Deck 5: Developing an Effective Business Plan

Question 1

The terms lender and investor can be used interchangeably when talking about raising funds for a start-up venture.

Answer 1

False

Question 2

Prospective investors play the role of skeptics,thinking more about what could go wrong,whereas an entrepreneur characteristically focuses on the positive potential of the start-up; that is,what will happen if everything goes right.

Answer 2

True

Question 3

Once a good business plan is written,updates are unnecessary.

Answer 3

False

Question 4

Preparation of a business plan helps to bridge the gap between an idea and reality.

Question 5

Unlike an investor,the lender is not focused on capital gains,but rather loan repayment.

Question 6

A well-prepared business plan may be helpful in gaining a supplier's trust and securing favourable credit terms.

Question 7

A business plan is a written document that sets out the basic idea underlying a business and related start-up considerations.

Question 8

The primary concern of the banker providing a loan to a new business is loan repayment.

Question 9

The firm's mission statement concisely describes,in writing,the intended strategy and business philosophy for making the entrepreneur's vision a reality.

Question 10

The fundamental purpose of an "elevator pitch" is to create interest.

Question 11

The executive summary in a business plan highlights the significant points and,ideally,creates enough excitement to motivate the reader to continue reading.

Question 12

The sole purpose of a business plan is to persuade potential investors to supply funding to the business.

Question 13

The "elevator pitch" is a detailed presentation given to prospective investors.

Question 14

A product or services plan is a section of the business plan that describes the distribution network to be provided and explains its locations.

Question 15

A business plan should describe where you are,where you want to go,and how you propose to get there.

Question 16

Entrepreneurs seeking bank financing need to customize their funding proposal according to the type of financing they are pursuing.

Question 17

A business plan for a new venture usually leaves out the operating plan but adds it after a year of experience.

Question 18

Writing a business plan provides an opportunity for the entrepreneur and a management team to think about the key drivers of a venture's success or failure.

Question 19

A prospective entrepreneur is preparing to write a business plan.He should first consider the amount of time and money he has to spend.

Question 20

A good business concept may be destroyed by business plan writing that fails to communicate.

Question 21

Franz is starting a snowboard and ski shop.He will need financing in order to stock the shop with sufficient equipment,clothing,and accessories for opening day.What kind of plan should Franz prepare?

A) full marketing plan
B) partial business plan
C) full business plan
D) partial marketing plan

Question 22

Violet has hired an accountant to help her project the financial results for a business she plans to start.She will pay the accountant $500 for each year that is projected.How much will Violet likely pay the accountant?

A) from $250 to $1,000
B) from $1,000 to $1,500
C) from $1,500 to $2,500
D) from $2,500 to $3,500

Question 23

The marketing plan should identify user benefits and show evidence of consumer interest,as well as clarifying the firm's competitive edge.

Question 24

A business plan may be prepared for a major expansion of an existing business,as well as for a proposed new business.

Question 25

Entrepreneurs should be prepared to present their "elevator pitch" on street corners,or anywhere the opportunity presents itself.

Question 26

A business plan should project marketing,operational,and financial aspects of a business for the first seven years.

Question 27

Once an entrepreneur secures specialists to write the plan such as a marketing expert,accountant,and lawyer,the entrepreneur's involvement is not required.

Question 28

A business plan is prepared for external use only; for example,to interest potential investors.

Question 29

An investor has reviewed a business plan and the company's track record since its inception six months ago.The investor is ready to provide capital for the company to grow.Why is the investor interested in providing capital?

A) evidence of customer acceptance of the venture's product or service
B) expense projections that are far lower than normal industry ranges
C) competition in the industry is on the decline
D) new features have been added to the product being sold

Question 30

A business plan must contain believable financial projections.

Question 31

The biggest advantage of using a computer spreadsheet to prepare the financials is the professional formatting of the output.

Question 32

A "can do" attitude is essential in starting a new business.Planning is a good thing,although getting the business operational is equally important.

Question 33

Computer software that prepares business plans greatly simplifies and speeds up the process with little risk.

Question 34

Where in the business plan should the executive summary be inserted?

A) at the beginning
B) after the marketing plan
C) before the finance plan
D) at the end

Question 35

The amount of time spent planning depends on the management team's personal preferences.

Question 36

Kelvin was glad he created a business plan for his painting business.He was able to ensure all the important items were covered such purchasing brushes and ladders,printing and mailing brochures,and negotiating a line a credit at the bank.In what capacity was Kelvin's plan useful to him?

A) as a schedule
B) as a checklist
C) as a proposal
D) as a review

Question 37

Carried out correctly,the process of preparing the business plan will clarify what you want to accomplish in a new business and,equally important,which factors might determine your success or failure in the venture.

Question 38

The level of complexity of a business affects how much planning is appropriate.

Question 39

As the game plan for a new venture,the business plan refers to the entrepreneur's bank account and other cash sources.

Question 40

An entrepreneur proceeds with plans to manufacture a new product designed by her firm's top engineers.She should realize that the product,although well engineered,may not be wanted by customers.

Question 41

What is another term for a business plan?

A) management plan
B) money plan
C) contingency plan
D) game plan

Question 42

Corey owns a medical supplies company.He's noticed an increase in the number of other medical supplies companies which has affected his pricing.How has this also affected his planning?

A) increased the amount of planning required
B) has not affected the amount of planning required
C) reduced the amount of planning required
D) eliminated the need for planning

Question 43

Malcolm has just started the marketing research he and his wife wish to do for their online fishing lure new venture.Specifically,what is Malcolm doing?

A) writing survey questions
B) defining the information needed
C) reviewing fishing and wildlife magazines
D) comparing the costs of various research firms

Question 44

When should the executive summary in a business plan be written?

A) after the other sections are completed
B) after setting an appointment to meet with a lender
C) before dealing with financing considerations
D) before dealing with the marketing section

Question 45

Noah is conducting research about a type of business by reading industry journals and newspaper records of articles.What kind of research is Noah conducting?

A) print
B) media
C) primary
D) secondary

Question 46

What is the optimum length for a business plan?

A) no more than 10 pages
B) no more than 20 pages
C) no more than 25 pages
D) no more than 40 pages

Question 47

What is the most important feature of the marketing plan?

A) to identify user benefits and the type of market that exists
B) to show the degree of patent or copyright protection
C) to summarize the location of potential customers
D) to identify distribution channels

Question 48

An investor is reviewing a business plan and is particularly interested in reading about the background of the owners and how they will structure the organization.What section of the plan would the investor be most interested in?

A) operating plan
B) management plan
C) financial plan
D) executive summary

Question 49

What is a key statement in the financial plan?

A) break-even analysis
B) estimate of returns and allowances
C) salary expense statement
D) cash flow statement

Question 50

What should the business plan discussion of the production process include?

A) grand opening plans
B) quality and control of inventory
C) pro forma statements
D) marketing issues

Question 51

Nicholas is describing the ideal demographic and psychographic characteristics of his target market.Which section of the business plan is Nicholas writing?

A) financial plan
B) general company description
C) executive summary
D) marketing plan

Question 52

Roslyn wants to open a bike shop but needs capital to purchase inventory,hire staff,and cover overhead costs for about six months.What should Roslyn do to attract investors?

A) Pitch the plan to a venture forum.
B) Mail the plan to many banks.
C) Send out fliers stating the need for capital.
D) Wait for investors to find her.

Question 53

A prospective entrepreneur focuses his presentation to an investor on his invention,enthusiastically pointing out its unique features.What is the most likely question in the venture capitalist's mind?

A) How strong is the patent protection?
B) How costly will it be to produce the product?
C) How do I minimize my risk?
D) What management skills does this entrepreneur have?

Question 54

Jacqueline wants to start an in-home pet cleaning business.She does not know if pet owners will be interested so needs to conduct market research.Jacqueline has very little start-up capital.What should she do?

A) Hire a small research firm to conduct primary research.
B) Conduct secondary research herself.
C) Hire a small research firm to conduct secondary research.
D) Conduct primary research herself.

Question 55

Alexander is presenting his business to a bank's commercial loans officer in order to finance his venture selling custom canoes.What will the loan officer's greatest concern be?

A) the size of the market for custom canoes
B) the risk the loan will be repaid
C) the price and quality of the canoes
D) Alexander's experience in the watercraft industry

Question 56

Gordon is describing the highlights of his business,including its sales and profit potential and the proprietary processes that make it unique from the competition.Which section of the business plan is Gordon writing?

A) financial plan
B) general company description
C) executive summary
D) operating plan

Question 57

What is a business plan?

A) a legal document for raising capital to fund the business start-up
B) a prospectus identifying the business purpose and uses of financial investment
C) a document that sets out the basic idea underlying a business and related start-up considerations
D) a memorandum to prospective investors offering better than average returns

Question 58

What is one danger in using a business plan software package?

A) Profit projections can be unrealistic.
B) It is easy to gloss over important aspects of the plan.
C) May exclude unique features of the business.
D) Plan may look too generic and overlooked by investors.

Question 59

Where should the cash flow forecasts and pro forma financial statements appear in the plan?

A) within the executive summary
B) within the operating plan
C) within the marketing plan
D) within the appendices

Question 60

Brian and Shelley have collected a lot of data about their new energy bars and drinks.They need to assimilate the data into useful information to make decisions.What will help them do this?

A) test marketing
B) questionnaires
C) descriptive statistics
D) observational analysis

Question 61

Filomena has always maintained a business plan but for internal use only.Filomena is now adjusting the plan for external use due to changes in the company.Who is Filomena likely preparing the plan for?

A) employees
B) investors and lenders
C) customers
D) government agencies

Question 62

Preparing a business plan takes both time and money.After those givens,there must be tradeoffs.What are some of the other elements that the writer of a business plan must think about?

Question 63

Caruso is creating a document that will describe the products,markets,and operations of a business he wishes to start.What is Caruso creating?

A) organization chart
B) budget
C) sales analysis
D) business plan

Question 64

Discuss the basic four business plan objectives for an entrepreneur starting a new venture.

Question 65

Betsy is in a partnership with three of her neighbours to start a flower shop.Betsy and one partner want to create a plan but the two other partners feel a plan is not necessary because they all have their own beautiful gardens.What will likely occur?

A) Insufficient planning will result.
B) Betsy will ensure full planning is completed.
C) Investors will be more interested in their experience than the plan.
D) The venture will surely fail.

Question 66

Identify the three different users of business plans and show how a plan is useful to each.

Question 67

Jonathan invited various people to a pre-opening of his advertising firm.One individual was very interested in the venture and asked to see Jonathan's business plan.Which group would this individual likely belong to?

A) graphic artists
B) investors
C) retailers
D) printers

Question 68

Jonah wants to open a hot dog fast food restaurant.He asks people in line at a hamburger restaurant if they would prefer a hot dog if it was available.What kind of research is Jonah conducting?

A) print
B) media
C) primary
D) secondary

Question 69

Which of the following is least likely to provide assistance in preparing a business plan?

A) accounting firm
B) incubator organization
C) commercial real estate broker
D) marketing specialist

Question 70

Identify other outsider sources of assistance in writing the business plan.

Question 71

Discuss why a business plan would be needed for 1)suppliers,2)sales prospects,and 3)potential key employees.

Question 72

What is documented in the marketing plan?

A) costs to develop a new product
B) insurance coverage for customer liability claims
C) a profile of the target customer
D) a ranking of graphic artists that can create a new logo

Question 73

Karen is preparing a business plan for an investor group interested in helping her grow her business.To make the business more attractive to the investors group,what should Karen's plan show that the business will do for them?

A) make as much money as possible and help the business owners realize their vision
B) minimize taxes and maximize their return on investment
C) avoid risk altogether but still earn a high return on their investment
D) maximize return on investment while minimizing personal risk

Question 74

Describe the main elements of an "elevator pitch."

Question 75

Elle and Richard design a new wildflower arrangement they sell through trade shows.Richard puts the arrangement on display to watch the reaction of potential buyers.Which method is being used to collect data?

A) observational
B) focus groups
C) test marketing
D) questioning

Question 76

Jonathan is describing the flow of raw materials into the production process and how they are converted into finished goods for sale.Which part of the business plan is Jonathan writing?

A) executive summary
B) management plan
C) operating plan
D) product and service plan

Question 77

Discuss some common flaws that occur in writing the business plan.

Question 78

Discuss how often a business plan should be updated and why.

Question 79

Explain the key elements that make up the financial plan component of the business plan.

Question 80

Market research conducted by a marketing firm is important and can provide useful information for the new enterprise; however,it is expensive.What questions should owners ask themselves before contacting a research firm?