Deck 6: The Business Plan: Visualizing the Dream

Question 1

Writing an effective plan is more helpful for company insiders than for outsiders.

Answer 1

False

Question 2

While every financial statement is important, the pro forma statement of cash flows deserves special attention.

Answer 2

True

Question 3

An extensive business plan that is not executed is more valuable than no business plan at all.

Answer 3

False

Question 4

The financial plan section of a business plan should include balance sheets and income statements on an annual basis and statements of cash flows on a monthly basis, all projected out for two to three years.

Question 5

A business model explains how a business will generate profits and cash flow.

Question 6

There is no current formula for preparing a business plan.

Question 7

The executive summary of a business plan presents a firm's history and its form of organization.

Question 8

A business plan should always be written before deciding to go forward with a startup business idea.

Question 9

A business plan provides evidence that a business can sell enough products or services to make an attractive profit.

Question 10

A business model's key resource requirements include only the amount of investment in hard assets, such as equipment and buildings, not personnel and contacts.

Question 11

Investors are more product-oriented than market-oriented.

Question 12

Time and capital are factors that affect the extent of business plan preparation.

Question 13

A business plan is a document that outlines the basic concept underlying a business-specifically, what problem will be solved-and describes how the entrepreneur will execute the plan to solve the problem.

Question 14

Once the decision is made to prepare a business plan, it should always be a comprehensive plan.

Question 15

Pro forma financial statements reflect the past financial performance of a firm.

Question 16

A business plan should not mention competitors' strengths and weaknesses.

Question 17

A narrative is more appropriate for businesses that are breaking new ground with a new product, a new market, or new operational techniques.

Question 18

Investors are only interested in reading a comprehensive business plan before deciding about the investment.

Question 19

When writing a business plan, it is important for an entrepreneur to think of his or her assumptions as facts.

Question 20

A loss leader is a revenue stream that is sold at a loss to create sales in a more profitable revenue stream.

Question 21

An extensive business plan would be most helpful for a startup that

A) will be operating in a turbulent environment.
B) needs to become operational as soon as possible.
C) needs to secure funding.
D) is severely constrained by a shortage of capital.

Question 22

A business plan is more likely to make a difference when the entrepreneur and management team

A) identify all unexpected events.
B) make decisions realizing that change may hurt the new company.
C) understand the plan is static.
D) effectively execute the plan.

Question 23

At a minimum, a business plan should include all of the following elements EXCEPT

A) a significant amount of hard evidence.
B) a primary focus on the product(s) the entrepreneur is selling.
C) candor about the risks, gaps, and assumptions that might be proved wrong.
D) a logical statement of a problem and its solution.

Question 24

Jill is writing a business plan for a small home-based operation. If well written, the business plan will assist her in determining if

A) the business aligns with her personal goals.
B) an investor would be a perfect fit for the proposed company.
C) suppliers can be found for the operation.
D) outsiders can be made into insiders.

Question 25

Incubator organizations can provide advice on structuring a new business.

Question 26

With the right assistance from professional sources (e.g., attorneys, accountants, incubator organizations) in business plan preparation, the entrepreneur can be relieved of having the responsibility of being the primary planner.

Question 27

Which of the following key factors should a comprehensive business plan consider?

A) Opportunity
B) Critical resources
C) Financing structure
D) All of these are correct.

Question 28

Capital-constrained entrepreneurs cannot afford to do much prior analysis and research because

A) the affordability of properly conducted research is beyond the means at their disposal.
B) the costs of any mistakes are lower than the risks of missing out on opportunistic actions.
C) the limited profit potential and high uncertainty of the opportunity they usually pursue may make the benefits low compared to the costs.
D) potential competitors could quickly discern the entrepreneurs' intentions and motives from their research.

Question 29

A business plan

A) is best for telling insiders about the company.
B) is more important than the final outcome.
C) is not the business.
D) will ensure success.

Question 30

Outside users of business plans include _____ and _____.

A) employees; leaders
B) investors; customers
C) managers; investors
D) government agencies; employees

Question 31

Two resources that are always in short supply for entrepreneurs are _____ and _____.

A) time; money
B) raw materials; labor
C) plant; equipment
D) financial backing; creative genius

Question 32

Which of the following issues would NOT be addressed in a short plan?

A) The problem that needs to be solved for customers
B) An in-depth analysis of critical factors
C) Measures used to gauge success
D) Milestones to be met

Question 33

A product or service should be described in lay terms even if the product is technical in nature.

Question 34

The document that provides a framework that helps an entrepreneur and the management team focus on important issues and activities for the new venture is the

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

Question 35

Because Tom is planning a new business with a limited time frame to capture an opportunity, the best solution would be a _____ business plan.

A) comprehensive
B) narrative
C) subjective
D) short

Question 36

Before beginning to write a business plan, the entrepreneur should complete a

A) thorough market analysis.
B) feasibility analysis.
C) patent application.
D) technical writing course.

Question 37

The purpose of the pitch is to close the deal with the investors.

Question 38

The most beneficial plan when facing significant change in the external environment is a _____ plan.

A) comprehensive
B) narrative
C) subjective
D) short

Question 39

A business plan can be thought of as a

A) crystal ball picture.
B) money plan.
C) contingency plan.
D) game plan.

Question 40

Even if the business plan reveals sensitive information (e.g., details of a technological design or the specifics of a marketing strategy), prospective investors can be trusted with that knowledge.

Question 41

The executive summary part of a business plan should be written

A) first.
B) last.
C) before the financial plan.
D) before the operations and development plan.

Question 42

A business model

A) is only important for startups with a large amount of uncertainty.
B) is intended to provide evidence on whether a concept is viable, not if it can be profitable.
C) is made up of a revenue model, cost structures, and required resources to grow the business.
D) forces the entrepreneur to be more disciplined about financial projections.

Question 43

Presenting a business plan with a unique format could be a mistake because

A) the business plan is not the right place to express one's creativity.
B) investors like to see the plan in a format that is familiar to them.
C) investors may lose confidence in the entrepreneur's ability to follow best practices.
D) investors don't appreciate opportunities that are too far "outside the box."

Question 44

Martin is creating the part of his business plan that includes the name, address, website, and logo of his company. Martin is working on the

A) cover page.
B) table of contents.
C) executive summary.
D) company description.

Question 45

With a(n) _____ revenue model, customers pay a fixed price per unit in exchange for a product or service.

A) volume
B) subscription/membership
C) advertising-based
D) licensing

Question 46

The narrative form of an executive summary

A) is more straightforward than the synopsis form.
B) allows the author to include hyperbole that builds enthusiasm.
C) is a better format for ventures that have several dominant advantages.
D) works well for companies with impressive histories.

Question 47

Which of the following is often thought to be the most important section of a business plan?

A) Financial plan
B) Company description
C) Executive summary
D) Operating plan

Question 48

Cost structures of a business model

A) define the types of income.
B) determine how much money is needed for positive cash flow.
C) drive the company's cost of goods sold and expenses.
D) are the most critical components for long-term success.

Question 49

In a business plan, the legal form of organization would be discussed in the

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

Question 50

Which of the following questions is key for forecasting revenues?

A) Who are the most likely customers?
B) What events will trigger the need or desire for the type of product or service?
C) How will customers make decisions on whether to buy the product or service?
D) All of these are correct.

Question 51

When considering the content of a comprehensive business plan, an entrepreneur should think first and foremost about

A) the opportunity, as identified by his or her feasibility analysis.
B) formulating effective strategies and financial projections.
C) who will be reviewing the plan.
D) how to protect the confidentially of the plan.

Question 52

The subscription/membership revenue model would require customers to pay a

A) fraction of the true value of the product or service.
B) fixed amount at regular intervals, prior to receiving the product or service.
C) fixed price per unit in exchange for a product or service.
D) one-time fee to be able to use a product or service.

Question 53

The _____ of a business plan provides a sequential listing of the sections and their page numbers.

A) executive summary
B) company description
C) cover page
D) table of contents

Question 54

When determining a cost structure for a business model, equipment lease payments would be an example of a _____ cost.

A) fixed
B) variable
C) semi-variable
D) static

Question 55

The industry, target customer, and competitive analysis section should

A) begin to describe the company.
B) present the opportunity and demonstrate why there is a significant market to be served.
C) introduce the product or service the company will offer.
D) identify the company's objectives for sales and growth.

Question 56

An entrepreneur should think of ways to _____ the resources necessary for startup.

A) outsource
B) insure
C) maximize
D) minimize

Question 57

The discussion of the opportunity in the business plan should reflect

A) how the product or service will fill a need.
B) the amount of return the investors should receive.
C) the potential and attractiveness of the market and industry.
D) the entrepreneur's enthusiasm for the business idea.

Question 58

The _____ type of executive summary is more appropriate for a business that intends to market a new product or enter a new market.

A) informative
B) synopsis
C) narrative
D) blended

Question 59

The company description section of a business plan should include the company's _____ if the business is already in existence.

A) history
B) customer list
C) sales revenues
D) credit score

Question 60

The type of executive summary that briefly covers all aspects of the business plan, giving each topic relatively equal treatment, is the ____ executive summary.

A) narrative
B) synopsis
C) abbreviated
D) comprehensive

Question 61

When describing the product in the business plan, the entrepreneur should

A) use technical terms.
B) state that the product will sell itself.
C) use lay terms.
D) assume that others will like the product.

Question 62

Items such as marketing research studies and the résumés of key executives are placed in the _____ of the business plan.

A) appendix
B) executive summary
C) table of contents
D) management team section

Question 63

The marketing plan should include which of the following topics?

A) Pricing strategies
B) The degree of patent or copyright protection
C) The spending habits of potential customers
D) Competitors' existing distribution channels

Question 64

The product/service plan section should include a

A) description of the competition's products and/or services.
B) description of the products and/or services.
C) listing of the weaknesses of the competition's product and/or services.
D) statement of how the company intends to capture market share.

Question 65

In a business plan, the management team section should detail

A) the proposed venture's organizational structure.
B) profiles of employee needs during the first three years of operation.
C) the projected growth of the proposed venture.
D) the intended distribution of ownership in the firm.

Question 66

One of the primary goals of a prospective investor is to

A) make as much money as possible.
B) minimize losses.
C) avoid risk at all costs.
D) maximize potential return on an investment.

Question 67

Nelson is writing about how he will identify and attract customers, how he will price his product, and how and where he will offer it for sale. Nelson is working on the _____ section of his business plan.

A) customer service
B) product/service plan
C) marketing plan
D) development plan

Question 68

Information about the backgrounds of key employees should be placed in the _____ of the business plan.

A) executive summary
B) management team section
C) operations and development plan
D) critical risks section

Question 69

Quentin, a venture capitalist, is scanning Mildred's business plan to see if and when he can recoup his investment and make a profit. Quentin is looking for a(n)

A) financial plan.
B) marketing plan.
C) investment plan.
D) exit strategy.

Question 70

Which of the following statements about the appearance of a business plan is true?

A) The plan should be presented in a three-ring, loose-leaf binder.
B) Visual aids, such as exhibits and tabular summaries, should be used conservatively.
C) The plan should be bound like a book.
D) The plan should be printed on shiny paper with flashy images and graphs.

Question 71

Prentiss is writing about the potential lack of customer acceptance of his product and possible retaliations from competitors. Prentiss is writing the _____ of the business plan.

A) critical risks section
B) executive summary
C) marketing plan
D) exit strategy

Question 72

When dealing with weaknesses in a business plan, the entrepreneur should

A) use technical jargon to confuse readers.
B) ignore them because they might not attract investors.
C) assume that investors will not find them.
D) be straightforward with them and have an action plan.

Question 73

In a business plan, the key statement in the financial plan is the

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

Question 74

Orlando has just finished the section describing his quality control methods and the need for specific equipment. Orlando has written the

A) management team section.
B) marketing plan.
C) company description.
D) operations and development plan.

Question 75

In the financial plan section of a business plan, pro forma statements should be presented for

A) six months.
B) one year.
C) three to five years.
D) seven years.

Question 76

Plans that appeal effectively to investors are

A) long and thorough.
B) market-oriented.
C) product-oriented.
D) ten or fewer pages.

Question 77

Of all the factors that investors consider, the _____ is/are paramount.

A) entrepreneur's educational achievements
B) quality of the management team
C) firm's competitive advantage
D) firm's target market

Question 78

In a business plan, the facilities and location of the proposed venture are described in the

A) executive summary.
B) management team section.
C) operations and development plan.
D) product/service plan.

Question 79

The sources and uses table is a part of the _____ of the business plan.

A) critical risks section
B) offering section
C) exit strategy
D) financial plan

Question 80

In analyzing the market for her or his product, an entrepreneur should answer which of the following questions?

A) How strong is the patent protection?
B) How costly will it be to produce the product?
C) How much are customers willing to pay for the product?
D) All of these are correct.