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The most effective business plans follow the "cookie cutter approach," following the
standard format most preferred by lenders and investors.
Narrower product lines, smaller customer bases, and more limited geographic areas
give small companies a natural advantage over large businesses when preparing a
strategic plan.
It is important that customers trust the Web sites they visit and one study reports that 89
percent of consumers worry about their privacy online.
Rapid prototyping, transforming an idea into an actual model, typically does not lead to
improvements in design.
The average loan in the SBA's Microloan Program is $100,000.
The most critical disadvantage of the sole proprietorship is ________.
A) the owner's unlimited personal liability
B) limited access to capital
C) lack of continuity
D) limited skills and abilities of the owner
The ________ is the percentage of visitors to the site who actually make a purchase and
the average is about ________ percent.
A) conversion rate; 1.28
B) bounce back rate; 3.21
C) conversion rate; 2.55
D) cost per acquisition; 3.29
In a Regulation D stock offering, the company ________.
A) sells its shares directly to private investors
B) makes a private placement without actually "going public"
C) does not have to register its shares with the SEC
D) All of the above
Entrepreneurs basically "borrow from themselves" by pledging their ________ as
collateral for the loans they receive in a ________.
A) business; commercial loan
B) business assets; home equity loan
C) home; home equity loan
D) big ticket items; floor loan
The Global Entrepreneurship Monitor reports that the average amount of capital that
entrepreneurs use to start small businesses is about ________.
A) $25,000
B) $50,000
C) $15,000
D) $100,000
A disadvantage of the corporate form of ownership is when profits are taxed at the
corporate rate and at the individual rate and this is referred to as ________.
A) double taxation
B) limited liability
C) double liability
D) single taxation
An estimated ________ percent of adults participate in social networks and the highest
level of participation is social media is among adults ________ 30 years of age.
A) 65; over
B) 73; under
C) 55; over
D) 55; under
The final aspect of the financial feasibility analysis combines the estimated earnings
and the capital requirements to determine the ________.
A) estimated earnings
B) total capital requirements
C) net profit
D) rate of return on the capital invested
The failure rate for franchises is ________.
A) higher than the average rate for new businesses
B) no different from the rate for new businesses
C) lower than the average rate for new businesses
D) indeterminable because of the Right to Privacy Act
Primary research data is less time consuming and less costly to gather than secondary
research data.
A quota is ________.
A) a duty or tax that a government puts on products that are imported into the country
B) the maximum amount of a product that can be imported into a country
C) a prohibition or suspension of foreign trade of specific imports or exports
D) a law that a government uses to regulate products that are imported into the country
The real benefit of barter for the entrepreneur is that ________.
A) it is essentially without cost to the business owner
B) it is considered a depreciable item for tax purposes rather than as income
C) it saves the small business owner between $100,000 and $150,000 a year on the
average
D) it is "paid" for at the wholesale cost of doing business, yet it is credited at the retail
price
Nature's Way, a health food store, has just opened in a popular neighborhood shopping
center next to Silver's Gym, a physical fitness center catering to both men and women.
Nature's Way is relying on which location principle?
A) Trade area
B) Retail consistency
C) Retail compatibility
D) Zoning
Mini-Case 14-2: "It's a Great Location for a Bar"
Fred Stanford has just completed bartenders' school in Los Angeles and is ready to
build a life for himself. Sunday's paper has an ad in the business opportunities section
for a bar in Mesa Verde, Colorado. Fred has heard that the West is a high growth area
and the quality of life in Colorado is very good. Fred's best friend, Carl, begins to ask
Fred some questions about his new idea. "To begin with, Fred, where is Mesa Verde,
Colorado?"
Fred decides to call the telephone number in the ad and is put in touch with Ansel King,
a business broker located in Pueblo, Colorado. When asked where in Colorado Mesa
Verde was, Ansel was prompt to point out that it was only 35 miles from Pueblo on the
Interstate and has a population of nearly ten thousand. "Fred, this town is a great
location for a bar, and I have just the kind of deal for a young man like you looking to
get started."
What city-related factors does Fred need to consider when evaluating this community
as a location for a bar?
Define franchising. Explain the three types of franchising. Which is the fastest-growing
segment?
Mini-Case 11-3: Birmingham's Stereo Shop
Birmingham's Stereo Shop expects net sales of $280,000 in the upcoming year, with a
cost of goods sold of $173,600 and total expenses of $76,200. Birmingham expects
variable expenses (including cost of goods sold) to be $195,700 and fixed expenses to
be $54,100.
What level of sales would Birmingham's have to achieve if it wanted to make a $25,000
profit?
Define each of the following terms and give an example of each: strengths, weaknesses,
opportunities, and threats.
Mini-Case 13-2: Bowden Brake Service
Jim Bowden has been operating his business for some time now and thinks it is time to
grow and expand. To compute the cost of expanding his existing business, Jim Bowden
makes the following estimates:
Explain to Jim the possible (and realistic) sources of capital for expansion. Where
would you recommend that he go for the funds he needs? Why?
Mini-Case 16-1: Kansas Manufacturers and Assemblers
Rose Richardson always knew that if she could land a major order for her firm, she
could prove its quality to the industry. Kansas Manufacturing and Assemblers was a job
shop manufacturing and assembling operation specializing in fast turnaround projects
for manufacturers with orders in excess of production capacity. Each job Rose's firm
did was a special order.
In September, a major appliance manufacturer approached Rose and inquired about her
ability and willingness to manufacture and assemble a new appliance. This order could
mean a very substantial profit for the firm, as well as recognition throughout the
industry. Rose was asked to undertake a project that would require a 100 percent
assignment of the firm's personnel for seven months. In addition, any slight
modification in design or material would require overtime. If this job went as most,
changes could be expected. On this short notice, it would be impractical for Rose to hire
additional personnel because it takes weeks, even months, to learn the necessary skills.
Rose faces an interesting dilemma: If she doesn't take the job, it may be years before
another one of this magnitude comes along; but if she takes the job and then fails to
deliver on time, or fails to meet the quality specifications because of her overworked
employees, her reputation will be hurt for years. Rose sees this opportunity as a
crossroads in the firm's history, but knows that she must gain the full and unquestioned
support of the employees if the project is to be a success.
If you were Rose, how would you go about gaining the commitment of your employees
to a project that will last a full seven months and will likely require each person to work
overtime and weekends and to forgo vacations for the duration of the project?
How does Porter's five forces model help analyze an industry?
List and briefly explain the steps an entrepreneur should follow to establish an export
program.
