1. One key to success with a business startup is to begin with enough ________________:

1. capital
2. sales
3. accounts payable
4. suppliers

2. Researchers who study entrepreneurs have discovered that:

1. successful entrepreneurs start with an idea, resources, and a small management team.
2. there is one key set of traits that mark a successful entrepreneur.
3. entrepreneurs desire responsibility and are willing to take moderate risks.
4. the most successful entrepreneurs are willing to take extreme risks and bet the farm in order to succeed.

3. Entrepreneurs start businesses for a number of reasons including:

1. an opportunity to make a difference.
2. having to deal with less government regulation than as an executive of a large company.
3. a much lower risk of career failure due to layoff or acquisition than working for a large company.
4. the opportunity to get rich much quicker than if they work for a large company.

4. "Copreneurs" are marked by:

1. a division of labor by expertise.
2. their similarity to the traditional mom and pop operation.
3. a decline in the number of businesses.
4. a greater success at raising venture capital than sole proprietorship-type businesses.

5. Successful copreneurs are marked by which of the following characteristics?

1. Distinct and different business and life goals.
2. A clear delineation of who is the superior partner and who is the subordinate partner.
3. A blending of responsibilities, roles, and authority.
4. Mutual respect for each other's talents.

6. The international market:

1. has proven to be a tremendous opportunity for small business.
2. is being dominated by large corporations based in Europe and Japan.
3. is largely closed to small U.S.-based businesses because of the growth of international entrepreneurship.
4. provides greater opportunities for women and minority entrepreneurs than U.S. domestic markets do.

7. Entrepreneurial activity is culturally diverse. Discuss the role of women, minorities, and immigrant entrepreneurs in this activity, profiling their characteristics, their impact, and the specific barriers they need to overcome in their small business start-ups.

8. What can an entrepreneur do to avoid the failure of his/her company? Discuss at least six actions they can take.

9. How is the strategic planning process for small companies different from that for large companies?

1. The planning horizon should cover at least five years into the future.
2. The process should begin with setting objectives and conclude with competitive analysis.
3. The process should be informal and not overly structured-"a shirtsleeve approach."
4. It should be conducted by top management and provided to lower management.

10. A small business owner needs to remember that when it comes to employee involvement in the strategic planning process:

1. involvement is a prerequisite for the achievement of total employee commitment.
2. his/her employees look to him/her for leadership and do not want to be involved.
3. the delegation of authority is not as important as communicating a clear vision.
4. employees do not need to be involved in the strategic process but do need to be involved in the operational process.

11. The strategic planning process for small businesses is:

1. market-focused.
2. the same as it is for a large company.
3. generally done by top management with little or no participation by employees.
4. product-focused and similar to that for large companies.

12. The principle behind a ________________ strategy is to select one or more market segments, identify customers' special needs, and approach them with a good or service designed to excel in meeting these needs.

1. cost-leadership
2. differentiation
3. focus
4. concentration

13. A competitive profile matrix:

1. identifies a firm's core competencies.
2. permits the small business owner to divide a mass market into smaller, more manageable segments.
3. compares the firm's and its competitors' key success factors.
4. creates a road map of action for the entrepreneur in order to fulfill his/her company's mission, goals, and objectives.

14. The strategic management process:

1. is especially difficult for the small business because of its limited resources.
2. divides mass markets into smaller, less homogeneous units.
3. provides the small business owner with the tools for managing the uncontrollable elements in the external business environment.
4. helps a small business develop the game plan that guides it in creating its mission, vision, goals, and objectives.

15. Once the vision and mission are established, the entrepreneur needs to:

1. select the target market.
2. conduct market research.
3. choose a competitive strategy.
4. assess the firm's strengths and weaknesses.

16. ________________ are negative external forces that inhibit the firm's ability to achieve its objectives.

1. Strengths
2. Weaknesses
3. Opportunities
4. Threats

17. Which of the following is a danger in choosing a differentiation strategy?

1. Charging a price so high that the company prices itself out of the market.
2. Choosing a basis for price leadership that is essentially unimportant to the customer.
3. Choosing a market that is not large enough to be profitable.
4. An overfocus on overhead costs.

18. When the small business owner assesses her company's strengths and weaknesses, she is dealing with the ________________ business environment.

1. macro
2. external
3. competitive
4. internal

19. The primary output of the strategic management process should be a(n):

1. matching of its strengths and weaknesses to the opportunities and threats in the environment.
2. enticement to outside investors and lenders to put money into the business.
3. complete explanation of the company's product or service.
4. description of the company's competitive situation.

20. What is the importance of positioning for the small business?

21. Describe core competencies and the role they play in helping the company segment its market and develop effective competitive strategies.

22. A master franchise is also called:

1. sub-franchise.
2. area developer.
3. Both A and B
4. None of the above

23. The FTC's philosophy focuses on:

1. catching and prosecuting abusers of franchise laws.
2. verifying the accuracy of FDD information.
3. providing information to prospective franchisees and helping them make good decisions.
4. licensing prospective franchisers.

24. The franchiser has the right to cancel a contract if a franchisee:

1. declares a bankruptcy.
2. fails to make required payments on time.
3. fails to maintain quality standards.
4. All of the above

25. The most expensive franchises in terms of total investment are:

1. ^{retail franchises.}
2. ^{business service franchises.}
3. ^{McDonald's franchises.}
4. ^{hotel and motel franchises.}

26. __________ franchising involves providing the franchisee with a complete business system-the established name, the building layout and design, accounting systems, etc.

1. ^{Product distribution}
2. ^{Trade name}
3. ^Pure
4. ^Conversion

27. A significant advantage a franchisee has over the independent small business owner is participation in the franchiser's __________.

1. centralized and large-volume buying power
2. social gatherings
3. profits
4. policies

28. The __________ requires all franchisers to disclose detailed information on their operations at the first personal meeting or at least fourteen days before a franchise contract is signed or any money is paid.

1. FCC
2. FDD
3. Trade Regulations Rule
4. FDA

29. In franchising, the reputation of the franchiser is dependent on:

1. their locations and popularity with the local customer.
2. the brand name recognition and appeal.
3. the rate of growth and the number of national outlets.
4. the quality of the goods and services provided.

30. The success of franchising is largely due to:

1. the economic growth of the United States and other developed nations, economies.
2. more college students choosing to go to work for themselves rather than for corporations.
3. the mutual benefits it provides to the franchiser and franchisee.
4. All of these factors

31. What clues should you look for that should arouse your suspicions regarding the honesty and legitimacy of a franchise? Identify at least eight.

32. Describe the key trends that will affect franchising over the next decade.

33. One advantage of buying an existing business is:

1. you always get the best location.
2. the opportunity to participate in a national advertising campaign.
3. equipment is installed and production capacity is known.
4. easy implementation of innovations and changes from past policies.

34. It is important to remember when assessing the financial soundness of a company that:

1. if profits are adequate, there will be sufficient funds to pay salaries and fund cash flow.
2. cash flow is the key financial element in determining financial soundness.
3. revenues need to equal twice the debt load in order for the company to be viable.
4. the buyer is buying the past revenues and profits of the company.

35. The biggest source for the best companies to buy is:

1. business brokers.
2. commercial bankers.
3. trade associations.
4. the hidden market.

36. The valuation method that is commonly used, but tends to oversimplify the valuation process, is called:

1. the excess-earnings method.
2. the balance sheet method.
3. the capitalization method.
4. the market approach.

37. Which of the following is a way to smooth the transition of leadership/management from the seller of a business to the buyer?

1. Focus on the customer, offer new incentives, improve customer service.
2. Focus on the employees, listen to them, keep them informed.
3. Concentrate on operations, updating equipment and changing processes.
4. Visit your competitors and introduce yourself and get to know them.

38. The capitalized earnings approach determines the value of a business by capitalizing its expected profits using:

1. the rate of return reflecting the risk level.
2. the prime interest rate.
3. the normal rate of return.
4. the prevailing rate of inflation.

39. The first step an entrepreneur should take when acquiring an existing business is to:

1. explore financing options.
2. prepare a list of potential candidates.
3. analyze his/her skills, abilities, and interests in an honest self-audit.
4. contact existing business owners in the area and ask if their companies are for sale.

40. When negotiating the deal, the most important thing to remember is:

1. terms are more important than the price paid.
2. to negotiate the lowest possible price.
3. often the difference in available funds can be made up by collecting accounts payable.
4. the owner of the business always asks 14-22% more than he/she is willing to take.

41. Review the five key legal issues an entrepreneur needs to consider when evaluating an existing business.

42. Briefly describe the advantages and disadvantages of buying an existing business.