Deck 7: Small Business Entrepreneurship: Economic Rocket Fuel

Question 1

Dr. George Petrie, educator and Auburn University football's first coach, explained his outlook: "I believe that this is a practical world and that I can only count on what I earn. Therefore, I believe in work­hard work." Dr. Petrie's view suggests that he had an internal locus of control.

Answer 1

True

Question 2

Successful entrepreneurs are seldom visionaries. Instead, their strength is the ability to take the abstract ideas of others and turn them into successful businesses.

Answer 2

False

Question 3

Many entrepreneurs strive to meet the needs of the marketplace in hopes of dramatically changing the economic and social landscape worldwide.

Answer 3

True

Question 4

Individuals with an internal locus of control tend to be very self­reliant.

Question 5

Roman Sivkov migrated to the United States from Russia soon after the collapse of the Soviet Union. He is very bright and is willing to work hard, but he has had a hard time keeping a full­time job because of his limited command of English and heavy accent. Roman may well find that entrepreneurship is his best option for economic success.

Question 6

Although entrepreneurs enjoy independence from working for a boss, they must still meet the needs of their customers.

Question 7

The vast majority of the richest individuals in the United States earned their wealth by obtaining employment in major corporations and then working their way into positions of senior management within these organizations.

Question 8

An entrepreneur is an individual willing to take the risk of owning and operating a business.

Question 9

The Forbes magazine list of the 400 richest individuals in the United States is dominated by entrepreneurs.

Question 10

Internal locus of control refers to a firm belief that the individual is personally responsible for what happens in his or her life.

Question 11

Most small business owners start their businesses with the intention of changing the world through transformative growth.

Question 12

David is a high school senior interested in starting his own computer repair business. David's interest in starting his own business will have no effect on the long­term recovery of the economy.

Question 13

Entrepreneurs often mention that the primary motivator for launching a new business is the opportunity to make more money.

Question 14

Dominic feels like the world must be against him. He feels his boss is making unreasonable demands and treating him very unfairly at work, and tells anyone who will listen about the incredible string of bad luck that has dogged his personal life. He hopes his luck would turn around. Dominic's perceptions suggest that he has an external locus of control.

Question 15

All entrepreneurs launch their businesses with the belief that it is their only economic option.

Question 16

David McRemitz developed three unique programs while working for his software firm. This makes him an entrepreneur.

Question 17

The desire for a higher level of challenge can motivate someone to become an entrepreneur.

Question 18

Juan was recently laid off from Breeze Motors and he has stopped looking for a job after numerous rejections. He has now focused on starting a new business. Juan is an example of a "necessity entrepreneur."

Question 19

People who face discrimination that limits their economic opportunities in corporate America are likely to find that entrepreneurship offers even less attractive opportunities.

Question 20

For entrepreneurs, there is usually a correlation between dollars earned and hours worked.

Question 21

The majority of new firms are funded with the personal resources of the founder.

Question 22

When borrowing money from family and friends to start a business, it is a good idea to keep the loan arrangements on a professional basis.

Question 23

About half of all start­ups use credit cards as a source of financing.

Question 24

According to Consumer Reports, 68% of total start­up financing comes from personal resources.

Question 25

An advantage of getting a loan from the Small Business Administration (SBA) rather than from a commercial lender because the SBA lends more money and doesn't charge any interest as long as the loan is repaid on time.

Question 26

The benefit of financing your company's start­up cost with a personal credit card is that it provides fast, flexible money.

Question 27

To increase rates of entrepreneurship, the Small Business Administration (SBA) has created its own bank to provide interest­free loans directly to entrepreneurs.

Question 28

Renee has worked very hard for the past six months to start a new business. Although she was very confident that it would be a great success, she now realizes that it is failing. If Renee is a true entrepreneur, this failure is likely to be a devastating blow to her ego and self­confidence.

Question 29

The Small Business Administration microloan program lends an average of $13,000 to start­up businesses through community nonprofit organizations.

Question 30

Successful entrepreneurs often have high energy levels that enable them to work extremely long hours.

Question 31

Unlike other lenders who invest for financial gain, the main reason angel investors provide financing to start­up companies is that they have a sincere desire to give back to the community that made them wealthy.

Question 32

Entrepreneurs usually view the world in terms of black and white. They seldom consider the many shades of gray that other people see when they look at the same issues.

Question 33

Ted Price's new company is experiencing a steady decline. He needs external financing to help the company grow. Considering that he wants to maintain personal ownership and control over the firm for as long as possible, Ted is likely to find angel investors who are very interested in helping him meet his financial needs.

Question 34

Entrepreneurs are often overconfident in their own abilities, which can lead them to start businesses even though they lack the skills they need to succeed.

Question 35

Mary Simon wants to start a new business but lacks sufficient personal financial resources. She has asked banks and other lenders for loans, but they have turned her down, telling her that her proposal is too risky. Mary might find that the Small Business Administration could help her get a loan from one of these lenders by providing a partial loan guarantee.

Question 36

Angel investors are wealthy individuals who provide financing to promising start­up companies.

Question 37

Over 50% of entrepreneurs finance their new businesses with loans provided by commercial lending institutions.

Question 38

Peer­to­peer lending is a funding option for entrepreneurs that is easier and has better borrowing terms than more established sources, such as commercial loans.

Question 39

Successful entrepreneurs typically view their failures as opportunities to learn, so that they can do better next time.

Question 40

Most entrepreneurs have little trouble finding adequate financing during their start­up year, because the small size of their new firms means that financial needs are minimal.

Question 41

Small businesses tend to be at a disadvantage when it comes to providing employees with healthcare coverage.

Question 42

In­depth knowledge in a specific area is all that is needed to successfully run a business.

Question 43

It is less risky for individuals who want to become small business owners to start their own business than to buy an existing business.

Question 44

Small business owners typically find that the small size of their companies makes it simple for them to handle all of the management functions by themselves.

Question 45

Rob Baron owns a small sheet metal fabrication business that employs 23 workers. As a small business owner, one of the major advantages Rob will enjoy when competing against larger firms is a lesser burden of government regulations.

Question 46

More than half of all start­up companies obtain at least part of their initial financing from venture capital firms.

Question 47

Many small businesses that don't survive more than six years, go out of business for reasons other than the actual failure of the business.

Question 48

A key benefit of buying an existing business is that relationships with customers, suppliers, and vendors are already established.

Question 49

Jorge Martinez wants to start his own small business, but he is concerned about competing against larger firms. Given his concerns, Jorge should focus on starting a business that serves a smaller, well­defined market niche.

Question 50

The five­year survival rate of a small business depends fairly heavily on the industry.

Question 51

One drawback of small businesses is that they are frequently limited to serving highly competitive market niches that offer little hope of being profitable.

Question 52

The Internet has opened a wide range of new opportunities for small businesses.

Question 53

One advantage small businesses often enjoy is the ability to keep overhead costs to a minimum due to the fact that the owner works different roles.

Question 54

A market niche that is too small to attract the attention of major corporations can prove to be quite profitable for a small business.

Question 55

Starting a business from scratch rather than buying an existing company means that the owner has more control over all aspects of the company's organization, structure, and strategy. This can be both a major advantage and a major disadvantage.

Question 56

Venture capital firms fund companies that are experiencing a decline and help them grow in return for a share of ownership.

Question 57

Small businesses often have an advantage in foreign markets where customers want to deal directly with a company's top management.

Question 58

Small businesses can often create a competitive edge by providing more personalized customer service.

Question 59

In light of the economic crisis, Phillip would find it advantageous to request venture capital funding for his business in the software sector.

Question 60

When starting a business, it is preferable to not invest in fixed assets, such as advanced electronics, before sufficient regular income warrants it.

Question 61

While clearly important to their owners, employees, and local communities, small businesses actually account for only a very small percentage of output and employment in the U.S. economy.

Question 62

Joan recently retired from an executive position in a midsize company. She is enthusiastic about spending some of her time helping out new business owners. Joan might find volunteering with the Small Business Administration's Service Corps for Retired Executives program a meaningful way to achieve her goals.

Question 63

One advantage of buying a franchise is that the franchiser usually offers training, financial assistance, and a recognizable brand.

Question 64

Even five years after their launch, half of all established small businesses remain viable.

Question 65

The failure rate of a franchise is significantly higher than the rate for starting a business from scratch.

Question 66

A typical business plan should be approximately five to seven pages and should provide only a brief overview of the purpose, strategy, and organization of the firm. One common mistake small business owners make is to develop long, detailed business plans that bankers and investors simply will not take the time to read.

Question 67

Small businesses are the major source of new jobs created by the U.S. economy.

Question 68

One of the major contributions of small businesses is the vitalization of inner cities.

Question 69

Three downsides to buying a franchise include high initial costs, the ongoing percent­of­sales royalty fees, and the franchise requirements that, in effect, reduce the owner's independence.

Question 70

According to the Small Business Administration, a small company is any independent firm whose number of employees ranges from fewer than 100 to 1,500.

Question 71

Small business owners who need help in planning and financing their businesses can often receive valuable advice from Small Business Development Centers.

Question 72

One of the biggest problems facing people who want to start a small business is the lack of educational resources available to help them learn the ins and outs of starting and managing their new company.

Question 73

Small businesses generate half of the U.S. gross domestic product.

Question 74

Small businesses cannot succeed without a business plan.

Question 75

Since they lack the financial resources to fund research and product development efforts, small businesses are seldom able to introduce new innovations into the marketplace.

Question 76

Workers employed by small businesses are much less likely to be laid off during an economic downturn than workers in major corporations.

Question 77

A key reason for developing a formal business plan is that having such a plan is absolutely critical when seeking external financing.

Question 78

While the Small Business Administration provides significant financial assistance to small businesses, many critics point out that it fails to provide other types of advice, information, and assistance desperately needed by small business owners.

Question 79

Working a few years for someone else in the field that interests you is not recommended as you may get too comfortable to take the plunge and launch your own venture.

Question 80

Buying an established business may involve inheriting old mistakes that can range from poor employee relations to pending lawsuits.