57) A ________ is a descriptive fact about a product or service.
A) feature
B) product summary
C) benefit
D) None of the above
58) What is the synonym for capacity?
A) Capital
B) Cash flow
C) Collateral
D) Credit
59) What is the competitive test?
A) It evaluates the company’s relative position to its key competitors.
B) It identifies the competitors only.
C) It finds their address and phone numbers.
D) None of the above
60) Which statement is correct?
A) Lenders and investors are familiar with industry cost structures.
B) A lender’s main consideration in granting a loan is the reassurance that the applicant will
repay.
C) An investor’s major concern is earning a satisfactory rate of return.
D) All of the above
61) Which financial forecast should be realistic?
A) Pessimistic
B) Most likely
C) Optimistic
D) All of the above
62) Competitor’s analysis should identify:
A) Who are the company’s key competitors?
B) What are their strategies?
C) What images do they have in the marketplace?
D) All of the above
63) One effective documentation technique involves ________, in which entrepreneurs test their
business models on a small scale before committing serious resources to a business.
A) forecasting
B) business prototyping
C) collateral
D) None of the above
64) A well-prepared business plan helps determine the risks facing the venture.
65) The business plan has two essential functions; it helps the entrepreneur determine if the
business will succeed and it helps recruit management talent to run the new company.
66) The primary purpose of building a business plan is to raise capital.
67) Entrepreneurs who apply for loans without having prepared business plans are less likely to
get the money they need.
68) The quality of the entrepreneur’s business plan has little impact on the first impression
potential lenders and investors have of the company.
69) Often, the presence or absence of a quality business plan is a determining factor in a lender
or investor’s decision to put money into a business venture.
70) General requests for funds are likely to win approval.
71) An executive summary highlights the critical aspects of the plan.
72) Investors read business plans in such detail that the executive summary is nice to have but it
is optional.
73) The ideal business plan should be at least 100 pages long and somewhat hard to read in order
to demonstrate your thoroughness and to capture the venture capitalist’s attention.
74) The executive summary should summarize all of the relevant points of the proposed venture
and should be concise—no more than two pages.
75) The executive summary should highlight significant financial and operational events.
76) The business plan should cover key people, the opportunity, provide a business context, and
explain the risks and rewards involved.
77) The company history should explain why the company was formed, its past successes, and
its image in the marketplace.
78) Objectives are long-range, broad statements of what the company plans to accomplish in the
distant future.
79) Company goals address the question, “Why am I in this business?”
80) The industry analysis should cover existing profitability and anticipated profitability of firms
in the targeted market segment, and any significant entry or exit of firms.
81) Business strategy outlines how the owner plans to achieve business objectives in the face of a
competitive environment.
82) A feature is what a customer gains from a product.
83) The executive summary should be written first and should be a broad general discussion of
the business plan.
84) The “competitor analysis” section of the business plan is optional since few lenders and
investors are concerned about a small company’s rivals in the marketplace.
85) The business strategy section addresses how the firm will meet the key success factors
necessary for success.
86) When the entrepreneur describes the product in terms of what the customer gains through its
purchase and use, he/she is describing it in terms of its features.
87) Defining the target market is one of the hardest and most important things the entrepreneur
can do in the business plan.
88) Some feel the worst mistake an entrepreneur can make is to fail to define the target market.
89) In the marketing strategy portion of the business plan, the entrepreneur should explain the
promotional strategy, pricing strategy and distribution strategy.
90) How the product will be distributed should be explained in the plan of operation.
91) The focus of the “competitor analysis” section of the business plan should be demonstrating
how the company has an advantage over its competitors.
92) The business plan needs to address, in the management section, how important officers will
be encouraged to remain with the company.
93) Essential pieces of information for potential investors and lenders are the assumptions the
entrepreneur used to derive forecasts, projections, etc.
94) General requests for funds e.g., “working capital” are sufficient for most loan offices.
95) Entrepreneurs should artificially inflate the amount of a loan request and expect the loan
officer to “talk them down.”
96) A business plan’s financial forecasts should reflect the company’s ability to repay loans.
97) An entrepreneur should not include an exit strategy as a way to “cash out” for investors in the
initial plan.
98) A business plan should always have a cash flow projection.
99) Always tell the truth, even if it’s bad news, in the business plan.
100) The internal competitive test focuses on management’s ability to create a company that will
gain a competitive edge.
101) The reality test of a business plan is the explanation of how much of a return is expected,
and when investors can expect it.
102) The business plan presentation should be slow, methodical, and detailed to show the depth
of understanding and preparation the entrepreneur has gone to.
103) Regardless of how good the plan or its presentation, the entrepreneur should always be
prepared for questions when he/she presents the venture.
104) The entrepreneur should begin the presentation with an explanation of the opportunity, the
benefit to the investors, and what the new venture is.
105) In today’s financial climate, more banks are becoming the primary and often only source of
capital for new ventures.
106) A common reason cited by banks which reject small business loan applications is
“undercapitalization or too much debt.”
107) Most loans banks make to start-up businesses are not secured by collateral but by the
character of the entrepreneur.
108) Even though it is an intangible factor, the entrepreneur’s “character”—and the quality of the
presentation—are important factors in evaluating a loan proposal.
109) The conditions in the business environment have little influence on lenders’ decision to
invest in a business start-up.
110) While every business plan will be unique, there are several areas of information that should
be common to all good business plans.
111) A benefit is a descriptive fact about a product or service.
112) Business prototyping recognizes that every business idea is a hypothesis that needs to be
tested before an entrepreneur takes it to full scale.
113) Lenders and investors look for the experience, qualifications and age of the people who will
breathe life into the plan.
114) Lean startup is the process of rapidly developing simple prototypes to test key assumptions
by engaging real customers.
115) To summarize the presentation to each potential financial institution or investor, the
entrepreneur should write an executive summary. It should be concise—a maximum of four
pages—and should summarize all of the relevant points of the proposed deal.
116) The executive summary is a written version of what is known as “the elevator pitch.”
117) Executive summary is the broadest expression of a company’s purpose and defines the
direction in which it will move.
118) It is not necessary for the industry analysis to address the profitability of the businesses in
the targeted market segment.
119) Objectives are short-term, specific performance targets that are attainable, measurable, and
controllable.
120) A benefit is a descriptive fact about a product or service (e.g., “an ergonomically designed,
more comfortable handle”).
121) A benefit is what the customer gains from the product or service feature.
122) Why does the entrepreneur need to develop a business plan? What functions does it fulfill?
123) Outline the elements of the feasibility plan with a one to two sentence explanation of each
element.
124) What are the components of a successful business plan?
125) What should be included in the section on the firm’s product/service? How should the
product or service be described?
126) What are the primary steps to proving that a market exists in the market strategy section?
What should an effective market analysis include?
127) What financial data will lenders want to see in your financial section?
128) What are the three tests any business plan should be put to? Name and explain the purpose
of each.
129) Review the business plan process, outlining the important elements of the presentation.
130) What are the five Cs that creditors look for in the business plan? Name and explain each.
131) What information should be included in the executive summary? Outline the main points.