, in turn, pays him an initial monthly fee for operational support and the use of the company name. What revenue model does this represent? a. intermediation model b. franchising model c. licensing model d. professional revenue model

b. franchising model

If a company has more than one revenue stream, what must the entrepreneur ask in relation to revenue? a. How many customers will I need for each stream? b. How much will each revenue stream contribute to total revenue? c. How many more revenue streams will I need? d. Will my revenue streams compete with each other?

b. how much will each revenue stream contribute to total revenue

The razor-and-razor-blade revenue model: a. includes tangible and intangible sales b. involves offering an item at no or low-cost to encourage the sale of expensive complementary or disposable products later c. involves the sale of a high-cost product with easy-to-replace parts d. includes additional products as an add-on to the sale

b. involves offering an item at no or low-cost to encourage the sale

What is the main reason customers are attracted to direct cross-subsidies? a. they get two products for the price of one b. it eliminates the upfront cost of a product or service c. it is the most cost-effective model d. they rarely calculate the true costs

b. it eliminates the upfront cost of a product or service

The revenue model associated with giving permission to other parties to use protected intellectual property in exchange for fees is called: a. fee revenue model b. licensing revenue model c. intellectual property model d. intermediation model

b. licensing revenue model

In this pricing strategy, a product or service is offered at or below cost in order to attract more customers: a. skimming b. loss leader c. customer-led d. competition-led

b. loss leader

Mehmet's café sells coffee for only $.50, which is less than it costs, but Mehmet hopes customers will come for the coffee and end up buying sandwiches and pastries. What sort of pricing strategy is Mehmet pursuing? a. psychological pricing b. loss leader c. introductory offer d. customer-led pricing

b. loss leader

Which of the following refers to the model that gives the product away to one party but charges another party? a. dual system b. multiparty business c. single-party marketing d. double-bind pricing

b. multiparty business

The cost of running the business, including rent, utilities, administration, salaries, marketing, etc., is referred to as which of the following? a. cost of goods sold b. operating expenses c. infrastructure costs d. nonsales costs

b. operating expenses

Which of the following is the role of the broker in an intermediation revenue model? a. sell to the ultimate buyer b. organize transactions between buyer and seller c. represent the buyer in legal cases d. represent the seller in legal cases

b. organize transactions between buyer and seller

A change in direction in response to a small failure is called a ________ a. failure b. pivot c. termination d. retrenchment

b. pivot

Nour operated a successful massage and health spa in a lucrative resort location. She handled all reservations herself and if a customer called to make an appointment when she wasn't in the spa, she asked her employees to leave her a note. The notes sometimes go missing, resulting in angry customers. Which startup failure would most likely be represented in this scenario? a. uncertainty b. process inadequacy c. inattention d. deviance

b. process inadequacy

Peter discovered difficulties in his business, a home-decorating company that sold blinds, window wear, and fabric-based solutions. Peter won many awards for his designs and was very well liked by his talented employees. They all worked hard and the business began to grow quickly. As orders began coming in more quickly, the company began to misplace orders that resulted in lost business. Which of the following would be the most likely cause of the failure? a. lack of ability b. process inadequacy c. uncertainty d. inattention

b. process inadequacy

Failure as a result of the wrong procedures being set up in the organization so communication breaks down among employees and things begin to fall through the cracks is known as _______________. a. uncertainty b. process inadequacy c. deviance d. lack of ability

b. process of inadequacy

A company prices a product at market levels but packages the product to read "introductory pricing." This would indicate which of the following pricing strategies? a. customer-led pricing b. psychological pricing c. freemium pricing d. bundled pricing

b. psychological pricing

According to the text, studies have shown that individuals who go out of their way to avoid failure were ______. a. raised in uncertain environments b. raised to believe failure is unacceptable c. raised to view failure as a learning opportunity d. raised to believe failure is acceptable

b. raised to believe failure is unacceptable

Brent has designed a barbeque smoker that will sell for $29.99 and appeal to campers. The product includes a disposable unit that will protect the food during smoking and make cleanup easier. What revenue model is Brent planning on? a. intermediation b. razor-and-razor-blade c. intangible sales d. subscription

b. razor-and-razor-blade

Kelly charges a premium price for her marketing services. In her sales pitch, she makes sure that she distinguishes key elements of quality not offered by her competitors. What key element of revenue is Kelly addressing by doing this? a. frequency b. selling price c. selling process d. customers

b. selling price

What is the primary source of revenue for Skype, a company that offers free online video and phone service? a. the money they charge for a connection b. the money they charge for Skypeout, the service that calls land lines and cell phones c. the long-distance fees d. the monthly subscription fee

b. the money they charge for skypeout, the service that calls land lines and cel lphones

Intermediation revenue is associated with: a. direct buyer-seller relationships b. the use of third parties (or "middlemen") c. repeat sales d. dispute management

b. the use of third parties (or "middlemen")

What is a likely reason why someone would pay money for a franchise? a. they are not aware of basic business practices b. they will not have to spend the same amount of time marketing and building the brand c. they do not have knowledge in the industry or business model d. they will not have to work as hard in running the business

b. they will not have to spend the same amount of time marketing and building the brand

Cylle installs a unique home entertainment center. He charges a flat fee of $1,200 for the system and the installation. What revenue model does Cylle employ? a. razor-and-razor-blade b. unit sales c. data revenue d. Intermediation

b. unit sales

This revenue model measures the amount of revenue generated by the number of items sold by the company. a. razor-and-razor-blade b. unit sales c. data revenue d. intermediation

b. unit sales

A mobile telephone company charges a base fee plus additional minutes for data usage. What revenue model is demonstrated in this example?a. contractor revenue model b. utility and usage revenue model c. professional revenue model d. franchising revenue model

b. utility and usage revenue model

This revenue model charges customers fees based on how often goods or services are used: a. contractor revenue model b. utility and usage revenue model c. professional revenue model d. franchising revenue model

b. utility and usage revenue model

Describe a successful entrepreneur's typical reaction to failures, particularly small ones. a. They have very few failures because they do everything to avoid them. b. They get out of the business as early as possible in order to cut their losses. c. They see failures as opportunities to build on what they learned or capture new opportunities. d. They try to make failures happen to increase the overall creative tension.

c. They see failures as opportunities to build on what they learned or capture new opportunities

A pivot would be described as which of the following? a. a difficult situation that changes the nature of your business b. the nature of the obstacle that must be overcome to avoid failure c. a change in direction in response to a small failure d. a change in direction in response to a catastrophic failure

c. a change in direction in response to a small failure

Google's "cost-per-click" model is a type of __________ revenue model. a. franchising b. licensing c. advertising d. data

c. advertising

In this pricing strategy, prices are guided by the price other businesses set for similar products and services: a. customer-led pricing b. loss-leader pricing c. competition-led pricing d. skimming

c. competition-led pricing

The costs that include design, material, manufacturing, packaging, and other costs before a sale can be made to the customer is referred to as: a. customer directed costs b. presales costs c. cost of goods sold d. operating costs

c. cost of goods sold

What is the first key driver of revenue? a. price b. selling process c. customer d. frequency

c. customer

In this pricing strategy, customers are asked how much they would pay for the product: a. skimming b. loss leader c. customer-led d. competition-led

c. customer-led

What behavior is at the top of the failure spectrum? a. inattention b. uncertainty c. deviance d. lack of ability

c. deviance

A cell phone company offers a promotion in which they give away a free phone to people who purchase the highest-level data usage plan. This is an example of which of the following? a. balance subsidies b. promotional subsidies c. direct cross-subsidies d. risk reduction subsidies

c. direct cross-subsidies

According to the text, what is the major advantage of business failure? a. Once the business is closed, stress is reduced. b. Avoiding failure makes the entrepreneur more vigilant. c. Failure makes learning for future performance more intensive. d. Those who aren't suited for business get out early.

c. failure makes learning for future performance more intensive

Myhours.com offers a free individual time reporting system. However, it charges for additional users and services. This is an example of which of the following revenue models: a. utility and usage revenue model b. professional revenue model c. freemium revenue model d. premium revenue model

c. freemium revenue model

This revenue model mixes free basic services with premium or upgraded services: a. utility and usage revenue model b. professional revenue model c. freemium revenue model d. premium revenue model

c. freemium revenue model

Justin opened a physical therapy business in a new location and hired two well-known therapists. Once the business was up and running, Justin began work on launching a restaurant in a neighboring town. With Justin at the restaurant most days, the physical therapy business began to flounder. Which startup failure was represented in this scenario? a. uncertainty b. process inadequacy c. inattention d. deviance

c. inattention

A popular sports company grants a license to people who use their logo on T-shirts and caps. They charge the company for the rights to use the logo. This is an example of which of the following revenue models? a. advertising revenue model b. intermediation revenue model c. licensing revenue model d. razor-and-razor-blades model

c. licensing revenue model

Revenue can be described as which of the following? a. all the money that a company has to work with b. the money from loans, sales, and contributions c. money gained from the sale of goods or services d. money gained from sales minus the cost of creating the goods

c. money gained from the sale of goods or services

In target-return pricing, the cost is determined by which of the following: a. the maximum amount that your customers will pay b. the cost of creating the product and adding a profit margin c. pricing is based on how much you have invested in your business d. the price you need to charge to meet your company goals

c. pricing is based on how much you have invested in your business

Joe owns a construction company and prices his services based on labor hours and the cost of material. Which of the following revenue models is Joe using? a. contractor revenue model b. utility and usage revenue model c. professional revenue model d. franchising revenue model

c. professional revenue model

This revenue model provides professional services on a time and materials contract. a. contractor revenue model b. utility and usage revenue model c. professional revenue model d. franchising revenue model

c. professional revenue model

A grocery store offers cans of vegetables at 10 for $10. This is most likely which of the following pricing strategies: a. skimming b. fair pricing c. psychological pricing d. customer-led pricing

c. psychological pricing

In this type of pricing, customers are encouraged to believe that the product is less expensive than it really is: a. skimming b. fair pricing c. psychological pricing d. customer led pricing

c. psychological pricing

When Sally placed cookies by the side counter of her coffee shop, which revenue component was she addressing? a. frequency b. selling price c. selling process d. customers

c. selling process

A form of pricing high, this strategy is used for new products that have no competition: a. customer-led b. competition-led c. skimming d. loss-leader

c. skimming

The income statement: a. subtracts the cost of goods sold from the total revenue to get net income b. subtracts the operating expenses from the total revenue to get net income c. subtracts the cost of goods sold and operating expenses from the total revenue to get net income d. reports all income with no adjustment for cost of goods sold or operating expenses

c. subtracts the cost of goods sold and operating expenses from the total revenue to get net income

Why is the razor-and-razor-blade model also known as the printer-and-ink model? a. the technique is only used by printing companies b. the razor blade is not used that much c. the printer is sold at a low cost, but ink or toner is priced much higher d. printers are expensive, but ink is readily available

c. the printer is sold at a low cost, but ink or toner is priced much higher

How do companies gain revenue from free products under the freemium model? a. They operate as nonprofits. b. They are sponsored by wealthy sponsors. c. The revenue earned from other sources supports the free side of the business. d. They get donations from users

c. the revenue earned from other sources supports the free side of the business

How do free newspapers like Metro gain revenue from free products under the freemium model? a. they operate as nonprofits b. they are sponsored by wealthy sponsors c. they are paid to feature advertisements d. they get donations from users

c. they are paid to feature advertisements

What can be said of small failures in the entrepreneurial journey? a. They usually lead to the overall failure of the company. b. They usually have no ultimate effect on the business or the entrepreneur. c. They are the low points but are manageable and help the entrepreneur learn. d. They cannot be reversed.

c. they are the low points but are manageable and help the entrepreneur learn

Airbnb is considered an intermediation revenue model because: a. they help people in a real-estate-related industry b. they advertise on behalf of the homeowner/renter c. they charge commission for connecting home renters and home owners d. they are purely web-based

c. they charge commission for connecting home renters and home owners

Tony owns a bicycle shop where he sells bicycles, repairs them, and sells accessories. How many revenue streams does Tony's business have? a. one b. two c. three d. it cannot be determined

c. three

A specialty tour company markets its service as offering "an experience of a lifetime." Which of the following would be the most likely pricing strategy? a. customer-led pricing b. psychological pricing c. value-based pricing d. bundled pricing

c. value-based pricing

This method of pricing involves pricing the product based on how it benefits the customers: a. target-return pricing b. customer-led pricing c. value-based pricing d. benefit pricing

c. value-based pricing

Different revenue streams may affect which of the following: a. the industry your company operates in b. the geography your company will operate in c. who your customers will be d. all of these

c. who your customers will be

If we develop the ability to "see" the learning opportunity in failure, which of the following will occur? a. We will be able to potentially mitigate the risks of big failure. b. We will be able to expect failure. c. We will be able to embrace the learning opportunity. d. all of these

d. all of these

People with a strong fear of failure tend to exhibit which of the following characteristics? a. anxiety b. low self-esteem c. a reluctance to try new things d. all of these

d. all of these

What can be sold as unit sales? a. food and beverages b. digital products c. software support offered by the hour d. all of these

d. all of these

Which of the following might be used with permission in a licensing revenue model? a. copyrights b. patents c. trademarks d. all of these

d. all of these

Amy C. Edmondson, professor of leadership and management at Harvard Business School, describes a spectrum for failure that runs from blameworthy to praiseworthy. According to Edmondson, a praiseworthy reason for failure is ______. a. uncertainty—taking unreasonable actions due to lack of clarity b. inattention—getting sidetracked from the core business c. deviance—defying ethical and legal boundaries d. exploratory experimentation—conducting market tests to get early feedback

d. exploratory experimentation—conducting market tests to get early feedback

______ is the degree to which both businesses and customers believe that the pricing is reasonable. a. lowest cost pricing b. loss-leader pricing c. customer-led pricing d. fair pricing

d. fair pricing

Which of the following would be considered an intangible? a. clothing b. food c. hardware d. iTunes download

d. iTunes download

Ellen has been in business for less than 3 months. Because she wants to build the client base, she concentrated primarily on marketing and neglected the operations. Which of the following would be the likely cause of failure? a. lack of ability b. process inadequacy c. uncertainty d. inattention

d. inattention

Which of the following is true about a revenue model? a. It is the same as a business model. b. It is a separate planning model from the business model. c. It is minor component of the business model. d. It is a key component of the business model.

d. it is a key component of the business model

A hardware store offers highly discounted sale items to attract people into the store. This is an example of which kind of pricing strategy? a. introductory offer b. sale pricing c. customer-led pricing d. loss leader

d. loss leader

Massage Envy, a franchised spa offering massages and facials, offers discounts for people who automatically purchase a monthly service or services. What revenue model does this represent? a. licensing revenue model b. franchising revenue model c. revolving revenue model d. subscription revenue model

d. subscription revenue model

This revenue model involves charging customers to gain continuous access to a product or service: a. licensing revenue model b. franchising revenue model c. revolving revenue model d. subscription revenue model

d. subscription revenue model

Rory and Katie manufactured a smartphone-related product marketed for personal safety. Unsure about the best market segment to target, they developed a product for older adults and the general public. They also had a version of the product for children. Which of the following might be a cause for failure? a. inattention b. deviance c. lack of ability d. uncertainty

d. uncertainty