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59) People ________ and older have demonstrated the greatest increase in entrepreneurial
activity over the last 25 years of any age group.
A) 55
B) 45
C) 35
D) 25
60) Women now own 31.1 percent of all privately-held businesses in the United States.
61) Women play a minor role in the entrepreneurial arena.
62) Starting a part-time business is a popular gateway to entrepreneurship.
63) Increasing numbers of women are discovering that the best way to break the "glass ceiling"
that prevents them from rising to the top of many organizations is to start their own companies.
64) Diversity may be considered a characteristic of entrepreneurs, as they don't fit any statistical
norm.
65) Minority-owned businesses have come a long way in the past decade, and their success rate
is climbing.
66) A major advantage of launching a business part-time is the lower risk it offers in case the
business fails.
67) Most home-based businesses are simple cottage industries such as crafts or sewing.
68) Not all family-owned businesses are small; in fact, approximately one-third of the Fortune
500 companies are family businesses.
69) More than 40 percent of all companies in the world are family-owned.
70) Ninety percent of businesses in the United States are family-owned and managed and
account for 62 percent of total U.S. employment.
71) Family-owned and managed businesses account for 78 percent of all new jobs.
72) Most family businesses survive to the fourth generation.
73) Successful "copreneurs" create a division of labor based on expertise.
74) About 20 percent of downsized corporate managers have become entrepreneurs.
75) Corporate downsizing has spawned a generation of entrepreneurs known as "corporate
castoffs."
76) Because they have college degrees, a working knowledge of business, and years of
management experience, both corporate castoffs and corporate dropouts who become
entrepreneurs will most likely increase the small business survival rate.
77) Discuss the role that the following groups are playing in leading the ongoing surge in
entrepreneurial activity:
∙ women
∙ minorities
∙ immigrants
∙ part-time entrepreneurs
∙ home-based entrepreneurs
∙ family businesses
∙ copreneurs
∙ corporate castoffs
∙ corporate dropouts
78) Of the 28.8 million businesses in the United States, more than ________ percent are
considered small.
A) 50
B) 75
C) 88
D) 99
79) According to the U.S. Small Business Administration, a common delineation of a small
business is one that employs fewer than ________ people.
A) 50
B) 100
C) 250
D) 500
80) The nation's small businesses ________.
A) employ more than 48 percent of the nation's private sector workforce
B) create more jobs than do big businesses
C) account for 47 percent of business sales
D) All of the above
81) Small companies ________.
A) created fewer jobs than big companies in the last decade
B) are concentrated in the manufacturing and retail sectors
C) are the leaders in offering training and advancement opportunities to workers
D) account for approximately 10 percent of the nation's GDP and 25 percent of business sales
82) The majority of small companies are concentrated in the ________ and ________ industries.
A) manufacturing; retail
B) manufacturing; service
C) retail; service
D) wholesale; retail
83) Research shows that the top-performing ________ percent of small companies create 67
percent of the net new jobs in the economy.
A) 90
B) 80
C) 5
D) 10
84) The young, job-creating small companies are known as ________.
A) "assertive"
B) "antelopes"
C) "aggressive"
D) "gazelles"
85) Small companies are incubators of new sales ideas, products and services and create
________ times more patents per employee than large companies.
A) 3
B) 5
C) 10
D) 16
86) "Gazelles" are those businesses that grow at 20 percent or more per year for four years and
gross at least $100,000 in annual sales.
87) Small companies have created at least two-thirds of the net new jobs in the U.S. economy.
88) Small businesses actually create more jobs than the number of jobs big businesses create.
89) Large companies create significantly more patents and other forms of innovations per
research and development dollars spent than small firms.
90) Because of their size and limited resources, small businesses rarely create innovations that
are important to the U.S. economy.
91) About 75 percent of the businesses in the U.S. can be considered "small" businesses.
92) The primary cause of small business failure is lack of capital.
93) Entrepreneurs realize that failure is a possibility, but are not paralyzed by that fear.
94) Discuss the impact of small businesses on the U.S. economy, including sales, GDP, job
creation, and innovation.
95) One hallmark of successful entrepreneurs is the ability to ________.
A) be willing to gamble
B) fail intelligently
C) overlook past successes
D) repeat the same mistake
96) About 52 percent of new businesses fail within five years.
97) The following lists the ten deadly mistakes of entrepreneurship:
1. Management mistakes
2. Lack of experience
3. Poor financial control
4. Weak marketing efforts
5. Failure to develop a strategic plan
6. Uncontrolled growth
7. Poor location
8. Improper inventory control
9. Incorrect pricing
10. Inability to make the entrepreneurial transition
Select one of these deadly mistakes, describe what it may look like for the entrepreneur, and give
an example.
98) Describe the small business failure rate. What are the primary causes of business failures,
and what steps can an entrepreneur take to avoid becoming a business failure statistic?
99) John has come to you for advice on starting a business venture. He wants to know the best
way to gain the experience he'll need. You suggest that he ________.
A) read a small business book
B) seek knowledge and experience in the field he wishes to enter
C) determine his weaknesses and return to school for a term or two
D) just jump in and learn as he goes
100) Most startup companies can expect to need ________ capital than they anticipate.
A) less
B) the same
C) more
D) within 10% of the
101) The primary cause of small business failures is ________.
A) the lack of capital
B) management mistakes
C) poor location
D) improper inventory control
102) Entrepreneurs tend to be overly ________ and commonly misjudge the ________
requirements of going into business.
A) optimistic; personal
B) optimistic; financial
C) pessimistic; financial
D) optimistic; professional
103) The only people who ________ are those who never do anything or never attempt anything
new.
A) succeed
B) prosper
C) profit
D) fail
104) Which of the following was not identified as one of the suggestions for small business
success?
A) Develop a business plan as you grow your business.
B) Manage your financial resources and understand financial statements.
C) Know your business in depth.
D) Learn to manage people successfully.
105) Which of the following is/are true regarding business plans?
A) Provide a pathway to success.
B) Allow entrepreneurs to replace faulty assumptions with facts before making the decision to go
into business.
C) Create a benchmark against which entrepreneurs can measure actual company performance.
D) All of the above
106) Most entrepreneurs believe that ________ is what matters most, but ________ is the most
important financial resource for a small business owner.
A) cash; profit
B) profit; cash
C) profit; inventory
D) inventory; cash
107) Entrepreneurs can increase their chances for success if they ________.
A) know their business in depth and develop a solid business plan
B) manage their financial resources and understand financial statements
C) learn to manage people and keep in touch with how they react to stress and balance their
health needs with the needs of the business
D) All of the above
108) Most entrepreneurs have invested the time to develop a sound business plan.
109) Too many entrepreneurs start their business undercapitalized.
110) The faster a small company grows, the greater its appetite for cash.
111) To boost sales, small businesses, especially start-ups, should grant credit to anyone who
wants to buy their products or services.
112) As an entrepreneur, you are always working for someone else — your customers.
113) Establishing prices that will generate the necessary profits means that business owners must
understand how much it costs to make, market, and deliver their products and services.
114) If an entrepreneur has a good enough product or service to sell, a business plan is not really
necessary since the product or service will sell itself.
115) Successful entrepreneurs recognize that their most valuable asset is their time, and they
learn to manage it effectively to make themselves and their companies more productive; having
passion about their businesses, products, and customers enables them to stay motivated.
116) Expanding a business usually requires no significant changes in structure or business
practices.
Mini Case 1-1: Hudson's Dilemma
Bill Hudson was a real craftsman when it came to being a machinist. Bill had learned almost all
that he knew from Hugo Huffman, his first and only employer. Bill Hudson was married and had
three young children. He was 33 years old and had worked for Hugo ever since he finished his
tour in the Army. In 12 years, Bill had polished his skills under the watchful and critical eye of
Hugo Huffman. Hugo was quick to recognize Bill's talent for the trade. Bill had a positive
attitude about learning and displayed a drive for perfection that Hugo admired.
Hugo's Machine Shop was a successful small business. Its success was based mostly on the
reputation for quality that had been established over its 42 years in operation. Hugo had come to
this country with his new wife, Hilda, when he was in his late twenties. Now the business was a
success, but Hugo remembered the early years when he and Hilda had to struggle. Hugo wanted
the business to continue to produce the highest quality craftsman products possible. On a Friday
evening, he called Bill into his office at closing time, poured him a cup of half-day-old coffee,
and began to talk with him about the future.
"Bill, Hilda and I are getting old and I want to retire. It has been 42 years of fun but these old
hands need a rest. In short, Hilda and I would like you to buy the business. We both feel that
your heart is in this craft and that you would always retain the quality that we have stood for."
Bill was taken back by the offer. He, of course, knew Hugo was getting older, but had no idea
Hugo would retire. Bill and his wife, Anna, had only $4,200 in the bank. Most of Bill's salary
went for the normal costs of rearing three children. Hugo knew Bill did not have the money to
buy the business in cash, but he was willing to take a portion of the profits for the next 15 years
and a modest initial investment from Bill.
Bill had, for the past four years, made most of the technical decisions in the shop. Bill knew the
customers and was well respected by the employees. He had never been involved in the business
side of the operation. He was a high school graduate but had never taken business courses. Bill
was told by Hugo that even after deducting the percentage of the profits he would owe under the
sales agreement, he would be able to almost double his annual earnings. Bill would have to take
on all the business functions himself because Anna had no business training either.
117) What steps should Bill take to avoid the pitfalls common to a small business?
