Deck 6: Creating Business Plans

Question 1

Investors are more product-oriented than market-oriented.

Answer 1

False

Question 2

A business plan is a written document that sets out the basic idea underlying a business and its related startup considerations.

Answer 2

True

Question 3

For David Gumpert the business plan is essentially a selling document.

Answer 3

True

Question 4

The business plan is used primarily to aid in the development of relationships with outsiders and not so much with insiders.

Question 5

Investors prefer lengthy business plans because they need details before making an investment decision.

Question 6

Entrepreneurs typically focus on the positive potential of the startup-what will happen if everything goes right.

Question 7

Business plans should seldom exceed 40 pages in length.

Question 8

The prospective investor usually plays the role of the encourager, often seeing market potential in a business plan that others overlook.

Question 9

Business plans should be prepared so that they are attractive in appearance and well organized.

Question 10

A business plan should always be written before deciding to go forward with a startup business idea.

Question 11

A business plan is prepared for external use only-for example, to interest potential investors.

Question 12

Because they have personal resources at risk, prospective investors tend to look carefully at the business plans they receive.

Question 13

One of the primary functions of a business plan is to serve as a selling document-convincing key individuals that the venture has real potential.

Question 14

As the game plan for a new venture, the business plan focuses on the entrepreneur's bank account and other cash sources.

Question 15

A business plan is a legal document.

Question 16

A business plan should describe where you are, where you want to go, and how you plan to get there.

Question 17

Once the decision is made to prepare a business plan it should always be a comprehensive plan.

Question 18

One advantage of preparing a formal written plan for a business is the discipline provided for the prospective entrepreneur.

Question 19

A written business plan helps to ensure systematic, complete coverage of the important factors to be considered in starting a new business.

Question 20

The level of complexity of a business affects how much planning is appropriate.

Question 21

Most major accounting firms can guide the development of the written business plan.

Question 22

A good business concept may be destroyed by writing that fails to communicate.

Question 23

The executive summary is often the most important section of the business plan.

Question 24

Which of the following is not one of the basic objectives of the business plan?

A) It identifies the nature and context of the business opportunity.
B) It outlines the approaches other entrepreneurs have taken in the same industry.
C) It outlines the approach the entrepreneur plans to utilize in exploiting the opportunity.
D) It highlights factors that will determine whether the venture will be successful.

Question 25

An extensive business plan that is not followed is more valuable than no business plan at all.

Question 26

Incubator organizations can provide advice on structuring a new business.

Question 27

A business plan is used to provide a statement of goals and strategies for use by company outsiders, and aid in the development of relationships with insiders

Question 28

Time and money are factors that affect the extent of business plan preparation.

Question 29

A computer may properly be used in a new business operation but not in preparation of the business plan.

Question 30

The business plan should never include photographs because these tend to make the plan look unprofessional.

Question 31

When prospective entrepreneurs prepare to write a business plan, they should first consider the amount of time and money they have to spend.

Question 32

The executive summary of a business plan presents a firm's history and its form of organization.

Question 33

Pro forma financial statements reflect the past financial performance of a firm.

Question 34

Even if the business plan reveals sensitive information (e.g., details of an advanced technology or the specifics of a marketing plan), prospective investors can be trusted with that knowledge.

Question 35

With the right assistance from professional sources (e.g., attorneys, accounting firms, incubator services), the entrepreneur can avoid direct involvement in developing the business plan.

Question 36

A business plan is best described as a

A) crystal ball picture.
B) money plan.
C) contingency plan.
D) game plan.

Question 37

The marketing plan should identify user benefits and show evidence of consumer interest.

Question 38

The Financial Plan section of a business plan should include balance sheets and income statements on an annual basis and cash flow statements on a monthly basis, all projected out 2-3 years.

Question 39

Though all financial statements are important, the cash flow statement deserves special attention.

Question 40

Clear writing gives credibility to the ideas presented in the business plan.

Question 41

Prior to writing a comprehensive business plan the entrepreneur should have completed a(n)

A) feasibility study
B) executive summary
C) financial projections
D) mini-plan

Question 42

John Keeler is a prospective entrepreneur who has just presented his business plan to a venture capitalist, enthusiastically pointing out the unique features of a new invention he is promoting. The most likely question in the venture capitalist's mind is:

A) How strong is the patent protection?
B) How costly will it be to produce the product?
C) What is the demand for the product?
D) What management skills does this venture have?

Question 43

The primary outside users of business plans are

A) suppliers.
B) investors and lenders.
C) customers.
D) government agencies.

Question 44

The mini-plan is a short form of a business plan focusing heavily on market issues such as the following except

A) pricing
B) supporting documentation
C) competition
D) distribution channels

Question 45

Both investors and lenders use the business plan to better understand the

A) type of product or service offered by the new venture.
B) probability that interest rates will rise or fall in the future.
C) potential of other competitors in the same line of business.
D) range of business opportunities available at a given point in time.

Question 46

Which of the following groups would be most interested in a business plan for a new venture?

A) Customers
B) Bankers
C) Supervisors
D) The Internal Revenue Service

Question 47

A business plan is

A) a legal document for raising capital.
B) a prospectus.
C) a selling document.
D) an offering memorandum.

Question 48

In writing the business plan, an entrepreneur should remember that

A) interested investors will commit the time necessary to fully understand the proposed venture.
B) certain features will be appealing to investors, while others are distinctly unappealing.
C) investors are too busy to read through the business plans that come across their desk.
D) the quality of this plan has little bearing on the potential for success in the startup.

Question 49

Investors who review business plans typically

A) cannot read through all they receive.
B) read about one-half of a plan.
C) read plans thoroughly.
D) read only the marketing and finance sections.

Question 50

The document that becomes a model that helps the entrepreneur and the management team focus on important issues and activities is

A) the organization chart
B) the budget
C) the sales analysis
D) the business plan

Question 51

In the context of business planning, a prospectus is viewed as a

A) financial system.
B) way to guarantee that every employee in the startup knows his or her role in the company.
C) marketing document used to solicit investors' monies.
D) methodology that defines the way every aspect of the business is to be run.

Question 52

For the entrepreneur starting a new venture, a business plan has three basic objectives. Which of the following is not one of them?

A) identify the nature and context of the business opportunity.
B) outline the approach the entrepreneur intends to use to exploit the opportunity.
C) recognize factors that will determine whether or not the venture will be successful.
D) present to local entities to get the required permits for startups.

Question 53

A potential investor's single goal is to

A) make as much money as possible.
B) minimize taxes.
C) avoid risk.
D) maximize potential return on investment through cash flows received while minimizing personal risk exposure.

Question 54

Prospective investors are most attracted by business plans showing

A) products or services that meet an identifiable customer need.
B) expense projections that are far lower than normal industry ranges.
C) growth projections that are unbelievably strong.
D) detailed drawings and engineering details of the proposed product.

Question 55

A business plan should generally project financial and operational aspects of the proposed business for the first

A) six months.
B) one year.
C) three to five years.
D) seven years.

Question 56

Which of the following outsiders do not need to read the new venture business plan?

A) state comptroller
B) banker
C) individual investor
D) venture capitalist

Question 57

Capital-constrained entrepreneurs cannot afford to do much prior analysis and research because

A) the affordability of properly conducted research is beyond the means at their disposal.
B) the costs of any mistakes are lower than the risks of missing out on opportunistic actions.
C) the limited profit potential and high uncertainty of the opportunity they pursue also make the benefits low compared to the costs.
D) potential competitors could quickly discern the entrepreneurs' intentions and motives from their research.

Question 58

Findings from the feasibility analysis must show the following before moving to the business plan step except

A) strong market potential
B) an attractive industry
C) the principle investors
D) the right team to execute the plan

Question 59

Plans that appeal effectively to investors are

A) long and thorough.
B) market-oriented.
C) product-oriented.
D) ten or fewer pages.

Question 60

Investors who read business plans can be described as

A) one-minute investors.
B) two-hour investors.
C) half-day investors.
D) weekend investors.

Question 61

Experience has shown that an effective plan should

A) be very long.
B) be encyclopedic in detail.
C) be brief.
D) emphasize budgets above all else.

Question 62

The narrative form of an executive summary

A) is more straightforward than the synopsis form.
B) allows the author to include hyperbole that builds enthusiasm.
C) is a better format for ventures that have one dominant advantage.
D) gives each topic relatively equal treatment.

Question 63

A prospectus is

A) a legal document for soliciting investment.
B) the legal document that replaces a draft business plan.
C) a marketing document intended to sell a concept.
D) a document containing confidential business information.

Question 64

An overview of the significant points of a business plan appear in the

A) financial plan.
B) general company description.
C) executive summary.
D) operating plan.

Question 65

When making a decision regarding the extent of planning, an entrepreneur should consider the

A) preferences of employees.
B) complexity of the environment.
C) level of uncertainty of the venture.
D) competitiveness of the product.

Question 66

Ideally, investors like a business plan that shows evidence of

A) a management staff that will minimize overhead.
B) a well-balanced managerial team.
C) an entrepreneur who has studied management.
D) an entrepreneur who will spend more time managing than selling.

Question 67

In a business plan, the facilities and location of the proposed venture are described in the

A) executive summary.
B) management plan.
C) operating plan.
D) product and service plan.

Question 68

Which of the following is least likely to provide assistance in preparing a business plan?

A) An accounting firm
B) An incubator organization
C) An industrial park
D) A marketing specialist

Question 69

The executive summary in a business plan should come

A) at the beginning.
B) at the end.
C) following the finance section.
D) following the marketing section.

Question 70

Business plan software packages

A) focus mostly on preparing slides to present the business concept to prospective investors.
B) spawn creativity and flexibility on the part of the entrepreneur.
C) help an entrepreneur think through the important issues in starting a new company.
D) offer a simple formula that leads startups to success.

Question 71

The owner of Alison Sportswear, a small manufacturer of women's tennis apparel, uses a computer in preparing a business plan. She finds that a major advantage of using a computer is that

A) the planner can easily generate reams of material.
B) spreadsheets are helpful for preparing financial reports.
C) the programs are easy to load and use.
D) it eliminates the need for proofreading the final product.

Question 72

The executive summary part of a business plan should be written

A) first.
B) last.
C) before the finance plan.
D) before the legal plan.

Question 73

To facilitate preparation of the financial portion of a business plan and the making of changes in the plan, the writer should use

A) a sample plan.
B) a plan preparation manual.
C) an annuity table.
D) a computer.

Question 74

If Tom is planning a new business but has limited time to capitalize on an opportunity the best business plan would be a ____.

A) Comprehensive
B) Narrative
C) Subjective
D) Mini-plan

Question 75

It is most important that the marketing plan

A) describe how the firm will reach and service customers
B) show the degree of patent or copyright protection.
C) summarize the location of potential customers.
D) identify distribution channels.

Question 76

In a business plan, discussion of the management plan should detail

A) the proposed venture's organizational structure.
B) profiles of employee needs during the first three years of operation.
C) the projected growth of the proposed venture.
D) the intended distribution of ownership in the firm.

Question 77

Business planning

A) is an ongoing process.
B) is an exacting science.
C) equals business success.
D) is none of these.

Question 78

In a business plan, the legal form of organization would be discussed in the

A) financial plan.
B) general company description.
C) executive summary.
D) marketing plan.

Question 79

In considering the content of a business plan, an entrepreneur should think first and foremost about

A) how to present factors related to the opportunity.
B) formulating effective strategies and financial projections.
C) who will be reviewing the plan.
D) how to protect the confidentially of the plan.

Question 80

In a business plan, the key statement in the financial plan is the

A) break-even analysis.
B) estimate of returns and allowances.
C) salary expense statement.
D) cash flow statement.