Questions for Chapter 5
True/False
1) A company is most likely to successfully pivot during its customer discovery phase. (pg.
121)
2) It is not necessary to focus on a target market when developing a business plan; having a
general sense of the overall market is enough. (pg. 125)
3) “Must–have” features and high switching costs are signs that a company’s product or service
has achieved differentiation. (pg. 124)
4) Developers encourage pivoting because they enjoy making new products. (pg. 121)
5) A business model is a hypothesis that a company is trying to prove or disprove. (pg. 121)
6) The order in which companies develop their customer value proposition, target market, and
differentiation does not matter, but changing one will affect the others. (pg. 123)
7) Most investors will prefer a proven business model to a well-researched business plan. (pg.
121)
8) In the Air, Aspirin, or Addiction framework to explain product/service differentiation,
addiction is a necessity. (pg. 124)
9) Customer case studies and testimonials are two ways to substantiate claims that a company
makes about its product or service. (pg. 124)
10) The Cost of Customer Acquisition is a capital expense. (pg. 127)
11) Nielsen Holdings switching to Google Docs instead of Microsoft Word is an example of
12) The Serviceable Available Market (SAM) is a segment of the Total Addressable Market that
a company targets for its product or service. (pg. 125)
13) When outlining milestones, it is more important to calculate the total capital required to get
to breakeven than how you plan to source that capital over time. (pg. 129)
14) The Total Addressable Market is based on the geography of the target customer. (pg. 125)
15) Having a single stream of revenue is preferred to having multiple streams of revenue because
it means a company is more focused. (pg. 128)
16) Human resources costs remain the same at all stages of company growth. (pg. 129)
17) In the early stages of company development, partnerships with outside entities can reduce
risk and uncertainty. (pgs. 129-130)
18) Whether an asset is leased, rented or borrowed, the capital expense does not change. (pg.
129)
19) A dashboard is primarily used for measuring the results of financial statements. (pg. 130)
20) Measuring the most critical elements of your business model in real-time will help you
understand patterns in your business before they appear on financial statements. (pg. 130)
21) If a product or service has no direct competitors, then it does not have a competitive
environment. (pg. 132)
22) Most startups cease to exist because the product doesn’t work. (pg. 130)
23) Strong online sales of a product is proof that it should be sold at a physical storefront. (pg.
129)
24) Cost drivers are affected by economies of scale or scope. (pg. 130)
25) Every entrepreneur should understand how to calculate breakeven, cost to acquire a
customer, and customer lifetime value. (pg. 103)
26) Strong regulations make it easy for new entrants to compete in an industry. (pg. 132)
27) A good financial strategy incorporates multiple scenarios of financial performance. (pg. 132)
(True)
(28) Having the customer remain with the status quo solution can be considered competition.
(pg. 132)
Multiple Choice
1) The most important depleting asset of any entrepreneur is (pg. 121)
e) None of the above
3) Which of the following represent the first step in development of the Business Model Wheel?
(pg. 122)
4) The core of the Business Model Wheel is (pg. 122)
a) Cost Drivers and Revenue Streams
e) Customer Segmentation, Marketing Channels, Distribution Channels
5) Which question does the customer value proposition not answer: (pg. 123)
6) A customer value proposition (pg. 123)
7) Volkswagen’s “clean diesel” cars are an example of (pg. 125)
d) CAC
e) CLTV
9) The ______ is the segment, or segments, of the ______ that you plan to target your product or
service for sale. (pg. 125)
10) Initially, the Serviceable Obtainable Market for startups will be composed of (pg. 125)
11) Which of the following step in development of the Business Model Wheel considers the
question: What is the Serviceable Obtainable Market?” (pg. 126)
12) Marketing channels serve to (pg. 126)
13) Which of the following step in development of the Business Model Wheel considers the
questions on CAC and CLTV?” (pg. 126-127)
e) None of the above
15) In order for a business to be successful, the lifetime value of a customer (CLTV) must be
(pg. 127)
16) Uber’s “surge pricing” is an example of (pg, 128)
17) Revenue streams refer to (pg. 128)
d) Professional Fees
e) Utility Fees
19) When displayed graphically the revenue line resembles a(n) (pg. 128)
20) Which of the following resource categories is not an important element of your business
model? (pg. 129)
21) Underestimating the capital requirements for a business can lead to (pg. 129)
22) The go-to-market strategy depends upon (pgs. 120-130)
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
23) Which of the following is not an example of a partnership that can enhance a customer value
proposition? (pgs. 129-130)
24) When it comes to costs, it is important to consider (pg. 130)
25) When considering industry attractiveness, investors will not look at (pg. 132)
Open Ended Questions:
1. Explain the difference between Total Addressable Market, Serviceable Addressable
Market, and Serviceable Obtainable Market. (pg. 125)
Total addressable Market (TAM) is the total market demand for a product or service.
distribution? What are some factors to consider when choosing which distribution
channel(s) to pursue? (pgs. 127-128)
Zacharakis, A., Corbett, A. & Bygrave (2020) Entrepreneurship, 5th Edition. Hoboken, NJ: Wiley.
A distribution channel is the means by which a product reaches the end-consumer. Direct
distribution is when a company’s salesforce sells directly to the customers. Indirect distribution
is when a company partners with intermediaries that sell its products.
Considerations for choosing a distribution channel include:
Revenue potential and cost efficiencies
How customers are currently being reached by the company and/or its industry
competitors
What is most convenient for the customer
How quickly the customer needs to receive the product/service
3. Name three types of revenue streams and how they work. (pg. 128)
A revenue stream is how a company makes money by selling its product or service. Types of
revenue streams include:
4. What are the characteristics of product differentiation? (pg. 124)
5. Assume that a company is selling a subscription to a car cleaning service for $20.00
per month and the average customer lifetime is 30 months. Their marketing
department has found that running online ads at $5000 per ad attracts 100 customer
and purchasing a billboard for $3000 attracts 60 customers.
Using the principles of customer lifetime value (CLTV) and Cost of Customer
Acquisition (CAC), explain whether these ads are worthwhile. Is one marketing
6. What are some ways to reduce capital expenditures early on in the lifecycle of a
– Outsourcing production of goods
7. What factors influence the competitiveness of a market? (pg. 132)
– Ability/desire of customer to stay at status quo
8. How does a company choose which key metrics need to be measured and