SBM CH-5 Review

The primary purpose of building a business plan is to raise capital

• True

• False

To get external financing, an entrepreneur's business plan must pass the reality test, the competitive test, and the value test with potential lenders and investors.

• True

• False

Although building a business plan does not guarantee an entrepreneur's success, it does increase his or her chances of succeeding in business.

• True

• False

The executive summary of a business plan should summarize all of the relevant points of the proposed venture and should be concise — no more than 1 paragraph.

• True

• False

A business plan is a written summary of ________.

• an entrepreneur's proposed business venture

• a business venture's operational, financial, and marketing details

• the skills and abilities of a business venture's managers

• All of the above

A solid business plan ________.

• forces potential entrepreneurs to look at their business idea in the harsh light of reality

• requires a potential entrepreneur to assess the venture's chances of success more objectively

• helps prove to outsiders, such as potential lenders and investors, that a business idea can be successful

• All of the above

The second essential purpose for creating a business plan is ________.

• to guide the operation of the company by charting its future course and devising a strategy for following it

• to guide the operation of the company by charting its future course and devising a strategy for following it

• to file with the SEC before a public stock offering

• to attract potential managers and employees to run the new venture

Which of the following is true regarding the process of building a business plan?

• It allows an entrepreneur to replace "I think" with "I know" and to make mistakes on paper, which is cheaper than making them in reality.

• It reduces the risk and uncertainty of launching a company by "teaching" the entrepreneur more about the industry, the market, and the proposed venture.

• It requires an entrepreneur to subject the business idea to a more objective and critical evaluation.

• All of the above

Ideally, a business plan should be about ________ pages in length.

• 10

• 20 to 30

• 30

• 40 or more

________ involves developing a game plan to guide a company as it strives to accomplish its mission, goals, and objectives to keep it on its desired course.

• Competitive advantage

• Mission

• Strategic management

• Market segmentation