Entrepreneurship: Successfully Launching New Ventures, 5e, Global Edition
(Barringer/Ireland)
Chapter 6 Writing a Business Plan
1) TempoRun, the company profiled in the opening feature of Chapter 4, makes an iPhone app
that syncs the songs on a user’s phone with his or her running pace. In 2013, the founders won a
business plan competition that they later characterized as Shark Tank times 10. The judges were
executives and well-known entrepreneurs from companies like Google, Square, and TechStars.
The competition was ________.
A) Student Startup Madness held at the South by Southwest Festival in Austin, Texas
B) CES Student Pitch Day held at the Consumer Electronics Show in Las Vegas, Nevada
C) Student Startup Weekend held in Portland, Oregon
D) World Student Pitch Event held at the United Nations in New York, New York
E) California Cup Student Pitch Event sponsored by the City of Los Angeles, California
2) Peter Watson is thinking about launching a small business consulting company. To get advice
on how to proceed, he stopped by his local Small Business Administration (SBA) office. The
SBA advisor told Peter that one of the first things he needs to do is to sit down and write a 25 to
35 page narrative that describes what his new business plans to accomplish and how it plans to
accomplish it. The SBA advisor is telling Peter to write a(n) ________.
A) tactical plan
B) marketing plan
C) operations plan
D) business plan
E) feasibility analysis
3) Which of the following is the main purpose for writing a business plan?
A) The plan helps the company develop a “road map” to follow.
B) The plan introduces potential investors and other stakeholders to the business opportunity.
C) Both A and B are equally important.
D) Neither A nor B captures the true purpose of a business plan.
E) Reason A is the most important for experienced entrepreneurs and reason B is the most
important for inexperienced entrepreneurs.
4) According to the textbook, a business plan is best described as a(n) ________.
A) narrative description of a new business
B) contract
C) budget
D) agreement
E) marketing initiative
5) According to the textbook, a 2010-2012 study of 350 entrepreneurs found that of those that
had successful exist, only about ________ started with a business plan
A) 10 percent
B) 15 percent
C) 20 percent
D) 30 percent
E) 40 percent
6) A business plan is important as it forces the founding team to systematically think through
every aspect of their new venture and ________.
A) it is a budget
B) it is a public relations document that can be used to promote the firm
C) it is a contract that is signed by the founders of the firm
D) it is a financial analysis
E) it communicates the merits of a new venture to outsiders, such as investors and bankers
7) A commercialization plan is a written narrative that describes what a new business plans to
accomplish and how it plans to accomplish it.
8) According to studies citied in the book, a large percentage of entrepreneurs write business
plans for their ventures.
9) For most new ventures, the business plan is a dual-purpose document used both inside and
outside the firm.
10) A business plan can usually be completed in one to three days.
11) Which of the following statements is incorrect about business plans?
A) Writing a business plan forces a firm’s founders to systematically think through each aspect of
their new venture.
B) For most new ventures, the business plan is a dual-purpose document used both inside and
outside the firm.
C) A business plan is typically 25 to 35 pages long.
D) A large percentage of entrepreneurs do not write business plans for their new ventures.
E) The business plan should be written while the feasibility analysis is being completed.
12) The document that does the best job of introducing potential investors and other stakeholders
with the business opportunity the firm is pursuing and how it plans to pursue it is the ________.
A) business plan
B) feasibility analysis
C) opportunity analysis
D) industry analysis
E) marketing plan
13) The two primary audiences for a business plan are ________ and ________.
A) a firm’s employees; officials with the SEC
B) a firm’s customers; its competitors
C) investors; other external stakeholders and public relations firms
D) officials with the SEC; public relations firms
E) a firm’s employees and investors; other external stakeholders
14) The two primary audiences for a business plan are investors and other external stakeholders
and ________.
A) officials with the SEC
B) a firm’s employees
C) a firm’s competitors
D) a firm’s customers
E) public relations firms
15) Which of the following is not an individual, group or institution that normally reads a
company’s business plan?
A) Board of directors
B) Potential alliance partners and major customers
C) State and local government officials
D) Key recruits for jobs with the new firm
E) Rank-and-file employees
16) Which of the following is not a recommended guideline for writing a business plan?
A) To make the best impression, a business plan should follow an unconventional structure and
stand out in some dramatic way.
B) A business plan needs to project a sense of anticipation and excitement about the possibilities
that surround a new venture.
C) For most plans, 25 to 35 pages is sufficient.
D) A business plan should look sharp, but not a lot of money should be spent on the physical
appearance of the plan.
E) Shy away from using a lot of boldfaced type, italics, clip art, and different font sizes and
colors when preparing a business plan.
17) The two primary audiences for a firm’s business plan are a firm’s employees and investors
and other external stakeholders.
18) What are the two main reasons for writing a business plan?
19) Which of the following is not one of the “red flags” listed in the textbook that raises
questions about one of more aspects of a company’s business plan?
A) Founders with none of their own money at risk
B) Defining the market size too narrowly
C) A poorly cited plan
D) Sloppiness in any area
E) Overly aggressive financials
20) Which of the following is one of the “red flags” listed in the textbook that raises questions
about one or more aspects of a company’s business plan?
A) Takes several days or weeks to complete
B) Founders that have their own money at risk
C) Defining the market size too broadly
D) Less than 50 pages long
E) Directed towards both an external and an internal audience
21) To make the best impression, a business plan should follow a ________.
A) conventional structure for companies with standard business models and a nonconventional
structure for firms with disruptive business models
B) conventional structure for manufacturing firms and a nonconventional structure for service
firms
C) conventional structure
D) nonconventional structure
E) nonconventional structure for manufacturing firms and a conventional structure for service
firms
22) For most business plans ________ pages are sufficient.
A) 40 to 50
B) 30 to 40
C) 15 to 20
D) 25 to 35
E) 5 to 10
23) The three types of business plans are ________.
A) functional business plan, full business plan, feasibility plan
B) summary business plan, contingency plan, full business plan
C) functional business plan, contingency plan, full business plan
D) opportunity plan, feasibility plan, full business plan
E) summary business plan, full business plan, operational business plan
24) Sarah Parks is in the very early stages of putting together a business startup, and is thinking
about writing a business plan to request funds to conduct a feasibility analysis and write a more
complete business plan. What type of business plan should Sarah write at this point?
A) Full business plan
B) Tactical business plan
C) Summary business plan
D) Operational business plan
E) Strategic business plan
25) A(n) ________ business plan, which is typically 25 to 35 pages long, works best for new
ventures who are at the point where they need funding or financing.
A) tactical
B) strategic
C) summary
D) full
E) operational
26) A(n) ________ business plan, which is intended to be a blueprint for a company’s operations,
is 40-100 pages long and is meant primarily for an internal audience.
A) operational
B) full
C) deliberate
D) summary
E) tactical
27) Kevin Andrews has decided to write a business plan that is intended to be read primarily by
his staff, which will present a blueprint for his company’s entire operation and will provide
guidance to operational managers. Kevin should write a(n) ________ business plan.
A) operational
B) tactical
C) strategic
D) summary
E) functional
28) Which of the following business plans matches with its appropriate length?
A) Operational business plan – 10-15 pages
B) Full business plan – 25-35 pages
C) Summary business plan – 25-35 pages
D) Full business plan – 40-100 pages
E) Operational business plan – 25-35 pages
29) Which of the following business plans matches with its appropriate emphasis?
A) Summary business plan – works best for companies who are at the point where they need
funding or financing; serves as a “blueprint” for the company’s operations
B) Operational business plan – works best for companies in the early stages of development that
want to “test the waters” to see if investors are interested in their idea
C) Full business plan – works best for companies in the early stages of development that want to
“test the waters” to see if investors are interested in the idea
D) Summary business plan is meant primarily for an internal audience – works best as a tool for
creating a blueprint for a company’s operations and providing guidance to operational managers
E) Summary business plan – works best for companies in the early stages of development that
want to “test the waters” to see if investors are interested in their idea
30) To make the best impression, a business plan should follow a conventional structure.
31) For most business plans, 25 to 35 pages are sufficient.
32) According to the textbook, the executive summary is arguably the most important section of
the business plan.
33) The executive summary is a lengthy overview of the entire business plan.
34) A company’s industry analysis and target market analysis are usually included in the same
section of its business plan.
35) Fragmented industries are more receptive to new entrants than industries that are dominated
by a handful of large firms.
36) A tagline is a phrase that a business uses to reinforce its position in the marketplace.
37) A competitor analysis, which is a detailed analysis of a firm’s competitors, should be
included in the market analysis section of its business plan.
38) The major revenue drivers, which are the ways a business earns money, should be first
identified in “The Economics of the Business” section of the business plan.
39) A firm’s operating leverage is an analysis of its debt versus its equity.
40) The management team and company structure section of a business plan is one of the lesser-
read sections.
41) An organizational chart is a graphic representation of how authority and responsibility are
42) A sources and uses of funds statement is a document that lays out specifically how much
money a firm needs, where the money will come from, and what the money will be used for.
43) The pro forma financial statements are the heart of the operations section of a business plan.
44) There is an emerging school of thought that opposes the idea of writing a business plan and
advocates experimentation and trial-and-error learning gleaned through customer feedback and
formal planning. How does the approach to writing a business plan described in this book differ
from this philosophy? How does trial-and-error learning figure into the approach to writing a
business plan advocated in this book?
45) The ________ is a short overview of the entire business plan.
A) summary statement
B) executive summary
C) managerial review
D) founder’s introduction
E) abstract
46) Which of the following statements is incorrect regarding the executive summary of a
business plan?
A) It is a short overview of the entire business plan.
B) In many instances an investor will first ask for a copy of a firm’s executive summary and will
request a copy of the full business plan only if the executive summary is sufficiently convincing.
C) It is arguably the most important section of the business plan.
D) It should not exceed two single-spaced pages.
E) The executive summary is the first thing that should be written in preparing a business plan.
47) Melanie Summer spoke to an investor who is interested in her business idea. Melanie offered
to send the investor a copy of her full business plan, but the investor asked for a short overview
of the business plan instead. What portion of her business plan should Melanie send the investor?
A) Marketing plan
B) Executive summary
C) Elevator pitch
D) Company description
E) Operations plan
48) According to the textbook, in many instances an investor will first ask for a copy of a firm’s
________ and will request a copy of the full business plan only if that portion of the plan is
sufficiently convincing.
A) appendix
B) industry analysis
C) operations plan
D) financial plan
E) executive summary
49) The Savvy Entrepreneurial Firm feature in Chapter 6 focuses on three companies: Songkick,
GrubHub, and Instagram. The overarching point of the feature is ________.
A) most business plans require major changes after the business is launched and the founders
start getting customer feedback
B) the degree to which business plans pan out as their founders envisioned varies
C) most business plans require only minor changes after the business is launched and the
founders start getting customer feedback
D) the most effective business plans take four to eight weeks to complete
E) most business plans are quickly discarded after the business is launched
50) Which of the following statements is incorrect regarding the industry analysis portion of a
firm’s business plan?
A) It is important to focus simultaneously on a business’s industry and its target market.
B) Industry structure refers to how concentrated or fragmented an industry is.
C) Most industries have 6 to 10 key success factors that should be reported in the industry
analysis.
D) Industry trends, which include both environmental and business trends, should be discussed.
E) The industry analysis should conclude with a brief statement of your beliefs regarding the
long-term prospects for the industry.
51) A company’s mission statement should be placed in the ________ section of its business
plan.
A) marketing plan
B) management team and company structure
C) company description
D) market analysis
E) industry analysis
52) Industry structure refers to how ________ an industry is.
A) concentrated or fragmented
B) traditional or progressive
C) innovative or conservative
D) hierarchical or flat
E) large or small
53) A(n) ________ statement describes why a company exists and what it aspires to become.
A) tactical
B) values
C) mission
D) operations
E) strategic
54) A(n) ________, in a business plan context, is a noteworthy event in the past or future
development of a business.
A) aspiration
B) intention
C) signpost
D) milestone
E) target
55) The ________ section of a business plan breaks the industry into segments and zeroes in on
the specific segment (or target market) to which the firm will try to appeal.
A) competitive analysis
B) current status
C) market analysis
D) marketing plan
E) operations plan
56) A competitor analysis should be included in the ________ section of a business plan.
A) market analysis
B) industry analysis
C) company description
D) management team and company structure
E) operations plan
57) The Partnering for Success feature in Chapter 4 focuses on the types of partnerships that are
common in business plans. According to the feature, businesses often make partnering an
essential part of their business plans because they ________.
A) want to obtain a key customer
B) want to increase their visibility
C) want to reduce risk
D) want to appear legitimate
E) have limited resources
58) The ________ section of the business plan addresses the basic logic of how profits are
earned in the business.
A) economics of the business
B) operations plan
C) executive summary
D) design and development plan
E) market analysis
59) Operating leverage is highest in companies that have ________.
A) a service rather than a manufacturing emphasis
B) virtually no fixed costs
C) equal variable and fixed costs
D) a high proportion of variable costs relative to their fixed costs
E) a high proportion of fixed costs relative to their variable costs
60) Which of the following statements is incorrect regarding the marketing plan section of a
business plan?
A) The marketing plan focuses on how the business will market and sell its product or service.
B) The two most important items to include in a marketing plan are (1) overall marketing
strategy and (2) the nuts and bolts of marketing a firm’s product in terms of product, price,
promotion, and place.
C) The best way to describe a company’s marketing plan is to begin by talking about its
competitors.
D) A firm’s marketing strategy refers to its overall approach for marketing its products and
services.
E) A firm’s overall approach to marketing typically boils down to how it positions itself in its
market and how it differentiates itself from its competitors.
61) A computer-generated image of an invention that displays the invention as a 3D model that
can be viewed from all sides and rotated 360 degrees is called a(n) ________.
A) virtual prototype
B) concept visualization
C) abstract prototype
D) virtual design
E) usability test
62) A prototype is ________.
A) a form of opportunity recognition
B) a tool for evaluating the industry a new firm plans to enter
C) a financial model
D) the first physical depiction of a new product
E) a tool for evaluating the organizational prowess of a new firm
63) What section of the business plan deals with the day-to-day operations of a company?
A) Financial plan
B) Marketing plan
C) Operations plan
D) Industry analysis
E) Executive summary
64) The facilities and equipment that a business needs should be described in the ________
section of its business plan.
A) marketing plan
B) management team and company structure
C) company description
D) market analysis
E) operations plan
65) According to the textbook, many investors and others who read business plans look first at
the executive summary and then go directly to the ________ section of the business plan to make
their preliminary assessment.
A) management team and company structure
B) product (or service) design and development plan
C) industry analysis
D) marketing plan
E) operations plan
66) A(n) ________ is a graphic representation of how authority and responsibility are distributed
within a company.
A) organizational chart
B) personnel chart
C) human resources chart
D) administrative chart
E) directional chart
67) The document that lays out specifically how much money a firm needs, where the money
will come from, and what the money will be used for is referred to as a(n) ________.
A) sources and uses of funds statement
B) assumptions sheet
C) pro forma financial statement
D) credit and debit statement
E) capital and operational budgeting statement
68) Kate Payne was reading the business plan for New Venture Fitness Drinks, and noticed that
prior to its financial statements, New Venture Fitness Drinks placed an explanation of the
sources of the numbers for the statements and the assumptions used to generate them. This
explanation is called a(n) ________.
A) estimate sheet
B) hypothesis sheet
C) assumptions sheet
D) forecast sheet
E) forecast hypothesis
69) According to the textbook, the ________ are the heart of the financial section of a business
plan.
A) financial ratios
B) pro forma financial statements
C) budgets
D) sources and uses of funds statements
E) break-even analyses
70) Most business plan writers interpret or make sense of a firm’s historical and/or pro forma
financial statements through ________ analysis.
A) ratio
B) assumptions
C) scenario
D) proportion
E) relative
71) What is an “executive summary?” Why is the executive summary often called the most
important part of a business plan?
72) Why is the “management team and company structure” section of the business plan often
given disproportionate weight among investors?
73) According to the textbook, the first rule in making an oral presentation is to ________.
A) follow instructions
B) be creative
C) emphasize all the positive aspects of a business venture
D) appear confident
E) do something out of the ordinary
74) The first rule in making oral presentations is to follow instructions.
75) What is a business plan?