Chapter # 6 - The Business Plan: Visualizing the Dream (Study Guide)

Small Business Management: An Entrepreneurial Emphasis, 13th Edition 

6.   Chapter "The Business Plan: Visualizing the Dream" Study Guide

1. A business plan:
a. identifies key factors of success or failure.
b. identifies the nature and context of a business opportunity.
c. describes the approach an entrepreneur will take to capture a business opportunity.
d. addresses all of these objectives. feedback: The business plan does serve all of these purposes.

2. The entrepreneur has two basic choices in type of business plan to write:
a. the narrative plan and the linear plan.
b. the summary plan and the comprehensive plan. feedback: These are two of the basic types of business plan.
c. the internal plan and the external plan.
d. the marketing plan and the operating plan.

3. To maximize the chances of success, an effective business plan must convince which of the following outside interests of the viability of the new venture?
a. suppliers
b. investors
c. potential customers
d. All of these answers are The new venture must tell a convincing story to all outsiders: suppliers, investors, and potential customers.

4. This document contains all the information needed to satisfy security laws related to warning potential investors about the possible risks of an investment.
a. business plan
b. financial plan
c. prospectus
d. investment document

5. Prospective investors in a business generally serve as ________ when it comes to an entrepreneur's business presentation.
a. advocates
b. skeptics. feedback:  Investors are interested in maximizing return on investment while minimizing risk.
c. cheerleaders
d. social commentators

6. Most investors are more ________ than product-oriented.
a. market-oriented. feedback: Incorrect. Investors are concerned with market prospects because without identifiable potential customers return on investment is unlikely.
b. people-oriented
c. finance-oriented
d. quality-oriented

7. Which of the following is NOT a feature of a successful business plan?
a. Financial justification of means chosen to sell the products or services.
b. The right length and right appearance.
c. Hard evidence of the marketability of a product or service.
d. Detailed computer-generated financial projections. feedback: Investors generally read brief reports, and the plan's overall appearance enhances the chances of investor consideration.

8. Initial decisions about which of the following factors will help determine the rest of the content of a business plan?
a. format of the business plan
b. style of oral presentation
c. supporting documentation
d. resources

9. The ________ identifies user benefits and the type of market that exists.
a. executive summary
b. products and/or services plan
c. marketing plan
d. management plan

10. The ________ offers information on the sources of financing, projected revenues and costs, as well as profits.
a. operating plan
b. financial plan
c. products and/or services plan
d. appendix

11. Which of the following is a common mistake to avoid when preparing a business plan?
a. Presenting a product or service in simple, general terms.
b. Disclosing and addressing potential problems or weaknesses.
c. Providing too much data in support of statements and projections.
d. Making the overall plan too long.

12. Which of the following is NOT a source of assistance in business plan preparation?
a. marketing specialists
b. local attorneys
c. chambers of commerce
d. accountants

13. A business plan can be viewed as an entrepreneur's game plan.

14. An entrepreneur should postpone consideration of personal goals and aspirations until financing is secured and the business is up and running.
False feedback: Aligning a business opportunity to personal goals and aspirations greatly enhances the likelihood of success.   

15. Anyone starting a business faces the task of raising financial resources.

16. A business plan is a legal document for raising needed investment.
False feedback: The business plan is not a legal document. A prospectus, or offering memorandum, is used to solicit investment.
17. Startups entering a turbulent, highly uncertain environment should avoid the temptation to adapt or vary from the original business plan, which displeases investors.
False feedback: In such cases, flexibility may be more important than disciplined adherence to a careful plan.   

18. The basic goal of investors is to minimize the return on their investment.
False feedback: The basic goal of investors is to maximize their returns while minimizing risk.
19. To ensure the greatest likelihood of securing investment, a business plan should seldom exceed 40 pages in length.
True feedback: Investors generally read brief reports and avoid lengthy proposals.   

20. The mission statement discusses the firm's background and identifies the form of organization.
False    feedback:  A mission statement is a concise statement of a firm's philosophy.

21. The executive summary may take the form of a synopsis or narrative.

22. The business plan is equally important for use by individuals within the firm as well as for telling the firm's story to outsiders.