Chapter 6 Entrepreneurship and Starting a Small Business

Some common causes of small business failure include:
underpricing or overpricing goods or services
no experience in that business or industry
starting with too little capital
Individuals who posses such attributes as being self-directed, action-oriented, and tolerant of uncertainty can make excellent _ like Bill Gates and Steve Jobs
entrepreneurs
_ want to maintain a balanced life style while doing the kid of work they want to do
Micropreneurs
Select the characteristics of an intrapreneur
a creative person who works within a corporation
he or she generates profits by leveraging a firm’s human financial and physical resources
someone who uses company’s resources to launch new products
Business _ are centers that offer businesses in the critical stage of early development low-cost offices and access to basic services such as accounting, legal advice, and secretarial help
incubators
_ are individuals or companies that invest in new businesses in exchange for partial ownership in those businesses
Venture capitalists
David opened his own bicycle shop 30 years ago, and although he enjoyed his work, he needed more free time. When Josie requested to work as an apprentice, David was very willing. Before long Josie was able to run the store without any help. This is an example of how:
apprenticeships can benefit both the business owner and the apprentice
Wayne is starting a small business, but needs help with management training, financial advice, and loans. He should contact the _
Small Business Administration
Select the characteristics of an entrepreneurial team that will be developing and marketing a new product
A group of experience people
Each from different areas of business
Members have complementary skills and are creative
All consumers with unsatisfied wants and needs who have both resources and the willingness to buy are:
a market
A(n) _ assumes risk when deciding to start and run a business
entrepreneur
A business plan is detailed written statement that describes:
the target market
the resources and qualifications of its owner(s)
A small business is defined as:
one that meets certain standards of size in terms of employees or receipts
one that is independently owned and operated
one that is not dominant in its field
Managerial incompetence and inadequate financial planning are two common reasons for _-_ failure
small business
_ are entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle
Micropreneurs
A(n) _ team is a group of experienced people form different areas of business who join together to form a managerial team with the skills needed to develop, make, and market a new product
entrepreneurial
Kayla wanted to open her own dress design business. She spent a few hours putting together a marketing plan, then selected an award- winning dress she designed and wore it to the meeting with the bank. The most likely reason she did not receive a loan was:
she did not develop a thorough business plan
Select reasons why people become entrepreneurs
opportunity
profit
independence
Working in a successful business is a good way to learn the operations and could:
be a step in buying out the owner
_ zones are specific geographic areas to which governments attract private business investment by offering lower taxes and other government support
enterprise
There are 27.8 million _ in the United States, accounting for more than 50 percent of the GDP
small businesses
Planning, _, keeping good business records, knowing your customers, and managing employees are what it takes to start and run a small business
financing
Managers have many functions, such as planning, financing. marketing, human resource development, and accounting. Of those, _ and _ are the two primary concerns in the start up phase
financing
planning
There are a few hurdles that prevent many small businesses from engaging in the global market. Which of the following are examples of such problems
Would-be exporters do not know how to get started
Financing is often difficult to find
A comprehensive business plan will include cover letter, _ ,company background, management team, financial plan, capital required, marketing plan, location analysis, manufacturing plan, and an appendix
executive summary
What are some of the factors that could be associated with small- business success
Managerial competence
Adequate financial planning
How do intrapreneurs launch new products and generate new profits
By using the company’s existing resources
Becoming a(n) _ is one of the best ways to learn about how to run a business
apprentice
Affiliate marketing involves an Internet- based marketing strategy in which a business:
rewards individuals for each customer the agent sends to its website
Select all that are true of entrepreneurs
create thousands of jobs
help the country prosper
strengthen the economy
True or false: Personal savings, venture capitalists, and government agencies such as the Small Business Administration (SBA) are possible sources of capital and information when starting a small business
True
Within the comprehensive business plan, the _ plan outlines sales, advertising, promotions, and public relations programs. This section also compares prices to competitors and forecasts sales in dollars and units
marketing
Chase has a great idea for a new business, but lacks the funs needed to pay rent and hire a part-time accountant and lawyer. Accordingly he decides to locate his offices temporarily in a business _ where he can receive accounting, legal, and secretarial help at little cost to him
incubator
Which of the following regarding entrepreneurs are true
They are thoroughly comfortable being their own boss
They are self-disciplined
A necessary and invaluable aid to entrepreneurs is a competent, experienced _ who knows and understands small business. This person can help with leases, contracts, partnership agreements, and protection against liabilities
lawyer
A Self- Employment Assistance Program (SEA) offered by some states is designed to:
pay unemployment benefits while building a business
provide training and counseling to the new business owner
The part of a business plan that includes an organization chart, job descriptions of listed position, and detailed resumes of the current and proposed executives is called the _ section
management team
One of the greatest advantages small business have is the ability to know their customers better and:
adapt quickly to their needs
A small business is considered “small” only in relationship to other _ in its industry
businesses
True or false: The principles of management are similar for a small neighborhood business and a giant global firm
True
Which of the following are some reasons for the growth of home-based businesses
Corporate downsizing
Computer technology
Tax laws that allow home office deductions
While browsing Sara’s Web page, Steve noticed a widget linked to a site selling stylish backpacks. Sara explained to him that she loves the brand and is actively promoting it. Moreover, Sara receives a commission on each client that clicks on the widget. Sara is engaged in:
affiliate marketing
There are many advantages small businesses have when engaging in international trade. Which of the following are examples of such advantages
Overseas buyers often enjoy dealing with individuals rather than with large corporate bureaucracies
Small companies can give customers personal service and undivided attention
Venture capitalist try to safeguard their investment by taking some control over the business. What could happen if a venture capitalist takes too large a stake in your company
You could lose control of the business
The program through which investment companies licensed by the Small Business Administration lend money to small businesses is called the:
Small Business Investment Company
One of the most difficult tasks is raising money for a start-up. To raise money, entrepreneurs talk with bankers and other potential investors, and try to sell their ideas. In order to have a chance, most of the time, entrepreneurs have to present a(n) _
business plan
Which of the following regarding high-growth business (e.g.,technology firms) are true
They are difficult to start
They are extremely difficult to keep going
A good business plan takes a lot of time to write, but you have only a few minutes to convince readers not to throw it away. This is why your _ summary is very important
executive
Which of the following are true regarding micropreneurs
They are interested in maintaining a balanced life style
They do not want to grow their businesses into large corporations
The expansion and development of the internet has sprouted a world of small web-based businesses. This, among other reasons, may explain why online sales are rapidly:
increasing
Many _ use their time, money, and energy to turn their passions into sustainable businesses. They are comfortable being their own bosses and are not afraid of failure
entrepreneurs
Entrepreneurial _ may be better suited to run a business than individual entrepreneurs because members can combine creative skills from the start and it may ensure cooperative and coordination later among functions in the business
teams
When writing a business plan, it is important to:
calculate how much money you need to start
analyze the competition
Which of the following is true regarding entrepreneurs
They have job-creating powers
Which of the following is true regarding businesses with low failure rates, such as veterinary services, dental practices, and medical practices
They often require advanced training to start
They do not tend to produce much growth
How did the 1990 Immigration Act encourage entrepreneurs to relocate to the United States
By creating a category of investor visas
If you want to start a business, you cannot be afraid to fail. Many well-known _ failed several times before achieving success. This is why these people are considered to tolerant of uncertainty
entrepreneurs
The SBA determines whether a business is considered “small” only after analyzing how a particular business measures up compared to other businesses in its _
industry
Which of the following are indications a business idea is a good opportunity
You can sell the product at a price customers will pay and still make a profit
It fills customers’ needs
The SBA micron program awards loans based on belief in the borrowers’ integrity and:
the soundness of their business idea
The executive summary is the part of the _ plan that consists of a two- or three- page management summary of the proposed venture, including a short description of the business, and discusses major goals and objectives
business
Community Development Financial Institutions (CDFI) have been successful because they:
provide counseling on improving cash flow
offer counseling on marketing strategies
maintained financial discipline other lenders lack
_ must be emotionally, mentally, and physically able to work long and hard. However, they mostly seek achievement rather than power and are self-motivated
Entrepreneurs
There are many good reasons for going global. Which of the following are examples of such reasons
Exporting can absorb excess inventory
Exporting can extend product life
The most important things investors want to know are what makes the product more desirable than what’s already available and whether or not the product can be patented. In which section of the business plan should investors look to find this information
Marketing plan
Which of the following are some challenges of running a home-based business
Keeping work and family tasks separate
Managing time
Himanshu called his large U.S. supplier to ask for an urgent delivery to his firm in Japan, but his request needed the approval of a high-level manager in the supplying firm. After 10 minutes browsing the Internet, Himanshu found a small business in the U.S. offering the same product. Seconds later, he was talking to the owner. The shipment left for Japan that day. This example demonstrates:
the advances small businesses have over large businesses in international trade
The phrase “poor management” covers a number of faults. Those faults include:
poor employee relations
poor planning
Which section of the comprehensive business plan indicates the amount of capital needed to commence or continue operations, and describes how these funds are to be used
Capital required
Which of the following characteristics are needed to become a successful entrepreneur
Tolerant of uncertainty
Initiative
Action-oriented
Which of the following is true of entrepreneurs
They take moderate, calculated risks
Which part of the business plan summarizes the most attractive points of your project in as few words as possible
Cover letter
Entrepreneurs must recognize that they need competent and motivated employees. Since they can’t compete with larger firms’ pay and benefits, they need to:
provide more challenging opportunities to learn
be respectful of employees’ opinions
delegate more often
Started by the Small Business Administration in 1991, the _ program provides very small loans (up to $50,000) and technical assistance to small-business owners
microloan
At what point is it most important to make your marketing decisions
Long before you introduce a product or open a store
Ahmed is the owner of a small U.S. shoe manufacturing business. He knows he could export some of his shoes, but he does not know if they fit other markets. Also, he cannot afford to hire an international trade expert. What does this situation demonstrate
Why many small business have difficulty engaging in global business
Managing a small business became relatively easy with the advent of inexpensive personal computers. Inexpensive computer systems and off-the-shelf or even free, open-source software make it easy for small business manager to:
follow the daily sales and expenses
manage customer records
The _ section of a business plan describes company operations to date (if any), potential legal considerations, and areas of risk and opportunity. This portion also summarizes the firm’s financial condition, and includes past and current balance sheets, income and cash flow statements
company background
In high school Li was captain of the women’s basketball team, student council president, captain of the cheerleading squad, and on the debate team. Fresh out of college, Li wants to start her own business. By looking at Li’s characteristics, what can one conclude
Li has some of the characteristics of an entrepreneur
Most entrepreneurs get ideas for products and services:
from asking questions
from looking around
An inexpensive marketing research study may help you determine which of the following
Where to locate
Whom to select as your target market
What is an effective strategy for reaching your target market
The SBA office staffed with volunteers from industry, trade associations, and education who counsel small businesses at no cost (except for expenses) is called:
Service Corps of Retired Executives
If you want to be both independent and rich, you need to pursue a business with high:
growth
Which section of a business plan provides a comprehensive demographic analysis of consumers in the area of the proposed business as well as traffic-pattern analysis and vehicular and pedestrian counts
Location Analysis
Included in the comprehensive business plan, the _ plan provides five-year projections for income, expenses, and funding sources
financial
The section of a business plan that describes minimum plant size, machinery required, production capacity, inventory and inventory-control methods, quality control, and plan personnel requirement is called the:
manufacturing plan