Deck 2: The Entrepreneurial Process

Question 1

Startups that tend to focus on multiple markets are the most successful.

Answer 1

False

Question 2

Raising venture capital is a critical step for most successful ventures.

Answer 2

False

Question 3

Secrecy about one's idea is more likely to hurt the development of the business than help it.

Answer 3

True

Question 4

If companies A and B are in the same industry, and A has $200,000 in sales per employee while B has $325,000 in sales per employee, then B is the more productive company.

Question 5

Entrepreneurial companies should consider outsourcing responsibilities and functions that are not critical to the company's success.

Question 6

To be successful, a company must possess a unique and novel idea.

Question 7

A majority of companies require at least $100,000 to begin operations.

Question 8

Marginal cost is a term that refers to expenses that are difficult to justify in an entrepreneurial environment.

Question 9

Whether a company is successful is largely a matter of luck.

Question 10

Entrepreneurs should always seek to own the resources that they utilize while building a company.

Question 11

Access to entrepreneurial role models can be a significant factor in determining whether or not someone will become an entrepreneur.

Question 12

The two types of startup capital are debt and equity.

Question 13

It is possible for a company to have a positive cash flow and be unprofitable.

Question 14

Having multiple layers of management is the best way to ensure that a startup is flexible and quick to react to changes.

Question 15

Only the most skilled entrepreneurs should attempt to build a business around social or cultural fads.

Question 16

The vast majority of entrepreneurs start their companies with their own personal savings.

Question 17

A majority of the businesses started each year will eventually go bankrupt.

Question 18

Entrepreneurs possess highly specialized behavioral attributes that are distinct from those of non-entrepreneurs.

Question 19

Investors in small, growing startups typically expect to earn the same rate of return as they would if they invested in a public company that is listed on the New York Stock Exchange.

Question 20

Entrepreneurship is a process that can be learned.

Question 21

The majority of entrepreneurs' business ideas come from area outside of their present line of employment or experience.

Question 22

Which of the following contacts can be critical to the startup phase of a new business?

A)Potential customers
B)Lawyers
C)Bankers
D)Accountants
E)All of the above

Question 23

Two ingredients that determine an entrepreneur's return on investment are (1)the amount invested and (2)the annual amount earned on that investment.

Question 24

One difference between having an idea vs.an opportunity is the ability to list potential customers by name.

Question 25

Where do most entrepreneurs get the idea for their businesses?

A)Through brainstorming
B)From mentors
C)From exposure to an industry
D)By reading entrepreneurship books
E)From venture capitalists

Question 26

Which of the following is not cited by the chapter as a primary reason that entrepreneurs choose to go into business for themselves?

A)Fame
B)Innovation
C)Financial success
D)Independence
E)Self-realization

Question 27

A serial entrepreneur is someone who starts multiple companies, one right after the other.

Question 28

Low-tech businesses, such as convenience stores, are not typically considered part of entrepreneurship because of their lack of innovation and intellectual property.

Question 29

On average, US companies make about 11% net income.

Question 30

For a company that goes public, the founding entrepreneur typically owns a majority of the shares of the corporation.

Question 31

The Small Business Administration's Service Core of Retired Executives provides paid assistance to entrepreneurs.

Question 32

Which of the following could be a "trigger" for the entrepreneurial process?

A)Being fired by an employer
B)Deep frustration with one's career
C)A conversation with a friend or peer
D)An unexpected financial windfall
E)All of the above

Question 33

Which of the following would be the best explanation for the lack of minority owned businesses in the United States?

A)Lack of entrepreneurial role models
B)Small market potential for minority owned businesses
C)Lack of business ideas in this population
D)Legal roadblocks to minority ownership
E)Satisfaction with one's present job

Question 34

The most costly expense that seed-stage biotechnology companies face in their early years is the initial expenditure on manufacturing equipment.

Question 35

Entrepreneurship reduces the overall health of an economy by destroying jobs in traditional industries.

Question 36

The most famous geographic region for high-tech entrepreneurship is in California and often referred to as, "Silicon Valley."

Question 37

Ross Perot, the former US Presidential Candidate, decided, as a young man, to pursue a life-long career in politics and never utilized his talent for entrepreneurship.

Question 38

Generally speaking, entrepreneurs have a stronger need to be in control of their own fate.

Question 39

Anyone who wishes to pursue an entrepreneurial venture would be wise to take at least three of the widely distributed entrepreneur-attribute tests beforehand.

Question 40

For fledgling entrepreneurs, there are few free resources available for input and guidance.

Question 41

When a venture capital firm invests in a company, they typically expect which of the following in return:

A)Cash
B)Shares of the company
C)Debt
D)A personal guarantee
E)Intellectual property

Question 42

Which of the following is not one of the Nine Fs of Entrepreneurial Success?

A)Focused
B)Frugal
C)Flexible
D)Frenetic
E)Fun

Question 43

A $150,000 dollar investment in a company that yielded a $30,000 dividend in the first year would have achieved which of the following returns on investment?

A)2%
B)5%
C)15%
D)20%
E)30%

Question 44

Investors typically expect an annual rate of return in the range of _______, from a growing startup:

A)-20% to 0%
B)0% to 10%
C)5% to 25%
D)40% to 60%
E)80% to 120%

Question 45

Which of the following is not a critical component for a successful new business?

A)The opportunity
B)The management team
C)The age of the lead entrepreneur
D)The resources available
E)None of the above

Question 46

The term 'free cash flow' generally refers to:

A)Money that is raised through grants and donations
B)Debt that requires no initial interest payments
C)Cash that is generated in excess of fund required to sustain operations and purchase assets
D)Capital raised through an initial public offering or other equity financing
E)None of the above

Question 47

When determining how to allocate scarce resources, an entrepreneur should:

A)Focus on the company's key success factors
B)Spread resources around to gain experience
C)Focus exclusively on marketing
D)Focus exclusively on technology
E)None of the above

Question 48

A good example of entrepreneurial frugality is:

A)Providing cell phones for all employees
B)Leasing more space than is immediately necessary
C)Purchasing used office equipment and machinery
D)Limiting employees to strict job responsibilities
E)Renting top notch facilities

Question 49

The 8 year survival rate for new businesses is:

A)1%
B)12%
C)25%
D)50%
E)73%

Question 50

Which of the following is not a common stage in the financing of new businesses?

A)Investing personal savings
B)Building sweat equity
C)Private investment by 'angels'
D)Bank debt
E)Initial public offering

Question 51

The best would-be entrepreneur will have a track record of:

A)Working consistently at one company
B)Increasing sales and profits
C)Managing multiple employees
D)Work in numerous industries
E)Strong relationships with managers

Question 52

Commonly outsourced responsibilities include all of the following except:

A)Payroll
B)Accounting
C)Legal work
D)Customer service
E)Janitorial Services

Question 53

What is the average net profit margin for companies in the US?

A)1%
B)5%
C)25%
D)50%
E)90%

Question 54

Which of the following is not a characteristic of most entrepreneurial ideas?

A)They are unique
B)They offer improved performance
C)They offer lower pricing
D)They offer higher quality
E)They offer better service

Question 55

In entrepreneurship, luck is where ______________ and opportunity meet.

A)Intelligence
B)Fortune
C)Strategy
D)Focus
E)Preparation

Question 56

The situation that arises when an entrepreneur is reliant on his or her company for a salary and has most of his or her personal net worth tied up in the company is called:

A)Sweat equity
B)Venture capital
C)Double jeopardy
D)Factoring
E)Locus of control

Question 57

What percentage of venture backed companies survive to the five year mark?

A)12%
B)20%
C)50%
D)67%
E)80%

Question 58

For an entrepreneurial company, leasing is better than buying because:

A)Leasing can lead to more favorable terms
B)Leasing preserves cash by spreading out payments
C)Owning and maintaining property and equipment is rarely a company's specialty
D)All of the above
E)None of the above

Question 59

Which of the following is not one of the 10 Ds of Successful Entrepreneurs?

A)Driven
B)Details
C)Dedicated
D)Distribute
E)Dream

Question 60

What ratio best reflects the number of companies that begin with venture capital in hand?

A)1 in 2 companies
B)1 in 20 companies
C)1 in 500 companies
D)1 in 2000 companies
E)1 in 10,000 companies

Question 61

Explain the benefits and drawbacks of debt and equity financing, respectively.

Question 62

To reduce the cost of office space you may be able to convince a landlord to…

A)Reduce rent
B)Defer rent payments for a period of time
C)Allow subletting of unused space
D)B and C
E)A and B

Question 63

Often start-ups can reduce overhead by using outside firms for…

A)Payroll
B)Accounting
C)Advertising
D)All of the above
E)None of the above

Question 64

The three crucial components of a successful venture are the opportunity, the entrepreneur/management team, and the resources needed to start the company.Explain the interrelation of these items.

Question 65

Discuss the impact that greater family responsibilities may have on the decision to become and entrepreneurs.

Question 66

How can an entrepreneur's location improve chances for success?

Question 67

Why do you suppose the authors say that in entrepreneurship, "Ideas are a dime a dozen,"? What does this statement imply about an idea's importance to a successful business?

Question 68

The factors that give birth to a new enterprise and influence its development can be categorized as

A)Innovation, Triggering, Environmental, Growth
B)Sociological, Environmental, Innovation, Personal
C)Personal, Sociological Organizational, Environmental
D)Innovation, Triggering Event, Implementation, Growth

Question 69

What are some of the sociological reasons that starting a company becomes more risky or difficult as people grow older?

Question 70

Which of the following is not one of the global conditions increasing the rate of change in business?

A)Managerial specialization and layering.
B)The industrial sector's reliance on advanced knowledge.
C)Advancements in communications.
D)Changes in government regulations.
E)All of the above

Question 71

What contacts will you need as an entrepreneur?

Question 72

What are the stages described in the model of the entrepreneurial process? What are the factors that give birth to a new enterprise and influence how it develops from an idea to a viable enterprise?

Question 73

How do salary and return on investment, for the founding entrepreneur, factor into the regular operations of a startup?

Question 74

Discuss some issues around being secretive about your business idea

Question 75

Explain the rationale behind the statement, "A first class team with a second class idea is better than a second class team with a first class idea."

Question 76

Approximately 50% of Inc.500 companies make a net profit margin of …

A)16% or more
B)15%
C)5% or less
D)13%

Question 77

Describe the likely progression of financing for a startup that achieves an IPO.

Question 78

What is 'free cash flow' and why is it such a critical factor for a growing business?

Question 79

One of the biggest misconceptions about an idea for a new business is that

A)It must be technology related
B)It must be unique
C)It must be patentable
D)None of the above

Question 80

Give several examples of triggering events that give birth to a new organization.