Chapter 18

Question 1

risk-taking behavior in pursuit of business success.

Answer 1

Entrepreneurship

Question 2

willing to pursue opportunities in situations that others view as problems or threats.

Answer 2

entrepreneur

Question 3

someone willing to pursue opportunities in situations others view as problems or threats.

Answer 3

classic entrepreneur

Question 4

starts and runs businesses and nonprofits over and over again, moving from one interest and opportunity to the next.

Answer 4

serial entrepreneur

Question 5

comes from being first to exploit a niche or enter a market.

Answer 5

first-mover advantage

Question 6

entrepreneurship is strong organizational skills and tolerance for risk.

Answer 6

veteran’s advantage

Question 7

Personality Traits and Characteristics Shared by Many Entrepreneurs

Answer 7

• Internal locus of control: Entrepreneurs believe that they are in control of their own destiny; they are self-directing and like autonomy.
• High energy level: Entrepreneurs are persistent, hardworking, and willing to exert extraordinary efforts to succeed.
• High need for achievement: Entrepreneurs are motivated to accomplish challenging goals; they thrive on performance feedback.
• Tolerance for ambiguity: Entrepreneurs are risk takers; they tolerate situations with high degrees of uncertainty.
• Self-confidence: Entrepreneurs feel competent, believe in themselves, and are willing to make decisions.
• Passion and action orientation: Entrepreneurs try to act ahead of problems; they want to get things done and not waste valuable time.
• Self-reliance and desire for independence: Entrepreneurs want independence; they are self-reliant; they want to be their own bosses, not work for others.
• Flexibility: Entrepreneurs are willing to admit problems and errors, and willing to change a course of action when plans aren’t working.

Question 8

Entrepreneurs believe that they are in control of their own destiny; they are self-directing and like autonomy.

Answer 8

Internal locus of control

Question 9

Entrepreneurs are persistent, hardworking, and willing to exert extraordinary efforts to succeed.

Answer 9

High energy level

Question 10

Entrepreneurs are motivated to accomplish challenging goals; they thrive on performance feedback.

Answer 10

High need for achievement

Question 11

Entrepreneurs are risk takers; they tolerate situations with high degrees of uncertainty

Answer 11

Tolerance for ambiguity

Question 12

Entrepreneurs feel competent, believe in themselves, and are willing to make decisions.

Answer 12

Self-confidence

Question 13

Entrepreneurs try to act ahead of problems; they want to get things done and not waste valuable time.

Answer 13

Passion and action orientation

Question 14

Entrepreneurs want independence; they are self-reliant; they want to be their own bosses, not work for others.

Answer 14

Self-reliance and desire for independence

Question 15

Entrepreneurs are willing to admit problems and errors, and willing to change a course of action when plans aren’t working.

Answer 15

Flexibility:

Question 16

occurs when people start new ventures because they have few or no other employment options.

Answer 16

Necessity-based entrepreneurship

Question 17

takes risks to find new ways to solve pressing social problems.

Answer 17

social entrepreneur

Question 18

has fewer than 500 employees, is independently owned and operated, and does not dominate its industry.

Answer 18

small business

Question 19

when one business owner sells to another the right to operate the same business in another location.

Answer 19

franchise

Question 20

a plan for making a profit by generating revenues that are greater than costs.

Answer 20

A business model

Question 21

a new and temporary venture that is trying to discover a profitable business model for future success.

Answer 21

start-up

Question 22

Birth Stage

Answer 22

• Establishing the firm
• Getting customers
• Finding the money

Question 23

Breakthrough Stage

Answer 23

• Working on finances
• Becoming profitable
• Growing

Question 24

Maturity Stage

Answer 24

• Refining the strategy
• Continuing growth
• Managing for success

Question 25

owned and financially controlled by family members.

Answer 25

Family businesses

Question 26

can lead to small business failure.

Answer 26

family business feud

Question 27

the issue of who will run the business when the current head leaves.

Answer 27

succession problem

Question 28

describes how the leadership transition and related financial matters will be handled.

Answer 28

succession plan

Question 29

Reasons for small business failures

Answer 29

* Insufficient financing—not having enough money available to maintain operations while still building the business and gaining access to customers and markets. * Lack of experience—not having sufficient know-how to run a business in the chosen market or geographical area. * Lack of expertise—not having expertise in the essentials of business operations, including finance, purchasing, selling, and production. * Lack of strategy and strategic leadership—not taking the time to craft a vision and mission, nor to formulate and properly implement a strategy. * Poor financial control—not keeping track of the numbers, and failure to control business finances and use existing monies to best advantage. * Growing too fast—not taking the time to consolidate a position, fine-tune the organization, and systematically meet the challenges of growth. * Lack of commitment—not devoting enough time to the requirements of running a competitive business. * Ethical failure—falling prey to the temptations of fraud, deception, and embezzlement.

Question 30

a facility that offers services to help new businesses get established.

Answer 30

business incubator

Question 31

offer guidance to entrepreneurs and small business owners on how to set up and manage business operations.

Answer 31

Small Business Development Centers

Question 32

describes the direction for a new business and the financing needed to operate it.

Answer 32

business plan

Question 33

an individual pursuing business for a profit.

Answer 33

sole proprietorship

Question 34

when two or more people agree to contribute resources to start and operate a business together.

Answer 34

partnership

Question 35

owners share management and responsibility for debts and losses.

Answer 35

general partnership

Question 36

owners shares profits, but responsibility for losses is limited to original investments.

Answer 36

limited partnership

Question 37

a legal entity that exists separately from its owners.

Answer 37

corporation

Question 38

a corporate form for businesses whose stated goals are to combine making a profit with benefiting society and the environment.

Answer 38

benefit corporation, or B-Corp,

Question 39

combines the advantages of the sole proprietorship, | partnership, and corporation.

Answer 39

limited liability corporation (LLC)

Question 40

involves borrowing money from another person, a bank, or a financial institution.

Answer 40

Debt financing

Question 41

gives ownership shares to outsiders in return for their financial investments.

Answer 41

Equity financing

Question 42

make large investments in new ventures in return for an equity stake in the business

Answer 42

Venture capitalists

Question 43

an initial selling of shares of stock to the public at large.

Answer 43

initial public offering (IPO)

Question 44

a wealthy individual willing to invest in return for equity in a new venture.

Answer 44

angel investor

Question 45

new ventures go online to get start-up financing for their businesses from crowds of investors.

Answer 45

crowdfunding