Deck 9: Managing Start-Ups and New Ventures

Question 1

Getting into business today is easier and faster than ever before and there are many more potential opportunities than at any other time in history.

Answer 1

True

Question 2

According to the Small Business Administration, small businesses account for a small percentage of all U.S. exports.

Answer 2

False

Question 3

Small business ⎯ especially in certain industries ⎯ is an important source of new (and often well-paid) jobs in the United States.

Answer 3

True

Question 4

Any start-up or new venture may succeed and grow to become a large business, succeed but remain small, fail and shut down, or be bought by an existing business.

Question 5

More than any other industry, manufacturing lends itself to small business.

Question 6

Small business is a strong presence in the U.S.economy, but that is not true of most of the world's mature economies.

Question 7

A first-mover enters a segment of a market that offers a new opportunity because it is not currently being satisfied.

Question 8

The purpose of the SBA's SCORE program is to evaluate the managerial performance of small businesses and then to assign scores that are used to determine the amount of loans that individual businesses can obtain.

Question 9

The Internet has virtually rewritten all of the rules for starting and operating a small business.

Question 10

Most U.S. workers are employed by large firms.

Question 11

Market research is a key step in building a business plan.

Question 12

History has shown that major innovations are as likely to come from small businesses (or individuals) as from big businesses.

Question 13

The business plan should describe the match between the entrepreneur's abilities and the requirements for producing and marketing a particular product or service.

Question 14

Professional managers, whose job is running someone else's business, are entrepreneurs.

Question 15

Professional managers who run someone else's business are not entrepreneurs.

Question 16

The idea of a business plan is not new. What is new is the growing use of specialized business plans by entrepreneurs, mostly because creditors and investors demand them for use in deciding whether to help finance a small business.

Question 17

The risks of starting a business from scratch are less than those of buying an existing firm.

Question 18

If someone is technically challenged, they should avoid starting a business because e-commerce is where small businesses are finding success.

Question 19

The purpose of the SBA's SBDC program is to consolidate information from various disciplines and institutions, including technical and professional schools.

Question 20

The more resources an industry requires, the harder it is to start a business and the less likely that the industry is dominated by small firms.

Question 21

Which of the following is NOT an example of an entrepreneur?

A) Madeline runs a neighborhood lemonade stand by herself.
B) Diane Molberg started By Request, a successful home bakery business that guarantees that any item it sells is no more than 24 hours old.
C) Elmer Olsen created the successful Bayfield Apple Jam Company using a recipe from his wife and some investment capital.
D) Cindy has a yard sale once a year.
E) Donna Cook wanted to start a little home business 10 years ago; now she has a company that produces and markets more than 150 dry cooking mixes.

Question 22

More people are discouraged to test their skills as entrepreneurs because the failure rate among small businesses has been increasing in recent years.

Question 23

Which of the following is NOT generally considered to be a role performed by small businesses?

A) Creation of new jobs
B) Development of new products
C) Manufacture of materials for large businesses
D) Distribution of products made by large businesses
E) Provision of capital for expansion of large businesses

Question 24

Teresa Walsh and Bonnie Kelly started Silpada Designs, jewelry sold through home parties. They are best classified as

A) intrapreneurs.
B) franchisers.
C) venture capitalists.
D) entrepreneurs.
E) franchisees.

Question 25

An entrepreneur does all of the following EXCEPT

A) organize.
B) plan.
C) hire professional managers.
D) assume risk.
E) operate.

Question 26

Starting a new business requires an overwhelming time commitment.

Question 27

Which of the following statements comparing small businesses to large businesses is FALSE?

A) More new jobs are created by small than by large businesses.
B) Large businesses show better financial performance than small businesses.
C) Small businesses represent the majority of new businesses started each year.
D) Small businesses can typically produce and deliver specialty products more efficiently than large businesses.
E) Small businesses outnumber large businesses by nearly 100 to 1.

Question 28

If an entrepreneur were considering a new business, which of the following would be a DESIRABLE characteristic of the industry being considered?

A) Several companies are engaged in highly competitive advertising, which indicates that the product is desirable.
B) The new company will sell a newly patented invention that is not yet well known but is expected to dominate the market.
C) Start-up costs are high, so only a few companies are in business.
D) The new company will be able to sell only to selected buyers.
E) Customers have substitute products from which to choose if the new company cannot produce the products as rapidly as needed.

Question 29

Which of the following describes an entrepreneur?

A) Richard Ames, an investor in Red Raider, which is run by his two partners
B) Chad Olsen, who hired a consulting firm to research his business idea and help him set up Help-Doc, which he now manages
C) James Hill, who owns Midtown TV but works as a Motorola engineer
D) Sidney Pell, who runs Midtown TV for its owner, James Hill
E) None of these choices

Question 30

Which of these statements comparing large and small businesses is TRUE?

A) Big businesses outnumber small businesses by a wide margin.
B) Tax policies favor medium-sized businesses.
C) Small businesses show consistently lower financial performance than big businesses.
D) Business success creates jobs regardless of size.
E) Small business formations are on the decline, but the rate for big businesses is increasing.

Question 31

Luck plays a role in the success of some firms.

Question 32

In terms of the number of new jobs formed each year, how does small business compare to big business?

A) Small business creates more than 99 percent of the new jobs.
B) Big business loses the most jobs each year.
C) Small business was recently passed by big business in creating new jobs
D) Business success creates jobs regardless of size.
E) Big business is responsible for nearly all of the new jobs created.

Question 33

A small business

A) is publicly owned.
B) creates jobs faster than big businesses.
C) has less than 100 employees.
D) is easily discernible from a big business.
E) has sales so small it cannot influence its environment.

Question 34

While watching her d ad cook bacon in the microwave, 10-year-old Abby Fleck asked, "Wouldn't it be less messy if you hung the bacon to cook?" After breakfast, she and her dad went to the basement and created the Makin Bacon, a gadget for making bacon cooking less messy. Abby, her parents, and her grandparents own and operate a company that makes and sells Makin Bacon trays. Her first big customer was Armour Bacon, which purchased the gadget to sell as a premium on its packages of bacon. This is a small business that has contributed by its

A) innovation and its importance to a big company.
B) financial performance and impact on its external environment.
C) innovation and its impact on the internal environment of Armour.
D) job creation, innovation, and importance to big business as a whole.
E) job creation and innovation.

Question 35

Women tend to start their own businesses because they really like being their own bosses.

Question 36

Few successful entrepreneurs succeed alone or straight out of college.

Question 37

Sara Blakely developed the idea to make Spanx undergarments. She filed a patent and researched production. She now sells Spanx through department stores. She is an example of a(n)

A) intrapreneur.
B) leaseholder.
C) venture capitalist.
D) entrepreneur.
E) franchisee.

Question 38

Kristen owns and operates a photography studio. She has no employees. She is a(n)

A) small business owner.
B) intrapreneur.
C) venture capitalist.
D) networker.
E) leaseholder.

Question 39

Less and less often businesses are being started by people who have opted to leave big corporations and put their experience and know-how to work for themselves.

Question 40

New businesses need six to twelve months of capital before they launch.

Question 41

An entrepreneur looking to enter the manufacturing industry is more likely to fail due to

A) size of initial capital investment.
B) economies of scale.
C) labor requirements.
D) market saturation.
E) all of these choices.

Question 42

Whisper Systems developed encryption systems that were efficient and without error. No other company had that ability.  Twitter Inc. bought Whisper Systems primarily so it could improve it's security.  Whisper Systems was a

A) retail business.
B) company with a first-mover advantage.
C) manufacturing business.
D) strategy imitator.
E) product assimilator.

Question 43

Why are some small business owners successful in the wholesaling industry?

A) A wholesaling business does not require a large capital investment.
B) Small businesses have access to more technology.
C) Wholesaling businesses serve more customers than retail businesses.
D) Small business owners are able to develop personal working relationships with their buyers.
E) All of these choices

Question 44

Whole Foods has succeeded in bringing natural foods to mainstream retail. A small business entering the natural food retail market would have a(n)

A) established market competitor.
B) advantage due to size.
C) niche market.
D) price advantage.
E) advantage in exporting.

Question 45

Which of the following statements is TRUE about the industries that small business owners may consider entering?

A) Small businesses dominate the construction industry.
B) Since the deregulation of banks, the small local bank has completely disappeared.
C) Barriers to entry are generally small.
D) There are no small businesses in the wholesaling industry.
E) More than any other industry, discounting lends itself to the skills of the small business owner.

Question 46

In which of the following ventures would a small business operator be most effective?

A) Construction
B) Transportation
C) Services
D) Manufacturing
E) Wholesale

Question 47

Which of the following is an example of identifying a new niche in an established market?

A) Modifying a cell phone keyboard to alphabetical order
B) Reducing the number of outlets that sell computers
C) Reducing the price of a printer so that it is more affordable
D) Introducing a new computer in an industrialized country
E) Designing a computer that can control traffic flow on a freeway

Question 48

Which of the following statements about service businesses that are classified as small businesses is TRUE?

A) Service businesses appeal to the innovative nature of many entrepreneurs.
B) A service company that gift wraps gifts for people too busy to do it themselves is an example of a small business if it is privately owned and has only four employees.
C) A small business offering a car repair service is like other service businesses in that it offers a higher return on time invested.
D) The service industry attracts small business owners because it requires so few start-up resources.
E) All of these choices

Question 49

Bai5 is a beverage company "born and raised in Princeton NJ."  The beverages come in a variety of flavors, with 5 calories per serving, no carbonation, and lots of antioxidants.  In a beverage market that is dominated by Coca-Cola and Pepsi, Bai5 is an example of

A) identifying a niche.
B) a company with a first-mover advantage.
C) a distribution company.
D) a new market identifier.
E) a product assimilator.

Question 50

In which of the following areas of retailing are small businesses most likely to create jobs through success?

A) Gas station
B) Creating organic health products
C) General hardware
D) Department store
E) Factory outlet

Question 51

Which of the following is an example of a first-mover advantage?

A) Orange County Choppers, builders of custom motorcycles, can exploit their own reality television show.
B) The manufacturer of Blistex lip cream, a U.S.-made product, is introduced for the first time to consumers in Europe.
C) Coca-Cola introduces its own brand of bottled water after the success of a number of other brands of water.
D) Kroger supermarkets add a new line of cosmetics for teens to its shelves.
E) Purina introduces a new package design for its dog food.

Question 52

The overall purpose of a business plan is to

A) identify all actions required up to the point when the firm opens its doors.
B) outline activities for the business in its first year of operation.
C) provide prospective lenders with a blueprint for action.
D) determine potential demand for the firm's product or service.
E) determine the most appropriate form of ownership.

Question 53

Which of the following statements explains why small businesses are generally more effective than large companies in specialty retailing?

A) Large companies generally lack the specialists that are needed to make a retail store profitable.
B) Specialty retail stores are generally located in small towns where large organizations tend not to compete.
C) Specialty retailing requires a different organizational structure than is usually found in large companies.
D) Innovative people leave the bureaucracy of big business to start their own firms.
E) Specialty retailing relies on customization, which is not cost effective for large companies.

Question 54

In which of the following industries are small businesses typically poorer performers than large businesses?

A) Construction
B) Manufacturing
C) Service
D) Retailing
E) Transportation

Question 55

Service businesses are the fastest growing segment of small-business enterprises primarily because of

A) low labor requirements.
B) lack of owner commitment.
C) favorable tax treatment.
D) high market demand.
E) size of initial capital investment required.

Question 56

Research has shown that manufacturing costs often fall as the number of units produced by an organization increases. This relationship between cost and production is called

A) economy of scale.
B) the scalar principle.
C) the equifinality principle.
D) synergy.
E) the 80/20 principle.

Question 57

In which of the following industries are you LEAST likely to find a small business owner performing well due to a lack of economies of scale?

A) Construction
B) Transportation
C) Service
D) Retailing
E) Manufacturing

Question 58

In which of the following industries are you most likely to find small business success?

A) Retailing
B) Department store retailing
C) Wholesaling
D) Airline
E) Manufacturing

Question 59

Large businesses are more likely to succeed in the manufacturing industry than small businesses due to

A) the principle of synergy.
B) economies of scale.
C) divesting.
D) the need for minimal start-up resources.
E) proven business plans.

Question 60

Which of the following is NOT considered to be a distinctive competency for small business?

A) Ability to move quickly to seize new opportunities
B) Ability to achieve economies of scale
C) Ability to identify new niches in established markets
D) Ability to identify new markets
E) Ability to exploit a first-mover advantage

Question 61

The most significant disadvantage to franchising as a means of acquiring a business is

A) the amount of paperwork.
B) the absence of economies of scale.
C) high start-up costs.
D) government regulation.
E) low break-even points.

Question 62

The text lists several questions that the business plan should answer for the entrepreneur who is planning to open a business. Which of the following is one of the questions?

A) What does she or he want to accomplish?
B) What financing is available?
C) What is the demand for the product/service?
D) What is the most effective production strategy?
E) What does the competitive situation look like?

Question 63

Why should a new entrepreneur, who has to be careful about how she spends every penny, join the National Federation of Independent Businesses (NFIB)?

A) The organization offers excellent networking opportunities.
B) The organization is the source of financial resources.
C) The organization is full of venture capitalists.
D) The organization provides generic promotional campaigns free of charge to new businesses.
E) There is no good reason for wasting money on this organization.

Question 64

Which of the following statements about recent trends in franchising is TRUE?

A) Franchising grew rapidly but has leveled off at one-third of retail sales.
B) Franchising is growing rapidly and is projected to account for half of all retail sales.
C) Franchising grew rapidly until about 1975, but its percentage of retail sales is now on the decline.
D) Franchising has not been a big factor in U.S. retail sales due to its high costs.
E) Franchising has declined in popularity because of the high risk it involves.

Question 65

The most significant change in small business is

A) the increase in the number of male-owned businesses.
B) the increase in the number of small business failures.
C) the decline in the number of sources of financing for small businesses.
D) the rapid emergence of electronic commerce.
E) the luring of entrepreneurs back to corporate America for financial security.

Question 66

The most important part of the small business financial plan is the

A) income statement.
B) balance sheet.
C) inventory analysis.
D) cash budget.
E) break-even chart.

Question 67

Jeff wants to start a company that makes the medical consent forms patients are required to sign easier to understand.  Jeff is a doctor with medical sales experience; his partner Gina has the technical abilities to make the product.  Where should they look first for financing?

A) Personal resources
B) SBA
C) Strategic alliances
D) SBICs
E) Venture capital companies

Question 68

____ are a group of small investors seeking to make profits on companies with rapid growth potential.

A) Intrapreneurs
B) Hierarchical allies
C) Stakeholders
D) Venture capitalists
E) Bondholders

Question 69

Jane's Candy Shack has ineffective advertising. Where should she go for help with a promotion program?

A) Active Corps of Executives (ACE)
B) National Federation of Independent Businesses (NFIB)
C) Small Business Development Center (SBDC)
D) Small Business Institute (SBI)
E) Service Corps of Retired Executives (SCORE)

Question 70

Which of the following is NOT a source of management advice for an entrepreneur?

A) Management consultants
B) Small Business Administration (SBA)
C) Networking
D) Advisory boards
E) Securities and Exchange Commission (SEC)

Question 71

Jane's Candy Shack was a quaint shop, in a small town, with high end items that never attracted many customers. Its failure was probably attributable to failure to

A) do market research.
B) pay decent wages.
C) raise enough capital.
D) contact the SBIC.
E) hire a consultant.

Question 72

What is the most common source of funds for entrepreneurs?

A) Bank loans
B) Money from venture capitalists
C) Personal financial resources
D) Issuing stock in the business
E) Forming strategic alliances

Question 73

Which activity in developing a business plan is the most important?

A) Choosing a business location
B) Researching the market
C) Choosing a product mix
D) Developing a production plan
E) Developing an organization chart

Question 74

Jay wants to start a new business. With which of the following methods will he pay a share of the income from the business in return for the use of trademarks and business formulas?

A) Venture capitalism
B) Franchising
C) Buying an existing business whose purchase price includes goodwill
D) Starting a new business with loans from the SBA
E) Industrial revenue sharing

Question 75

Which of the following is NOT a source of management advice for an entrepreneur?

A) Federal Trade Commission (FTC)
B) Small Business Administration (SBA)
C) Service Corps of Retired Executives (SCORE)
D) Active Corps of Executives (ACE)
E) Small Business Institute (SBI)

Question 76

After watching the royal wedding, Susan wants to start her own hat making company in the United States. To help her determine whether this is a good idea, she needs to find the answers to which of the following questions?

A) Who are my customers, and where are they?
B) Who are my competitors, and where are they?
C) How can I differentiate my product from that of my competitors?
D) In what quantities and at what price will my customers buy my service?
E) All of these choices

Question 77

Under the guidance of the ____, veteran business professors and students seeking advanced degrees work with small business owners to help solve specific problems like shoplifting and ineffectual advertising.

A) Active Corps of Executives (ACE)
B) National Federation of Independent Businesses (NFIB)
C) Small Business Development Center (SBDC)
D) Small Business Institute (SBI)
E) Service Corps of Retired Executives (SCORE)

Question 78

The ____ tells how much money is needed to operate a new business.

A) income statement
B) profit and loss statement
C) cash budget
D) t-account
E) balance sheet

Question 79

The first step for the entrepreneur in planning his or her business is to

A) forecast sales revenues.
B) develop an organizational plan.
C) choose a business location.
D) develop an organizational chart.
E) engage in self-analysis.

Question 80

Jane's Candy Shack is in danger of failing. She needs much consulting help, but she has limited financial resources. She contacts the SBA. She most likely will get help from the

A) Federal Trade Commission (FTC).
B) Small Business Administration (SBA).
C) Service Corps of Retired Executives (SCORE).
D) Active Corps of Executives (ACE).
E) Small Business Development Center (SBDC).