Exam on Friday, October 16, 2015 Chapter 6 Review Sheet – Principles of Business 1. Why do businesses fail? a. Lack of adequate capital b. Low sales c. Higher expenses than expected d. Competition e. Owner unprepared to manage the business. f. Unwilling to commit the time 2. What is a business plan? a. a written description of the business idea and how it will be carried out including all major business activities. 3. What are business plans used for? a. To persuade lenders and investors to finance the venture. 4. What are the steps in starting a business (the business decision process)? a. Gather and review information b. Develop strategic alternatives – (which Includes plans for Production, staffing, financing) c. Write up each section of the plan, and have it reviewed by a business expert. 5. What are the most important factors in becoming an entrepreneur? a. Having a real desire to be your own boss. b. Develop a good initial business plan. c. Takes unique skills and personal characteristics to develop a new idea for a product or service. d. Must have confidence and capability to turn an idea into a business. 6. What are the characteristics of entrepreneurs? a. Competitive g. b. Creative h. c. Energetic i. d. Goal oriented j. e. Independent k. f. Inquisitive l. Persistent Reliable Self-confident Problem solving Integrity Willing to work hard 7. Where does the money to start a business come from? a. A mix of owner-supplied money and borrowed money 8. What is improvement? a. A design change that increases the usefulness of a product, service, or process. Exam on Friday, October 16, 2015 9. What is innovation? a. An invention or creation that is brand new. 10. How much of the GDP do small businesses account for? a. More than 50% 11. What “qualifies” as a small business? a. 500 employees or less b. Owner is usually the manager c. Business operates in one or few locations d. Typically serves a small market e. Not dominant in its field 12. What can small businesses offer that other companies can’t? a. Smaller businesses are able to provide more personalized products and services to their customers. (Reach out directly to customers) b. Fill unique customer needs and product orders. 13. What are the top 3 largest small business types? a. Retail b. Construction c. Professional, science, and technical services 14. What is short term financing? a. Money needed to pay for the current operating activities (less than 1 year) 15. What is long term financing? a. Money needed for the main resources of a business that will last for many years (including land, buildings, and equipment) 16. What is venture capital? a. Money provided by large investors to finance new products and new businesses that have a good chance to be profitable. 17. What is start-up financing? a. The amount of money needed to open the business (including supplies, licenses, inventory, equipment) 18. What does a SBA do? a. Small Business Administration b. Government agency that helps small business owners develop business plans and obtain financing and other support for their companies. Exam on Friday, October 16, 2015 19. Where do business ideas come from? a. An idea plus experience b. preparation and research c. right place right time d. team approach 20. What is entrepreneurship? a. The process of starting, organizing, managing, and assuming the responsibility for a business. b. Nearly one in ten (10%) Americans ages 18-64, are involved in some type of entrepreneurship activities. 21. What are the start-up costs for part time small businesses and full time small businesses? a. Part time small businesses - $5,000 b. Fulltime small businesses - $100,000 22. What are the elements of the business plan? List and briefly describe. a. Description of the Business: business idea, products/services, structure, strengths and weaknesses, long/short term goals b. Description of Competitors: characteristics of the industry, condition of the economy, strengths and weaknesses of major competitors c. Customer Analysis: description of customers, location, census, sales forecasts d. Operations Plan: organization of the company, human resources plans, analysis of resources needed, describing major operations e. Marketing Plan: resources needed, mark. Activities, schedule of marketing activities f. Financial Plan: startup costs, short/long term financial goals, sources of financing, budgets and financial statements Extra Credit: On the SharkTank episode, which business inventions did not get venture capital offers?