Entrepreneurship 2008 1st Edition Bygrave Test Bank

Entrepreneurship 2008 1st Edition Bygrave Test

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Ch07: Chapter 7: The Business Planning Process

True/False

1. This chapter takes the view that the process undertaken in developing a tight, well
written story is the most important thing.

Ans: True

2. The plan must establish that there is an opportunity worth exploiting and must detail
how you will accomplish it.

Ans: True

3. Business planning literally starts when you start to look for external funds.

Ans: False

4. It’s a common misperception that a business plan is primarily used for raising capital.

Ans: True

5. Since the executive summary is the most important part of the finished plan, write it
before you have gained a deep understanding of the business by working through all the
other sections.

Ans: False

6. An important benefit of the business planning process is that it allows the entrepreneur
to articulate the business opportunity to various stakeholders in the most effective manner.

Ans: True
7. Market analysis looks at trends that are shaping the future.

Ans: True

8. Both positive and negative trends will interact with the businesses.

Ans: True

9. The biggest risk any new venture faces is that it doesn’t have enough cash flow.

Ans: False

10. “Cost plus” pricing is best because it is easy for entrepreneurs to do.

Ans: False

11. Your distribution strategy can define your company’s fortune as much as or more that
the product itself.

Ans: True

12. There is no need to examine how the customer currently acquires the product.

Ans: False

13. Detailed investigation of comparable companies can help you refine your financials
as can triangulating the comparable method results with your build-up method results.

Ans: True
14. It is appropriate to discuss the geographic location of production facilities and how
this enhances your firm’s competitive advantage.

Ans: True

15. The scope of operations section should discuss partnerships with vendors, suppliers,
and partners.

Ans: True

16. A development strategy includes a schedule that highlights major milestones and that
you can use to monitor progress and make changes.

Ans: True

17. An ‘A’ entrepreneur with a ‘B’ idea is better than a ‘B’ entrepreneur with an ‘A’
idea.”

Ans: True

18. A simple, relatively flat organization chart is often useful to visualize what roles you
have filled and what gaps remain.

Ans: True

19. The Board of Directors’ primary role is to oversee the company on behalf of the
investors, and to that end the board has the power to replace top executives if it feels
doing so would be in the best interests of the company.

Ans: True

20. Strategic partners are necessarily on your advisory board or your board of directors.
Ans: False

21. It is important to explain why the team’s compensation is appropriate.

Ans: True

22. Too many entrepreneurs believe either that direct competition doesn’t exist, or that it
is sleepy and slow to react.

Ans: True

23. The appendices can include anything and everything that you think adds further
validation to your concept, but doesn’t fit or is too large to insert in the main parts of the
plan.

Ans: True

24. A three-ring binder filled with initial intelligence can be a good starting point in the
business planning process.

Ans: True

25. The biggest difference between an operational plan and the one you might present to
a potential investor is the level of detail, which tends to be much greater in an operational
plan.

Ans: True

Multiple Choice

1. Which of the following is NOT a reason that business planning can help entrepreneurs
to articulate the business opportunity to stakeholders?
a) The plan provides background information that enables the entrepreneur to
communicate the upside potential to investors.
b) It provides the validation needed to convince potential employees to leave their current
jobs for the uncertain future of a new venture.
c) It can help secure a strategic partner.
d) It can help secure a key customer, or supplier.
e) All of the above.

Ans: e

2. A detailed table of contents is critical to make a business plan easy to read; thus, it
should include___.
a) major sections
b) sub-sections
c) exhibits
d) appendices
e) all of the above

Ans: e

3. Which of the followings is the most important part of the business plan?
a) Executive Summary
b) Operations
c) Team
d) Critical Risks
e) Financial Plan

Ans: a

4. In the executive summary, which of the following subsections is NOT needed?

a) Description of opportunity
b) Industry overview
c) Critical risks
d) Competitive advantage
e) Team and offering

Ans: c
5. When an entrepreneur understands who his customers are, he can assess___.
a) what compels them to buy
b) how his company can sell to them
c) the cost of sales
d) how his company can retain customers
e) all of the above

Ans: e

6. A company’s sales channels can include all of the following except:

a) internal sales team
b) retail
c) Internet
d) advertising
e) direct mail

Ans: d

7. If business planning suggests that your gross margins are 5%, you’d be best advised to:
a) redesign your concept or abandon your concept;
b) keep your business small so that you can manage costs;
c) focus on guerilla marketing to target a niche;
d) all of the above;
e) none of the above.

Ans: a

8. Which of the followings are methods to forecast future revenues?

a) The comparable method and the build-up method
b) The comparable method and the distributed method
c) The random method and the build-up method
d) The random method and the precise method
e) All of the above

Ans: a

9. Which of the following is NOT a common category in the critical risks section?
a) Market Interest and Growth Potential
b) Competitor Actions and Retaliation
c) Time and Cost of Development
d) Operating Expenses
e) Offering of Financing

Ans: e

10. Which of the followings is the key to create visual catch-points?

a) Write long, descriptive paragraphs
b) Use clearly marked headers and sub-headers throughout the document
c) Maintain 1 inch margins on the sides and top and ½ inch on bottom; single spaced text
d) None of the above
e) All of the above

Ans: b

11. When writing a business plan it is best to:

a) Use a creative format to capture your investor’s attention
b) Lead the plan with the TEAM section because investors like to back ‘A’ teams
c) Follow a common outline because it helps spot reading
d) Avoid appendices because nobody reads them
e) All of the above

Ans: c

12. Which of the following is NOT a subsection of the marketing plan?

a) Product or service strategy
b) Market strategy of the competitors
c) Pricing strategy
d) Distribution strategy
e) Sales strategy

Ans: b

13. Which of the followings is a common subsection of operations plan?

a) Operations strategy
b) Scope of operations
c) Ongoing operations
d) All of the above
e) None of the above

Ans: d

14. Which issue should we focus on in the development plan?

a) Development strategy
b) Development timeline
c) Development segments
d) Choice A and B
e) Choice B and C

Ans: d

15. How can entrepreneurs minimize risk?

a) Market research
b) Focus groups
c) Beta sites
d) All of the above
e) None of the above

Ans: d

16. Considering competitor actions and reactions, which of the following thinking would
be dangerous for entrepreneurs?
a) Assuming that competitors will be the same tomorrow as they are today
b) Identifying future competitors that might enter the market
c) Considering when and how your technology might become obsolete
d) None of the above
e) All of the above

Ans: a

17. Which of the following is NOT a goal of business planning?

a) To attract various stakeholders
b) To help entrepreneurs gain a deeper understanding of the opportunity
c) To convince stakeholders of the business potential
d) To inform competitors of your intentions
e) To convince potential employees to join

Ans: d

18. The best way to develop a winning business plan is to:

a) Have an accountant develop your financials;
b) Hire your professor to write the plan;
c) Go through several iterations to refine the strategy and business model;
d) Don’t bother writing a plan – it takes too long;
e) All of the above.

Ans: c

19. All of the following should be included in the table of contents, except___.
a) Appendices
b) Major sections
c) Sub-sections
d) Exhibits
e) Footnotes

Ans: e

20. Which of the following is NOT in the operations plan?

a) Locationsb
b) Insurance
c) Employees
d) Suppliers
e) Customers.

Ans: e

21. Which of the following is not in the contents of the marketing plan?
a) Growth plan
b) Marketing communications
c) Product mix
d) Pricing
e) Customer analysis
Ans: a

22. Many of the big names in retail revolutionized fragmented markets. Which of the
following should NOT be on such a list?
a) Microsoft
b) Wal-mart
c) Staples
d) Home Depot
e) All should be on the list.

Ans: a

23. To truly understand your customers, you MUST ___.

a) tell them why they need your product
b) hire the best marketing research firm available
c) listen carefully and adapt based upon what they say
d) advertise in different media forms, like the Internet
e) all of the above

Ans: c

24. Entrepreneurs should focus on the key success factors that often lead a customer to
buy one product over another, such as___.
a) Price
b) Quality
c) Speed
d) All of the above
e) None of the above

Ans: d

25. The options to reach a target audience include____.

a) Mass advertising
b) Direct mail
c) Public relations
d) All of the above
e) None of the above
Ans: d

Essay

1. Why is “it a common misperception that a business plan is primarily used for raising
capital?”

Ans: Although a good business plan assists in raising capital, the primary goal of the
process is to help entrepreneurs gain a deeper understanding of the opportunity they see,
since:
a) Lacking a deep understanding of the business model, many would-be
entrepreneurs doggedly pursue ideas that will never be profitable.
b) Given the enormous financial and emotional toll a failed startup can have, the
weeks or months it will take to complete a thorough business plan is a relatively
small investment.
c) In comparison, the cost of launching a flawed business concept can quickly
accelerate into millions in lost capital for the founders and investors.
So entrepreneurs should spend the time and money up front and go through the planning
process.

2. Generally speaking, what is the greatest benefit of the business planning process and
why?

Ans: The deep learning that the entrepreneur gains from the process, which helps them
articulate the business opportunity to various stakeholders in the most effective manner.
In short, the business plan provides the entrepreneur with the deep understanding she
needs to answer the critical questions these various stakeholders will ask. Completing a
well-founded business plan gives the entrepreneur credibility in the eyes of each group.
 First, the plan provides background information that enables the entrepreneur to
communicate the upside potential to investors.
 Second, it provides the validation needed to convince potential employees to
leave their current jobs for the uncertain future of a new venture.
 Finally, it can also help secure a strategic partner, key customer, or supplier
among other things.

3. What factors should be kept in mind when we are preparing the cover of the business
plan?
Ans:
a) First, the contact person for a new venture should be the president or some other
founding team member.
b) Second, business plans should have a disclaimer along these lines:
“This business plan has been submitted on a confidential basis solely to selected,
highly qualified investors. The recipient should not reproduce this plan, nor
distribute it to others without permission. Please return this copy if you do not
wish to invest in the company.”
c) The cover should also have a line stating which number copy it is.
d) Finally, the cover should be eye-catching.

4. What kind of information in a business plan do entrepreneurs need to provide?

Ans:
a) A hook to capture the reader’s attention
b) Description of Opportunity
c) Business Concept
d) Industry Overview
e) Target Market
f) Competitive Advantage
g) Business Model and Economics
h) Team and Offering
i) Critical risks
j) Financials
k) Appendices

5. What are the key issues in the industry section?

Ans: The goal of this section is to illustrate the opportunity and how entrepreneurs intend
to capture it, thus:
a) Entrepreneurs need to provide a setting or context, including both the current
market size and how much you expect it to grow in the future.
b) In addition, entrepreneurs need to indicate what kind of market they’re facing.
c) Another key attribute to explore is industry economics.
d) Finally, entrepreneurs need to describe your overall market in terms of
revenues, growth and future trends that are pertinent.

6. How should entrepreneurs introduce the basic details of their company, before moving
on to a more detailed analysis of the marketing and operations plans?
Ans:
a) Provide a brief overview of the concept for the company, and then highlight what
the company has achieved to date.
b) Take some time to communicate the product and its differentiating features.
c) Identify market entry and growth strategies.
d) Finally, sell the entrepreneur’s vision for the company’s long term growth
potential.

7. What are the critical risks entrepreneurs need to identify in the business plan?

Ans:
a) Market Interest and Growth Potential
b) Competitor Actions and Retaliation
c) Time and Cost to Development
d) Operating Expenses
e) Availability and Timing of Financing

8. What slides are useful in oral presentations of your business?

Ans:
1. Cover page showing product picture, company name and contact information
2. Opportunity description emphasizing customer problem or need that hopefully
could be solved
3. Illustration of how the product or service solves the customer’s problem
4. Some details (as needed) to better describe the product
5. Competition overview
6. Entry and growth strategy showing how to get into the market and then grow
7. Overview of the business model – how to make money and how much it will cost
to support those sales
8. Team description
9. Current status with timeline
10. Summary including how much money is needed and how that money will be
used

9. Why should entrepreneurs go out and interview potential customers, especially in the
early conceptualization stages?

Ans: The typical reason is too often entrepreneurs figure that if they love their product
concept, so should everybody else. But even if their needs and wants are the best place to
Entrepreneurship 2008 1st Edition Bygrave Test Bank

start, they must recognize that their tastes may not be the same as everyone else’s, so to
truly understand customers, they need to talk and listen to them.
This process also helps create a better product that is more likely to gain customer
acceptance. As they get closer to launching, entrepreneurs will likely have a beta
customer use their product or service to further refine the concept. The key once again is
that business planning is the process, not the output (written plan).

10. What are the primary components of the marketing plan section in a business plan?
Describe them.

Ans:
a) a description of the target market strategy
b) the product/service strategy
c) pricing strategy
d) distribution strategy
e) advertising or promotion strategy
f) sales strategy
g) sales and marketing forecasts

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