Chapter 9—Proof of Concept: A New Approach to Business Plans
TRUE/FALSE
1. Somewhere in the micro strategy process, the business is actually launched in a small, controlled way.
2. POC tests involve field work with the customer.
3. Submitting a professionally crafted business plan is less important than making it clear what the
entrepreneur has accomplished in the way of starting the business.
4. The strongest product POC is a working prototype.
5. A feasibility study and a business plan are essentially the same.
6. Building a POC prototype reduces the risk of failure and clarifies customer needs.
7. Investors tend to look for technology-driven companies rather than market-driven companies.
8. A highly focused executive summary and pitch presentation are best developed from a completed
business plan.
9. The executive summary of the business plan should be no more than two pages long.
10. As long as the market is growing, it is more important that the entrepreneur is solving a critical pain
with a value proposition the customer quickly understands.
MULTIPLE CHOICE
1. A ____ depends on a feasible business model that has been market-tested and is reliable.
a.
feasibility study
b.
marketing plan
c.
business plan
d.
micro strategy
e.
POC
2. The new environment for business planning makes the case for the importance of a feasibility study
and ____ to prove the concept and enable the founding team to launch the venture before completing
the formal business plan.
a.
micro strategies
b.
marketing plan
c.
POC
d.
executive summary
e.
prototype
3. A good way to test a new concept in the marketplace is through a ____.
a.
feasibility study
b.
marketing plan
c.
business plan
d.
market test
e.
business test
4. A ____ is simply evidence that a technology, product, business model, or idea is feasible.
a.
prototype
b.
marketing plan
c.
business plan
d.
proof of concept
e.
feasibility study
5. Entrepreneurs typically face two types of POC: the technology or product POC, and the ____ POC.
a.
prototype
b.
marketing
c.
business plan
d.
operations
e.
business model
6. The ____ for POC consists of three primary elements: outcomes, assets, and actions.
a.
prototype
b.
micro strategy
c.
business plan
d.
feasibility test
e.
executive summary
7. The micro strategy process repeats itself over and over again and with each successful outcome, the
new business is moved toward a complete ____.
a.
prototype
b.
proof of concept
c.
business plan
d.
feasibility test
e.
executive summary
8. To avoid ____, the team needs to change its angle of vision by looking at the situation in a new way
and then testing alternative hypotheses.
a.
contingency planning
b.
relying on intuition
c.
pattern recognition bias
d.
excessive optimism
e.
None of these choices
9. A ____ will tell the entrepreneur whether people are interested in the product/service and prove that
it’s worth the time and money to build out a more elaborate site.
a.
virtual store
b.
website
c.
beta site
d.
virtual prototype
e.
None of these choices
10. Anyone investing in a new venture has four principal concerns: rate of growth, return on investment,
____ and ____.
a.
degree of risk / protection
b.
cash flow / degree of risk
c.
founding team / protection
d.
balance sheet / income statement
e.
assets / equity
11. ____ are primarily interested in the company’s margins and cash flow projections.
a.
Bankers/lenders
b.
Suppliers/creditors
c.
Customers/stakeholders
d.
Investors
e.
Strategic partners
12. So that entrepreneurs do not have to incur the tremendous cost of purchasing equipment for a
manufacturing plant, they may ____.
a.
acquire stakeholders
b.
purchase suppliers
c.
form a strategic alliance
d.
downsize their operations
e.
change their strategy
13. Which of the following is not a flaw that investors commonly find in business plans?
a.
Overly optimistic projections
b.
Lack of enthusiasm
c.
Too much hype
d.
Poor explanation of the business model
e.
No demonstration of customer demand
14. Today most investors want to see a well-written ____ that tells a compelling story and grabs their
interest.
a.
business plan
b.
elevator speech
c.
executive summary
d.
proof of concept
e.
marketing plan
15. An executive summary should demonstrate a clear link between the ____ and the ____.
a.
customer / market
b.
founder / team
c.
return on investment / cash flow
d.
pain / solution
e.
None of these choices
16. ____ is created when the business is adequately capitalized and has highly regarded investors, an
experienced management team, customers, a unique technology, product, or service, the ability to
continually innovate, and a rapidly expanding market.
a.
Value
b.
Income
c.
Cash flow
d.
Equity
e.
None of these choices
17. Entrepreneurs should keep in mind that the purpose for doing a/an ____ is to sell the business.
a.
prototype
b.
executive summary
c.
feasibility analysis
d.
business plan
e.
None of these choices
18. Once the new venture has passed the startup stage, additional value is created by ____.
a.
bankers/lenders
b.
suppliers/creditors
c.
significant customers
d.
low return on equity
e.
investors
19. Which section of the business plan details features and benefits as well as the plan for prototyping and
testing?
a.
Industry/market analysis
b.
Operations plan
c.
Marketing plan
d.
Product/service plan
e.
None of these choices
20. The ____ plan focuses on issues related to processes the venture will own and outsource, as well as
where it will get its raw materials, and what type and quantity of labor will be required.
a.
operations
b.
marketing
c.
financial
d.
growth
e.
industry
21. The ____ plan specifies the legal form of organization that the venture will take, whether that be sole
proprietorship, partnership, LLC, or corporation.
a.
operations
b.
marketing
c.
financial
d.
organization
e.
industry
22. A financially healthy company will see its major source of ____ coming from operating sources, such
as sales.
a.
cash inflows
b.
cash outflows
c.
profit
d.
equity
e.
assets
23. The ____ gives information about the projected profit or loss status of the business for a specified
period of time.
a.
balance sheet
b.
statement of cash flows
c.
current ratio
d.
profit margin
e.
income statement
24. The ____ is different from the other financial statements in that it looks at the financial health of the
business at a single point in time.
a.
balance sheet
b.
statement of cash flows
c.
current ratio
d.
profit margin
e.
income statement
25. The higher the ____, the more liquid the company is and the more easily these assets can be converted
to cash to pay off short-term obligations.
a.
return on investment
b.
inventory turnover
c.
current ratio
d.
profit margin
e.
income statement
26. Which ratio uses net income and net sales from the income statement to give the percentage of each
dollar of sales remaining after all costs of normal operations are accounted for?
a.
Return on investment
b.
Inventory turnover
c.
Current ratio
d.
Profit margin
e.
Income statement
27. The ____ plan reflects recognition that sometimes the “best laid plans” do not work the way you
intended.
a.
business
b.
production
c.
financial
d.
contingency
e.
media
28. The section of the business plan that presents the strategy that will be used to ensure that the business
is sustainable and continues to scale over its life is included in the ____.
a.
financial plan
b.
growth plan
c.
marketing plan
d.
contingency plan
e.
production schedule
29. Which of the following is not a principal concern of investors?
a.
Rate of growth
b.
Return on investment
c.
Degree of risk
d.
Market analysis
e.
Protection
30. Which of the following is not a concern for lenders when they consider an entrepreneur for a loan?
a.
The amount of money that is needed
b.
The kind of positive impact the loan will have on the business
c.
The number of strategic partners the venture has
d.
The kinds of assets the business has for collateral
e.
How the business will repay the loan
SHORT ANSWER
1. What are the four principal concerns of investors?
2. What are the primary concerns of bankers/lenders when considering a business plan?
3. Briefly describe a compelling executive summary and pitch.
4. What questions should be answered to create a compelling executive summary?
5. What are the most common mistakes that entrepreneurs make in developing a business plan?
6. What are the components of the business plan?
7. How does an entrepreneur benefit from a proof of concept with a prototype?
8. Briefly outline the entrepreneur’s micro strategy for proof of concept.
9. Briefly discuss the elements of a successful business plan presentation.
10. Briefly discuss what the presentation team should be concerned about when responding to questions
from investors.
