Exam 1: The Foundations of Entrepreneurship

Minority-owned businesses have come a long way in the past decade, and their success rate is climbing.

The primary cause of small business failures is:

Entrepreneurs who repeatedly start businesses and grow to a sustainable size before striking out again are known as ________ entrepreneurs.

Which of the following is a benefit of entrepreneurship?

The opportunity to reap impressive profits is the primary motivation for most entrepreneurs.

Of the 28 million businesses in the United States, more than ________ are considered small.

Describe the small business failure rate. What are the primary causes of business failures, and what steps can an entrepreneur take to avoid becoming a business failure statistic?

Serial entrepreneurs repeatedly start businesses and grow them to a sustainable size before striking out again.

The recent number of job losses in large corporations compared to the jobs created by small business has changed the perception of ________ for launching a new business.

Family-owned and managed businesses account for 78 percent of all new jobs.

It is estimated that ________ percent of new businesses fail within two years, while ________ percent fail within five years.

One advantage of being your own boss and owning a small business is that work hours are very flexible and leisure time is abundant.

Which of the following is NOT a characteristic of a successful working relationship between copreneurs?

David Birch, president of the research firm Cognetics, suggests that three percent of small businesses create approximately ________ percent of new jobs.

Mini Case 1-1: Hudson's Dilemma Bill Hudson was a real craftsman when it came to being a machinist. Bill had learned almost all that he knew from Hugo Huffman, his first and only employer. Bill Hudson was married and had three young children. He was 33 years old and had worked for Hugo ever since he finished his tour in the army. In 12 years, Bill had polished his skills under the watchful and critical eye of Hugo Huffman. Hugo was quick to recognize Bill's talent for the trade. Bill had a positive attitude about learning and displayed a drive for perfection that Hugo admired. Hugo's Machine Shop was a successful small business. Its success was based mostly on the reputation for quality that had been established over its 42 years in operation. Hugo had come to this country with his new wife, Hilda, when he was in his late twenties. Now the business was a success, but Hugo remembered the early years when he and Hilda had to struggle. Hugo wanted the business to continue to produce the highest quality craftsman products possible. On a Friday evening, he called Bill into his office at closing time, poured him a cup of half-day-old coffee, and began to talk with him about the future. "Bill, Hilda and I are getting old and I want to retire. It has been 42 years of fun but these old hands need a rest. In short, Hilda and I would like you to buy the business. We both feel that your heart is in this craft and that you would always retain the quality that we have stood for." Bill was taken back by the offer. He, of course, knew Hugo was getting older, but had no idea Hugo would retire. Bill and his wife, Anna, had only $4,200 in the bank. Most of Bill's salary went for the normal costs of rearing three children. Hugo knew Bill did not have the money to buy the business in cash, but he was willing to take a portion of the profits for the next 15 years and a modest initial investment from Bill. Bill had, for the past four years, made most of the technical decisions in the shop. Bill knew the customers and was well respected by the employees. He had never been involved in the business side of the operation. He was a a high school graduate but had never taken business courses. Bill was told by Hugo that even after deducting the percentage of the profits he would owe under the sales agreement, he would be able to almost double his annual earnings. Bill would have to take on all the business functions himself because Anna had no business training either. -What steps should Bill take to avoid the pitfalls common to a small business?

An often fatal error made by many small business owners is to open their businesses on a "shoestring," causing them to be undercapitalized.

What is an entrepreneur? Give a brief profile of a typical entrepreneur. What is the primary motivation for the typical entrepreneur?

Most startup companies can expect to need ________ capital than they anticipate.

In addition to the opportunity to create their own destiny and enjoy what they do, entrepreneurs also benefit from the ability to:

Mini Case 1-1: Hudson's Dilemma Bill Hudson was a real craftsman when it came to being a machinist. Bill had learned almost all that he knew from Hugo Huffman, his first and only employer. Bill Hudson was married and had three young children. He was 33 years old and had worked for Hugo ever since he finished his tour in the army. In 12 years, Bill had polished his skills under the watchful and critical eye of Hugo Huffman. Hugo was quick to recognize Bill's talent for the trade. Bill had a positive attitude about learning and displayed a drive for perfection that Hugo admired. Hugo's Machine Shop was a successful small business. Its success was based mostly on the reputation for quality that had been established over its 42 years in operation. Hugo had come to this country with his new wife, Hilda, when he was in his late twenties. Now the business was a success, but Hugo remembered the early years when he and Hilda had to struggle. Hugo wanted the business to continue to produce the highest quality craftsman products possible. On a Friday evening, he called Bill into his office at closing time, poured him a cup of half-day-old coffee, and began to talk with him about the future. "Bill, Hilda and I are getting old and I want to retire. It has been 42 years of fun but these old hands need a rest. In short, Hilda and I would like you to buy the business. We both feel that your heart is in this craft and that you would always retain the quality that we have stood for." Bill was taken back by the offer. He, of course, knew Hugo was getting older, but had no idea Hugo would retire. Bill and his wife, Anna, had only $4,200 in the bank. Most of Bill's salary went for the normal costs of rearing three children. Hugo knew Bill did not have the money to buy the business in cash, but he was willing to take a portion of the profits for the next 15 years and a modest initial investment from Bill. Bill had, for the past four years, made most of the technical decisions in the shop. Bill knew the customers and was well respected by the employees. He had never been involved in the business side of the operation. He was a a high school graduate but had never taken business courses. Bill was told by Hugo that even after deducting the percentage of the profits he would owe under the sales agreement, he would be able to almost double his annual earnings. Bill would have to take on all the business functions himself because Anna had no business training either. -Which entrepreneurial characteristics does Bill have that may be important to his success? Which characteristic could lead to his failure?