Entrepreneurship, 3e (Bamford)
Chapter 3 Business Idea Generation and Initial Evaluation
1) A person’s past work experience is a source of skills and ideas for new businesses.
2) Entrepreneurs must quickly react to any business opportunities they identify to maximize their
gains.
3) The generation of ideas for new businesses often occurs spontaneously and automatically.
4) The process of generating new business ideas is something that occurs automatically.
5) The first step in developing a quality business idea is to analyze the market.
6) Potential entrepreneurs often overlook family experiences as a source of knowledge and skills.
7) A small business owner must have the necessary skills to operate a business, and he or she must
also clearly understand the marketplace.
8) A new business owner could easily become frustrated if he or she has no passion for the
business he or she has decided to start.
9) A person who is passionate about a hobby might be able to turn that hobby into a successful
business.
10) A rule of thumb in the founding of businesses has always been that an owner whose business is
both a vocation and an avocation is difficult to beat.
11) A gap analysis identifies any differences between the demand by customers and the supply
provided by firms currently in the market.
12) Assume that an opportunity exists in northern Minnesota. A customer needs a “hand warmer”
packet. Mary, a new business owner, decides she has the ability to address this gap because she
knows how to produce hand warmer packets. This process is called gap analysis.
13) Brainstorming is a creative process in which a group of individuals are brought together and
asked to generate ideas related to a specific topic or problem.
14) When brainstorming, the true potential for each idea is often fully evaluated before the process
moves onto generating the next one.
15) Gap analysis involves identifying an opportunity between the demand for a product or service
and the availability of the product or service that you can buy from vendors to be resold to your
customers.
16) One way to identify a gap in the marketplace is to examine trends around the region, nation, or
world that may not yet have reached your geographic location.
17) A good way to generate new business ideas is to think about the things that frustrate you or
cause you problems and then identify solutions.
18) Some small business owners find a patent, and then get permission from the owner to develop
marketable products based on it.
19) When a potential business owner has several ideas for a business, he or she needs to identify
one on which to perform a due diligence analysis.
20) When performing a gap analysis, an entrepreneur must describe business ideas in detail in the
first column.
21) A gap analysis identifies potential gaps in a market, but it does not provide individuals with the
capability to fill those gaps.
22) The first column in a gap analysis is devoted to various business ideas.
23) The second column in a gap analysis is devoted to listing the market need.
24) The third column in a gap analysis is where the potential owner should provide a realistic
estimation of his or her present resources.
25) The fourth column in a gap analysis is used to list the resources required for the successful
operation of a business.
26) The last column of a gap analysis is used to list the categories that are used to analyze each
idea.
27) Qualitative gap analysis charts require extensive research into markets and business practices
to complete.
28) The threats to sales generation schemes refer to an organization not being able to generate
sufficient sales required to make it profitable.
29) Threats to operational financing states that there are a number of obstacles to a new venture in
obtaining the necessary financing for its growth.
30) Firms that have low initial capitalization have an opportunity to grow faster.
31) While developing a quality business idea, what should potential business founders ideally do
after evaluating their personal skill sets?
A) Interview successful entrepreneurs to generate business ideas
B) Brainstorm for potential business ideas with family
C) Propose a business idea to potential investors
D) Carefully analyze the market and look for a gap
32) In the context of generating new ideas, which of the following is an example of a personal
hobby developed into a business venture?
A) A sports card collector becomes a dealer who specializes in the trade of rare and valuable
trading cards.
B) A plumber opens a new business that sells piping coated in special anticorrosive paint.
C) A web designer decides to invest in a firm that produces security software.
D) A baker decides to involve various members of his family in the operation of his baking
business.
33) Successful new business ideas can come from
A) books and magazines.
B) an individual’s background.
C) hobbies.
D) all of these.
34) Identify a true statement about the process of generating business ideas.
A) Potential business owners must now become personally involved in their new ventures, and
they should look at it as a purely financial endeavor.
B) Individuals should quickly exploit opportunities they identify before competitors can identify
the same gaps.
C) Entrepreneurs should limit themselves to generating business ideas based on their education
and work experience.
D) After analysis, the opportunity identified might be very different from the business idea initially
conceived.
35) Before establishing a new business, the first thing founders should do is
A) analyze the market.
B) list their personal skill sets.
C) obtain financial support.
D) hire a lawyer.
36) A small business owner must possess all of the following EXCEPT
A) necessary skills to run the business.
B) an in-depth understanding of the market.
C) passion for starting a business.
D) a sequential formula.
37) Potential owners should examine all of these specific areas before choosing a business idea
EXCEPT
A) work experience.
B) financial history.
C) education.
D) family history.
38) The founders of a small business need to be involved in which of the following tasks when
starting the new business?
A) Design
B) Funding
C) Operating
D) All of these
39) ________ is defined as the connection between an entrepreneur’s skills, understanding of an
industry, and the ability to create a competitive advantage such that the sum of the parts of the new
business is greater than the individual parts alone.
A) Gap analysis
B) Brainstorming
C) Opportunity analysis
D) Synergy
40) Which of the following experiences can entrepreneurs evaluate when generating business
ideas based on their education?
A) The courses they took that were particularly enjoyable
B) The most difficult material in the courses they took
C) The classmates who made their experience enjoyable
D) The professors whose teaching they enjoyed the most
41) Identify a true statement about the potential founder of a new business.
A) The founder of a new business needs to be intimately involved in its designing, funding, and
running.
B) An individual who wishes to start a new business should not confine himself or herself to
generating ideas based on skills he or she already has.
C) An entrepreneur must avoid involving his or her family in a new venture, because such a
partnership has a negative impact on the running of the business.
D) An entrepreneur must quickly act on any opportunity he or she identifies to maximize profits.
42) What term is used to describe the process of systematically examining the difference between
what is expected and what occurs?
A) Economic analysis
B) Gap slack analysis
C) Difference analysis
D) Gap analysis
43) A type of analysis that examines opportunities in the marketplace compared to the individual’s
ability to address those gaps is called
A) opportunity analysis.
B) difference analysis.
C) market analysis.
D) customer analysis.