Chapter 1—The Entrepreneurial Life
TRUE/FALSE
1. The universally accepted definition of the term small business is based on the number of people
employed by the firm.
2. According to the text, the term entrepreneur refers to small business founders only.
3. The term bootstrapping refers to the practice of bartering rather than buying with cash or credit.
4. Successful entrepreneurs should be aware of their strengths and weaknesses and be willing to strive
toward goals.
5. Entrepreneurs should avoid hiring mediocre people.
6. According to the text, managers who buy out founders of existing firms may be classified as
entrepreneurs.
7. Franchisees are not really entrepreneurs because they have a contract with a franchising organization.
8. An entrepreneurial team consists of the owner, the financier, and one key employee.
9. To be classified as a social entrepreneurship, a business must have a triple bottom line.
10. The mission of XYZ Company is to reduce landfill waste by recycling plastic containers into other
useful products. XYZ Company is a social entrepreneurship.
11. Women aren’t good entrepreneurs because women-owned businesses create fewer jobs than businesses
owned by men.
12. Many small business owners fail to identify and capture new opportunities to grow their businesses.
13. Josie’s position was eliminated when the company moved its operations to another state so she started
her own business. Josie is a reluctant entrepreneur.
14. A primary reason for becoming an entrpreneur is to create a product or service that improves the lives
of customers.
15. Xavier had many ideas about new products but no one in his corporation seemed interested. So
Xavier left and founded his own company to create these new products. Xavier is a corporate refugee.
16. The primary motivation for starting a new business should be to make as much money as possible.
17. Most entrepreneurs work shorter hours in their own businesses than they did when working for
someone else because they have no boss to report to.
18. Self-employed people are less likely to be millionaires than are those who work for others.
19. According to Stephen Covey, if we want to make important changes in our lives, we need to change
from the inside out.
20. The entrepreneur personality thinks in terms of opportunities rather than skills.
21. Good customer service can be provided by a business of any size but small entrepreneurial companies
do it better.
22. An entrepreneurial legacy is limited to the tangible assets of the business.
MULTIPLE CHOICE
1. Compared to large corporations, small businesses
a.
play just as important if not a larger part in the economy.
b.
represent less than 1 percent of all firms with employees.
c.
account for 55 percent of private payrolls.
d.
generated 20-40 percent of all new jobs in the last decade.
2. Adam has contracted with about a third of the dozens of artisans in his town in the mountains of South
Carolina. His reputation has grown; he now believes the sky’s the limit for this web page design and
maintenance business. What kind of small business does Adam have?
a.
lifestyle business
b.
microbusiness
c.
high-potential venture
d.
attractive small firm
3. Small businesses that have great prospects for growth are called:
a.
gorillas.
b.
antelopes.
c.
jaguars.
d.
gazelles.
4. By the time Jobs and Wozniak had moved out of the garage and into their first production facility, the
business would have been labeled as a(n):
a.
high-potential venture.
b.
attractive small firm.
c.
microbusiness.
d.
lifestyle business.
5. A firm that provides substantial profits to its owner is called a(n):
a.
franchise.
b.
high-potential venture.
c.
attractive small firm.
d.
lifestyle business.
6. Bailey works as a self-employed golf pro at the local country club, allowing him to spend more time
with his young family. He’ll never earn much but he and his family are happy. Which type of small
business does Bailey have?
a.
gazelle
b.
attractive small firm
c.
microbusiness
d.
lifestyle business
7. Carmen operates a franchise tanning salon. The negative publicity about the effects of tanning has
diminished her ability to grow the business. Carmen has a(n):
a.
high-potential venture.
b.
attradctive small firm.
c.
lifestyle business.
d.
microbusiness.
8. Which of the following best fits the definition of a small business?
a.
A manufacturer with 75 investors
b.
A hardware store franchise with 20 employees
c.
A fast food franchise with locations in three states
d.
A campground with gross revenues of $4 million per year.
9. Using the criteria in the text to define a small business, Table Occasions will not be considered a small
busoness one the company:
a.
is financed by three individuals.
b.
has sales greater than 20% of other firms in the industry.
c.
is operating in numerous states.
d.
has 50 employees.
10. Devon believes now is the time to launch his welding business since the only competitor has just
announced his retirement. Devon has identified:
a.
an entrepreneurial opportunity.
b.
a bootstrap opportunity.
c.
a small business opportunity.
d.
a lifestyle business opportunity.
11. Eduardo took out a second mortgage on his home to finance his new business. He makes all the
decisions and keeps all the profits. Eduardo is:
a.
bootstrapping.
b.
an entrepreneur.
c.
an administrator.
d.
a partner.
12. Francesca convinced her aunt to invest in her day spa in exchange for a percentage of the profits.
Francesca is:
a.
taking advantage of her aunt.
b.
capitalizing on an opportunity.
c.
conserving her own resources.
d.
bootstrapping.
13. Geraldo often would rather go fishing than work his business. Geraldo lacks:
a.
commitment.
b.
leadership.
c.
creativity.
d.
tolerance of risk.
14. A prospective entrepreneur is evaluating the suitability of his own characteristics for an entrepreneurial
career. He realizes that he should be prepared to assume:
a.
moderate risks.
b.
no risks—that is, he should plan to operate conservatively.
c.
risks similar to those a gambler assumes in Las Vegas.
d.
psychological risks but not financial risks.
15. Henry is well respected by his few employees. He models the highest integrity and encourages
tyeamwork. Henry is high in:
a.
determination.
b.
leadership.
c.
risk tolerance.
d.
motivation.
16. Isabella overheard her customers discussing their desire for more baked treats suitable for diabetics.
Immediately she added sugar-free items to her inventory. Isabella has strong:
a.
creativity.
b.
leadership.
c.
opportunity obsession.
d.
risk tolerance.
17. Jasper is so convinced he will succeed he has mortgaged his home, maxed out his credit cards, and
borrowed from his retirement savings to finance his business. Jasper is:
a.
high in commitment.
b.
high in leadership.
c.
high in creativity.
d.
high in risk tolerance.
18. Kevin developed a clever marketing campaign that increased his sales by 48%. Kevin is high in:
a.
commitment.
b.
leadership.
c.
creativity.
d.
risk tolerance.
19. Lance has set for his business the goal of increasing revenues by 20% and profits by 15% by the end of
the year. Lance is likely high in:
a.
risk tolerance.
b.
opportunity obsession.
c.
leadership.
d.
motivation to excel.
20. Martina expected to build her direct sales business ot the point that she can quit her day job after six
months. Five months later she barely has any customers. Martina:
a.
has overestimated what she can do.
b.
knows her market well.
c.
is a domineering manager.
d.
should take on a partner.
21. Natalie enjoyed yarn crafts so she opened a yarn and craft store in her small town. Sales have been
dismal; few people visit her store. What mistake did Natalie make?
a.
She overestimated what she could do.
b.
She lacked an understanding of the market.
c.
She hired mediocre people
d.
She failed to share ownership.
22. Oscar wants everything in his restaurant to be perfect so he points out every little mistake his servers
make. He has high turnover among his staff. Why?
a.
Oscar is a domineering manager
b.
Oscar is not a team player.
c.
Oscar lacks risk tolerance.
d.
Oscar does not know his market.
23. Lucien recently opened a shop to repair antique furniture. Which of the following best describes
Lucien?
a.
founder
b.
general manager
c.
franchisee
d.
two of the above are correct.
24. Pauley launched a new business designing and producing embroidered goods. Pauley is:
a.
a founder.
b.
an entrepreneur.
c.
both a founder and an entrepreneur.
d.
neither a founder nor an entrepreneur.
25. Raold operates a fast-food restaurant. He is under contract to the organization under whose name he
does business. The contract limits what Raold can do with his business. Raold is a:
a.
franchisor.
b.
franchisee.
c.
contract employee.
d.
partner in an LLC.
26. Bill Gates and Steve Ballmer, founders of Microsoft, would be considered:
a.
franchisors.
b.
franchisees.
c.
an entrepreneurial team
d.
sole proprietors.
27. Sabrina has figured out how to recycle clear plastic bottles into woven fabric and has launched a new
business. Sabrina is:
a.
an entrepreneurial team member.
b.
a social entrepreneur.
c.
risk averse.
d.
a franchisee.
28. Sally,, a single mother, opened a florist shop to support her family after losing her job in a corporate
layoff. She is a(n)
a.
woman without a portfolio.
b.
parental refugee.
c.
reluctant entrepreneur.
d.
independent refugee.
29. When a Fortune 500 business lays off workers, some displaced employees may decide to start their
own businesses. They are best described as
a.
foreigh refugees.
b.
welfare profiteers.
c.
corporate entrepreneurs.
d.
reluctant entrepreneurs.
30. Tatiana was laid off from her manufacturing job and in desperation launched a business providing
transportation services for the non-drivers in her community. We would classify Tatiana as:
a.
a social entrepreneur.
b.
a creative entrepreneur.
c.
a corporate refugee.
d.
a reluctant entrepreneur.
31. The daughter of an entrepreneur disliked her father’s criticism and eventually decided to quit the
family business and start her own business. The daughter is a
a.
corporate opportunist.
b.
gazelle.
c.
reluctant entrepreneur.
d.
refugee.
32. Ursula feels trapped in her dead-end job in a large corporation. She daydreams about opening her
own boutique at the seashore. Ursula is:
a.
a social entrepreneur.
b.
a reluctant entrepreneur.
c.
a corporate refugee.
d.
a bureaucrat.
33. Lydia works as a senior network administrator and is dissatisfied with the stifling bureaucratic
environment of her job. She is considering venturing out on her own as a consultant. If she carries
through with her intentinos, she would be considered a(n)
a.
corporate pariah
b.
entrepreneurial dilettante
c.
bureaucratic emigrant
d.
corporate refugee
34. The first goal of an entrepreneur should be:
a.
to meet financial goals.
b.
to maximize shareholder wealth.
c.
to operate the business ethically.
d.
to create a product or service that improves the lives of others.
35. Vincent’s business has grown; he now employs 14 people. He enjoys teaching new employees the
skills they need to make his products. One of Vincent’s reasons for being in business for himself is:
a.
personal satisfaction.
b.
independence.
c.
financial rewards.
d.
being the best he can be.
36. A camera hobbyist starts a photographic supplies store. The most obvious reward for this
entrepreneur is the opportunity to:
a.
serve other photography enthusiasts.
b.
enjoy satisfying work.
c.
be independent.
d.
work with people.
37. A prospective entrepreneur wants to find a career doing what she enjoys most. She might be drawn to
try an entrepreneurial venture
a.
to enjoy satisfying work.
b.
for substantial long-term profits.
c.
to have freedom from a managerial hierarchy.
d.
for a sense of self-esteem.
38. Valerie has been described as a “free spirit.” She has tolerated bu seldom appreciated parental,
academic, or even job authority. The factor most likely to lure her to entrepreneurship is
a.
profit opportunities.
b.
freedom to operate independently.
c.
enjoyment of doing what she likes to do.
d.
satisfaction in serving the community through the business.
39. Walter wanted to be able to make decisions about issues that directly affected his department but in his
corporation, the managers made all the decisions. So Walter left the corporation and started his own
firm. Walter was looking for:
a.
personal fulfilllment.
b.
personal satisfaction.
c.
independence.
d.
financial rewards.
40. A significant number of entrepreneurs are motivated by
a.
an easy life.
b.
financial rewards.
c.
freedom from long hours.
d.
job security.
41. A corporate manager chafes under red tape and bureaucratic regulations until finally deciding to start a
separate business. The apparent reward he seeks is
a.
community service.
b.
a satisfying way of life.
c.
independence.
d.
the satisfaction of working with people.
42. Xavier believed his labor was only making others rich while he struggled from paycheck to paycheck.
He started his own small business and now labors only for himself. Xavier’s motivation is:
a.
personal fulfillment.
b.
personal satisfaction.
c.
independence.
d.
financial rewards.
43. Zelda worked for years in a medical clinic as a biller and coder. Now she operates her own billing
service for several doctors. Zelda has a(n) ___________ personality.
a.
technician
b.
manager
c.
entrepreneur
d.
artisan
44. Although Abner started the business by making his own product, his greater talent is planning for the
future and arranging for growth. Abner has a(n)___________ personality.
a.
technician
b.
manager
c.
entrepreneur
d.
opportunistic
45. Ben seems to have the Midas touch. He can recognize opportunity where others see only problems.
His focus is on creating solutions for customers. Ben has a(n) _____________ personality.
a.
technician
b.
manager
c.
entrepreneur
d.
opportunistic
46. Calvin knew his small local hardware could not compete on price with the big-box discounters so he
began offering classes for new homeowners and found other ways to provide services the bigger stores
don’t. Calvin’s competitive edge is:
a.
customer focus.
b.
quality performance.
c.
innovation
d.
niche markets.
47. Darlene was disappointed with mass-produced children’s clothing that fell apart after a couple
washings so she and her few employees began making garments that would hold together until they
were outgrown. Darlene’s competitive edge is:
a.
customer focus.
b.
quality performance.
c.
niche markets.
d.
integrity and responsibility.
48. Legend holds that Abraham Lincoln walked miles to return two cents change to a customer. His
actions demonstrate:
a.
customer focus.
b.
quality performance.
c.
integrity and responsibility.
d.
social entrepreneurship.
49. Entrepreneurs are more likely than large corporations to capitalize on innovations because:
a.
entrepreneurs have more time to be creative.
b.
larger corporations must satisfy stockholders and cannot take risks.
c.
entrepreneurs are more likely to find grants for research.
d.
larger corporations may be too focused on existing products.
50. Evelyn opened a small boutique catering to a very narrowly defined target market. Evelyn’s
competitive edge is:
a.
the niche market.
b.
customer focus.
c.
quality performance.
d.
innovation.
51. Flora built her business from two employees to over 2,000 during her 30 years in business. She was
able to endow a scholarship fund to the community college and to leave her children a perpetual
income. We call this her:
a.
corporate responsibility.
b.
social mission.
c.
good citizenship.
d.
entrepreneurial legacy.
52. Garner places great emphasis on operating his business to the highest standards of honesty and ethics.
Garner likely believes:
a.
the end justifies the means.
b.
how you achieve is as important as what you achieve.
c.
the customer is always right.
d.
good guys finish last.
53. Sometimes entrepreneurs spend so much time and energy building the business that relationships are
destroyed. Which phrase best describes this misfortune?
a.
Some sacrifices are necessary for the greater good.
b.
You’ve got to give a little to get a little.
c.
What goes around comes around.
d.
It’s possible to score points in the wrong game.
MATCHING
Match the term with its definition.
a.
attractive small firm
g.
manager personality
b.
corporate refugee
h.
microbusiness
c.
entrepreneur personality
i.
niche market
d.
entrepreneurial opportunity
j.
reluctant entrepreneur
e.
founder
k.
social entrepreneurship
f.
high-potential venture
l.
technician personality
1. A person who becomes an entrepreneur to escape an undesirable job situation
2. A personality that is pragmatic and likes order and planning operations
3. An economically attractive and timely opportunity that creates value for inrerested buyers or end users
4. A specific group of customers with an identifiable but narrow range of product or service interests
5. A small firm that provides substantial profits to its owner
6. Entrepreneurial activity whose goal is to find innovative solutions to social needs, problems, and
opportunities
7. A small firm that has great prospects for growth
8. A person who becomes an entrepreneur as a result of some severe hardship
9. An entrepreneur who brings a new firm into existence
10. A small firm that provides minimal profits to its owner
11. A personality that focuses on the business as a whole and providing results for the customer
Match the term with its definition.
a.
bootstrapping
g.
lifestyle business
b.
entrepreneur
h.
mentor
c.
entrepreneurial legacy
i.
microloans
d.
entrepreneiurial team
j.
paradigm shift
e.
franchisee
k.
small business
f.
gazelle
l.
technician personality
12. Material assets and intangible qualities passed on to both heirs and society
13. Very small loans, often provided to entrepreneurs in developing countries
14. Two or more people who work together as entrepreneurs on one endeavor
15. A change in how we fundamentally see a situation
16. A person who relentlessly pursues an opportunity, in either a new or an existing business
17. A business with growth potential that is small compared to large companies in an industry, has
geographically localized operations, and is financed by only a few individuals
18. A knowledgeable person who can offer guidance based on experience in a given field
19. An entrepreneur whose power is limited by a contractual relationship with an organization
20. A personality that focuses on an already developed technical skill, wants to be left alone to get the job
done, and is primarily concerned about the present
21. A microbusiness that permits the owner to follow a desired pattern of living
22. Doing more with less in terms of resources invested in a business
ESSAY
1. Discuss similarities and differences of entrepreneurs and small business owners.
2. Explain the nature of and differences among microbusinesses, attractive small firms, and
high-potential ventures.
3. Malinda wants to start a restaurant in her city of about 50,000 people. There are already 325
restaurants in this city. Malinda’s reasons include that she is a good cook who enjoys working in the
kitchen and she wants to involve her three children aged 9 to 15 in the venture. She has not decided
what types of foods she will offer.
If Malinda launches this business, do you think it will succeed? Why or why not? What advice
would you give her?
4. Define entrepreneurial opportunity. Using one of the three success stories in the chapter, explain how
the owners identified their opportunity.
5. List and briefly explain the six categories of “desirable and acquirable attitudes and behaviors” found
in Spinelli’s and Adams’ research on entrepreneurial characteristics.
6. Identify the six attitudes and behaviors entrepreneurs should avoid. For each, explain the likely result
of engaging in that behavior or holding that attitude. Simply saying “the business will likely fail” is
insufficient.
7. Explain the advantages of a social entrepreneurship. Give an example of such a business.
8. After identifying the five rewards for entrepreneurs, relate each to an example either discussed in the
book, in class, or from the community.
9. Explain the difference between personal fulfillment and personal satisfaction as an entrepreneurial
motivation.
10. Explain how a small business can be more innovative than a large firm.