Deck 6: Writing a Business Plan

Question 1

Which of the following statements is incorrect about business plans?

A) Writing a business plan forces a firm's founders to systematically think through each aspect of their new venture.
B) For most new ventures, the business plan is a dual-purpose document used both inside and outside the firm.
C) A business plan is typically 25 to 35 pages long.
D) A large percentage of entrepreneurs do not write business plans for their new ventures.
E) The business plan should be written while the feasibility analysis is being completed.

Answer 1

E

Question 2

A business plan can usually be completed in one to three days.

Answer 2

False

Question 3

Which of the following is not a recommended guideline for writing a business plan?

A) To make the best impression, a business plan should follow an unconventional structure and stand out in some dramatic way.
B) A business plan needs to project a sense of anticipation and excitement about the possibilities that surround a new venture.
C) For most plans, 25 to 35 pages is sufficient.
D) A business plan should look sharp, but not a lot of money should be spent on the physical appearance of the plan.
E) Shy away from using a lot of boldfaced type, italics, clip art, and different font sizes and colors when preparing a business plan.

Answer 3

A

Question 4

According to studies citied in the book, a large percentage of entrepreneurs write business plans for their ventures.

Question 5

Peter Watson is thinking about launching a small business consulting company. To get advice on how to proceed, he stopped by his local Small Business Administration (SBA) office. The SBA advisor told Peter that one of the first things he needs to do is to sit down and write a 25 to 35 page narrative that describes what his new business plans to accomplish and how it plans to accomplish it. The SBA advisor is telling Peter to write a(n) ________.

A) tactical plan
B) marketing plan
C) operations plan
D) business plan
E) feasibility analysis

Question 6

The two primary audiences for a business plan are ________ and ________.

A) a firm's employees; officials with the SEC
B) a firm's customers; its competitors
C) investors; other external stakeholders and public relations firms
D) officials with the SEC; public relations firms
E) a firm's employees and investors; other external stakeholders

Question 7

The two primary audiences for a firm's business plan are a firm's employees and investors and other external stakeholders.

Question 8

A business plan is important as it forces the founding team to systematically think through every aspect of their new venture and ________.

A) it is a budget
B) it is a public relations document that can be used to promote the firm
C) it is a contract that is signed by the founders of the firm
D) it is a financial analysis
E) it communicates the merits of a new venture to outsiders, such as investors and bankers

Question 9

What are the two main reasons for writing a business plan?

Question 10

TempoRun, the company profiled in the opening feature of Chapter 4, makes an iPhone app that syncs the songs on a user's phone with his or her running pace. In 2013, the founders won a business plan competition that they later characterized as Shark Tank times 10. The judges were executives and well-known entrepreneurs from companies like Google, Square, and TechStars. The competition was ________.

A) Student Startup Madness held at the South by Southwest Festival in Austin, Texas
B) CES Student Pitch Day held at the Consumer Electronics Show in Las Vegas, Nevada
C) Student Startup Weekend held in Portland, Oregon
D) World Student Pitch Event held at the United Nations in New York, New York
E) California Cup Student Pitch Event sponsored by the City of Los Angeles, California

Question 11

Which of the following is not one of the "red flags" listed in the textbook that raises questions about one of more aspects of a company's business plan?

A) Founders with none of their own money at risk
B) Defining the market size too narrowly
C) A poorly cited plan
D) Sloppiness in any area
E) Overly aggressive financials

Question 12

A commercialization plan is a written narrative that describes what a new business plans to accomplish and how it plans to accomplish it.

Question 13

According to the textbook, a 2010-2012 study of 350 entrepreneurs found that of those that had successful exist, only about ________ started with a business plan

A) 10 percent
B) 15 percent
C) 20 percent
D) 30 percent
E) 40 percent

Question 14

Which of the following is not an individual, group or institution that normally reads a company's business plan?

A) Board of directors
B) Potential alliance partners and major customers
C) State and local government officials
D) Key recruits for jobs with the new firm
E) Rank-and-file employees

Question 15

Which of the following is one of the "red flags" listed in the textbook that raises questions about one or more aspects of a company's business plan?

A) Takes several days or weeks to complete
B) Founders that have their own money at risk
C) Defining the market size too broadly
D) Less than 50 pages long
E) Directed towards both an external and an internal audience

Question 16

Which of the following is the main purpose for writing a business plan?

A) The plan helps the company develop a "road map" to follow.
B) The plan introduces potential investors and other stakeholders to the business opportunity.
C) Both A and B are equally important.
D) Neither A nor B captures the true purpose of a business plan.
E) Reason A is the most important for experienced entrepreneurs and reason B is the most important for inexperienced entrepreneurs.

Question 17

The document that does the best job of introducing potential investors and other stakeholders with the business opportunity the firm is pursuing and how it plans to pursue it is the ________.

A) business plan
B) feasibility analysis
C) opportunity analysis
D) industry analysis
E) marketing plan

Question 18

The two primary audiences for a business plan are investors and other external stakeholders and ________.

A) officials with the SEC
B) a firm's employees
C) a firm's competitors
D) a firm's customers
E) public relations firms

Question 19

According to the textbook, a business plan is best described as a(n) ________.

A) narrative description of a new business
B) contract
C) budget
D) agreement
E) marketing initiative

Question 20

For most new ventures, the business plan is a dual-purpose document used both inside and outside the firm.

Question 21

To make the best impression, a business plan should follow a conventional structure.

Question 22

A competitor analysis, which is a detailed analysis of a firm's competitors, should be included in the market analysis section of its business plan.

Question 23

Kevin Andrews has decided to write a business plan that is intended to be read primarily by his staff, which will present a blueprint for his company's entire operation and will provide guidance to operational managers. Kevin should write a(n) ________ business plan.

A) operational
B) tactical
C) strategic
D) summary
E) functional

Question 24

For most business plans ________ pages are sufficient.

A) 40 to 50
B) 30 to 40
C) 15 to 20
D) 25 to 35
E) 5 to 10

Question 25

Fragmented industries are more receptive to new entrants than industries that are dominated by a handful of large firms.

Question 26

According to the textbook, the executive summary is arguably the most important section of the business plan.

Question 27

Which of the following business plans matches with its appropriate emphasis?

A) Summary business plan - works best for companies who are at the point where they need funding or financing; serves as a "blueprint" for the company's operations
B) Operational business plan - works best for companies in the early stages of development that want to "test the waters" to see if investors are interested in their idea
C) Full business plan - works best for companies in the early stages of development that want to "test the waters" to see if investors are interested in the idea
D) Summary business plan is meant primarily for an internal audience - works best as a tool for creating a blueprint for a company's operations and providing guidance to operational managers
E) Summary business plan - works best for companies in the early stages of development that want to "test the waters" to see if investors are interested in their idea

Question 28

A company's industry analysis and target market analysis are usually included in the same section of its business plan.

Question 29

To make the best impression, a business plan should follow a ________.

A) conventional structure for companies with standard business models and a nonconventional structure for firms with disruptive business models
B) conventional structure for manufacturing firms and a nonconventional structure for service firms
C) conventional structure
D) nonconventional structure
E) nonconventional structure for manufacturing firms and a conventional structure for service firms

Question 30

The major revenue drivers, which are the ways a business earns money, should be first identified in "The Economics of the Business" section of the business plan.

Question 31

The three types of business plans are ________.

A) functional business plan, full business plan, feasibility plan
B) summary business plan, contingency plan, full business plan
C) functional business plan, contingency plan, full business plan
D) opportunity plan, feasibility plan, full business plan
E) summary business plan, full business plan, operational business plan

Question 32

A firm's operating leverage is an analysis of its debt versus its equity.

Question 33

Which of the following business plans matches with its appropriate length?

A) Operational business plan - 10-15 pages
B) Full business plan - 25-35 pages
C) Summary business plan - 25-35 pages
D) Full business plan - 40-100 pages
E) Operational business plan - 25-35 pages

Question 34

A tagline is a phrase that a business uses to reinforce its position in the marketplace.

Question 35

Sarah Parks is in the very early stages of putting together a business startup, and is thinking about writing a business plan to request funds to conduct a feasibility analysis and write a more complete business plan. What type of business plan should Sarah write at this point?

A) Full business plan
B) Tactical business plan
C) Summary business plan
D) Operational business plan
E) Strategic business plan

Question 36

A(n) ________ business plan, which is typically 25 to 35 pages long, works best for new ventures who are at the point where they need funding or financing.

A) tactical
B) strategic
C) summary
D) full
E) operational

Question 37

For most business plans, 25 to 35 pages are sufficient.

Question 38

The executive summary is a lengthy overview of the entire business plan.

Question 39

A(n) ________ business plan, which is intended to be a blueprint for a company's operations, is 40-100 pages long and is meant primarily for an internal audience.

A) operational
B) full
C) deliberate
D) summary
E) tactical

Question 40

The management team and company structure section of a business plan is one of the lesser-read sections.

Question 41

A(n) ________ statement describes why a company exists and what it aspires to become.

A) tactical
B) values
C) mission
D) operations
E) strategic

Question 42

Industry structure refers to how ________ an industry is.

A) concentrated or fragmented
B) traditional or progressive
C) innovative or conservative
D) hierarchical or flat
E) large or small

Question 43

The ________ section of the business plan addresses the basic logic of how profits are earned in the business.

A) economics of the business
B) operations plan
C) executive summary
D) design and development plan
E) market analysis

Question 44

The Savvy Entrepreneurial Firm feature in Chapter 6 focuses on three companies: Songkick, GrubHub, and Instagram. The overarching point of the feature is ________.

A) most business plans require major changes after the business is launched and the founders start getting customer feedback
B) the degree to which business plans pan out as their founders envisioned varies
C) most business plans require only minor changes after the business is launched and the founders start getting customer feedback
D) the most effective business plans take four to eight weeks to complete
E) most business plans are quickly discarded after the business is launched

Question 45

Which of the following statements is incorrect regarding the marketing plan section of a business plan?

A) The marketing plan focuses on how the business will market and sell its product or service.
B) The two most important items to include in a marketing plan are (1) overall marketing strategy and (2) the nuts and bolts of marketing a firm's product in terms of product, price, promotion, and place.
C) The best way to describe a company's marketing plan is to begin by talking about its competitors.
D) A firm's marketing strategy refers to its overall approach for marketing its products and services.
E) A firm's overall approach to marketing typically boils down to how it positions itself in its market and how it differentiates itself from its competitors.

Question 46

The pro forma financial statements are the heart of the operations section of a business plan.

Question 47

The Partnering for Success feature in Chapter 4 focuses on the types of partnerships that are common in business plans. According to the feature, businesses often make partnering an essential part of their business plans because they ________.

A) want to obtain a key customer
B) want to increase their visibility
C) want to reduce risk
D) want to appear legitimate
E) have limited resources

Question 48

The ________ section of a business plan breaks the industry into segments and zeroes in on the specific segment (or target market) to which the firm will try to appeal.

A) competitive analysis
B) current status
C) market analysis
D) marketing plan
E) operations plan

Question 49

According to the textbook, in many instances an investor will first ask for a copy of a firm's ________ and will request a copy of the full business plan only if that portion of the plan is sufficiently convincing.

A) appendix
B) industry analysis
C) operations plan
D) financial plan
E) executive summary

Question 50

Operating leverage is highest in companies that have ________.

A) a service rather than a manufacturing emphasis
B) virtually no fixed costs
C) equal variable and fixed costs
D) a high proportion of variable costs relative to their fixed costs
E) a high proportion of fixed costs relative to their variable costs

Question 51

The ________ is a short overview of the entire business plan.

A) summary statement
B) executive summary
C) managerial review
D) founder's introduction
E) abstract

Question 52

A(n) ________, in a business plan context, is a noteworthy event in the past or future development of a business.

A) aspiration
B) intention
C) signpost
D) milestone
E) target

Question 53

An organizational chart is a graphic representation of how authority and responsibility are distributed within a company.

Question 54

A sources and uses of funds statement is a document that lays out specifically how much money a firm needs, where the money will come from, and what the money will be used for.

Question 55

Which of the following statements is incorrect regarding the industry analysis portion of a firm's business plan?

A) It is important to focus simultaneously on a business's industry and its target market.
B) Industry structure refers to how concentrated or fragmented an industry is.
C) Most industries have 6 to 10 key success factors that should be reported in the industry analysis.
D) Industry trends, which include both environmental and business trends, should be discussed.
E) The industry analysis should conclude with a brief statement of your beliefs regarding the long-term prospects for the industry.

Question 56

Melanie Summer spoke to an investor who is interested in her business idea. Melanie offered to send the investor a copy of her full business plan, but the investor asked for a short overview of the business plan instead. What portion of her business plan should Melanie send the investor?

A) Marketing plan
B) Executive summary
C) Elevator pitch
D) Company description
E) Operations plan

Question 57

Which of the following statements is incorrect regarding the executive summary of a business plan?

A) It is a short overview of the entire business plan.
B) In many instances an investor will first ask for a copy of a firm's executive summary and will request a copy of the full business plan only if the executive summary is sufficiently convincing.
C) It is arguably the most important section of the business plan.
D) It should not exceed two single-spaced pages.
E) The executive summary is the first thing that should be written in preparing a business plan.

Question 58

A company's mission statement should be placed in the ________ section of its business plan.

A) marketing plan
B) management team and company structure
C) company description
D) market analysis
E) industry analysis

Question 59

A competitor analysis should be included in the ________ section of a business plan.

A) market analysis
B) industry analysis
C) company description
D) management team and company structure
E) operations plan

Question 60

There is an emerging school of thought that opposes the idea of writing a business plan and advocates experimentation and trial-and-error learning gleaned through customer feedback and formal planning. How does the approach to writing a business plan described in this book differ from this philosophy? How does trial-and-error learning figure into the approach to writing a business plan advocated in this book?

Question 61

The document that lays out specifically how much money a firm needs, where the money will come from, and what the money will be used for is referred to as a(n) ________.

A) sources and uses of funds statement
B) assumptions sheet
C) pro forma financial statement
D) credit and debit statement
E) capital and operational budgeting statement

Question 62

What is a business plan?

Question 63

The facilities and equipment that a business needs should be described in the ________ section of its business plan.

A) marketing plan
B) management team and company structure
C) company description
D) market analysis
E) operations plan

Question 64

According to the textbook, the ________ are the heart of the financial section of a business plan.

A) financial ratios
B) pro forma financial statements
C) budgets
D) sources and uses of funds statements
E) break-even analyses

Question 65

Why is the "management team and company structure" section of the business plan often given disproportionate weight among investors?

Question 66

Most business plan writers interpret or make sense of a firm's historical and/or pro forma financial statements through ________ analysis.

A) ratio
B) assumptions
C) scenario
D) proportion
E) relative

Question 67

What is an "executive summary?" Why is the executive summary often called the most important part of a business plan?

Question 68

What section of the business plan deals with the day-to-day operations of a company?

A) Financial plan
B) Marketing plan
C) Operations plan
D) Industry analysis
E) Executive summary

Question 69

A(n) ________ is a graphic representation of how authority and responsibility are distributed within a company.

A) organizational chart
B) personnel chart
C) human resources chart
D) administrative chart
E) directional chart

Question 70

A prototype is ________.

A) a form of opportunity recognition
B) a tool for evaluating the industry a new firm plans to enter
C) a financial model
D) the first physical depiction of a new product
E) a tool for evaluating the organizational prowess of a new firm

Question 71

According to the textbook, many investors and others who read business plans look first at the executive summary and then go directly to the ________ section of the business plan to make their preliminary assessment.

A) management team and company structure
B) product (or service) design and development plan
C) industry analysis
D) marketing plan
E) operations plan

Question 72

The first rule in making oral presentations is to follow instructions.

Question 73

Kate Payne was reading the business plan for New Venture Fitness Drinks, and noticed that prior to its financial statements, New Venture Fitness Drinks placed an explanation of the sources of the numbers for the statements and the assumptions used to generate them. This explanation is called a(n) ________.

A) estimate sheet
B) hypothesis sheet
C) assumptions sheet
D) forecast sheet
E) forecast hypothesis

Question 74

A computer-generated image of an invention that displays the invention as a 3D model that can be viewed from all sides and rotated 360 degrees is called a(n) ________.

A) virtual prototype
B) concept visualization
C) abstract prototype
D) virtual design
E) usability test

Question 75

According to the textbook, the first rule in making an oral presentation is to ________.

A) follow instructions
B) be creative
C) emphasize all the positive aspects of a business venture
D) appear confident
E) do something out of the ordinary