MIDTERM EXAM

Question 1

Entrepreneurship definition & what Entrepreneurs have to do

Answer 1

Entrepreneurship is the process by which individuals pursue opportunities without regard to resources they currently have under control

Entrepreneurs have to assemble the resources, pursue the venture and convince people to join the concept

Question 2

3 Primary Reasons people become Entrepreneurs

Answer 2

1) To be their own boss
2) Pursue their own ideas/dreams
3) Realize financial rewards

Question 3

Entrepreneurial Myths

Answer 3

1) Entrepreneurs are born not made
2) Entrepreneurs are gamblers (risk management)
3) Entrepreneurs are primarily motivated by money
4) Entrepreneurs are predominantly young
5) Entrepreneurs love the spotlight

Question 4

Entrepreneurial characteristics

Answer 4

1) have the passion for the business (you are motivation for the company)
2) have a product and consumer focus (external orientation of the world)
3) Tenacity despite failure
4) Execution intelligence (make shit happen)

Question 5

Not all business ideas are business opportunities. What are the 4 requirements?

Answer 5

1) Needs to be attractive, salable and commercializible to produce a profit
2) Needs to be durable and withstand a longer period of time to return investments (3+ years)
3) Timeliness and leverage marketplace trends
4) Must create value for the user, uniquely solves a problem while providing social benefit

Question 6

How to measure the salability of an opportunity

Answer 6

1) Targeted a big and growing market
2) Is attractive and likely to produce a profit
3) Porter’s 5 forces
4) does not have significant barriers to entry

Question 7

Porter’s 5 Forces

Answer 7

1) Competitive rivalry
2) Supplier power
3) Buyer power
4) Threat of substitution
5) Threat of new entry

*Panera Bread

Question 8

9 Barriers to Entry

Answer 8

1) Product differentiation
2) Capital requirements
3) Cost advantages
4) Access to distribution channels
5) Governmental/legal barriers
6) Strength of management team
7) First mover advantage
8) Unique business model
9) Exceptional excellence

Question 9

Leveraging trends in the marketplace and riding the tide to get a natural lift can be seen in what 4 forces?

Answer 9

1) Economic forces
2) Social forces
3) Technological advances
4) Political action/regulatory changes

Question 10

Once established enough to take to customers, what do you need to show value?

Answer 10

1) Concept statement
2) Intended audience
3) Benefits and features
4) Differentiators from competition
5) Preliminary marketing approach
6) Sales and distribution ideas

Question 11

Testing among target audience (customer interviews) does what

Answer 11

1) Validates overall appeal
2) Projects initial sales
3) Defines competitive positioning
4) Compares concept promise to product delivery experience

Question 12

A business model describes how the business is going to be ____

Answer 12

Economically self-sufficient

Question 13

Business Model 9 Critical Success Factors

Answer 13

1) Customer prolem
2) Product soltuion
3) Unique value proposition
4) Competitive advantage
5) Customer segmentation
6) Key metrics
7) Channels
8) Cost structure
9) Revenue streams

Question 14

Benefits vs Features

Answer 14

Benefits are what people buy

Features are the products attribute to deliver the benefit

Question 15

In order to establish a ____ in the marketplace in the market, you need ____ which is ____

Answer 15

Unique position
Positioning statement
A statement that captures the brands’ essence that acts as a placeholder in consumers’ mind associated with the unique attributes

*Volvo

Question 16

4 Financial Objectives all Companies Have

Answer 16

1) Profitability
2) Liquidity (having enough cash to satisfy short-term obligations)
3) Efficiency (how a company is using their assets, determined by CEO)
4) Stability (consistency in performance)

Question 17

Keeping score and measuring success is measured by ___

Answer 17

Financial statements (income, balance, cash flow, and ratio analysis)

Question 18

3 kinds of financial statements

Answer 18

1) Income Statement
2) Balance Sheet
3) Cash Flow Statement

Question 19

Income statement

Answer 19

Measures financial performance over a period of time (3 and 5-year trends)

Can tell because will say net sales

Year ending

Revenue and expenses to get net sales

Question 20

2 ways to forecast future

Answer 20

1) Top Down (market - share of market - sales - expenses - profit)
2) Bottom Up (profit - expenses - sales - share of market - market)

Question 21

Pro forma means ____

Answer 21

a projection

Question 22

Balance sheet

Answer 22

Measures assets vs liability
What is left over is net worth of the company
Can identify by two pages and assets and liabilities

ASSETS - LIABILITY = SHAREHOLDERS EQUITY or COMPANY NET WORTH

Question 23

Assets - Liability = _____

Answer 23

Equity

BALANCE SHEET

Question 24

Sales - Expenses = ____

Answer 24

Profit

INCOME STATEMENT

Question 25

Cash Flow Statement

Answer 25

Measures cash coming in and cash going out If cash-out is greater than cash coming in need to raise money or cut expenses

Question 26

Cash out + Cash in = _____

Answer 26

Profit CASH FLOW STATEMENT

Question 27

2 Ways of looking at Income Statements

Answer 27

1) HIstorically | 2) Projections

Question 28

4 ways of measuring financial performance

Answer 28

1) Trend analysis (historical vs pro forma) 2) Budget vs actual (projections vs actual achievements) 3) Comparison to industry norms 4) Financial ration analysis

Question 29

An investor scorecard is a way to evaluate a company. What are the 4 critical performance indicators?

Answer 29

1. Team 2. Opportunity )durable, salable, timely, adds value) 3. Industry (size, growth, competition) 4. Business Model

Question 30

Three Types of Agreements

Answer 30

1. Non-Disclosure Agreement: maintains firms trade secrets 2. Non-compete agreement: Prohibits directly competitive behavior for a specific period 3. Founders Agreement: details responsibilties (compensations and exits)

Question 31

5 Ethical Behavior Clauses

Answer 31

1. Establishes an honor and ethics code 2. Ensures anticipation of personal actions 3. Understand that unethical behavior increases costs 4. Always treat people how you want to be treated 5. Understand the rules to manage the situation but never lie

Question 32

Legal Structures

Answer 32

1. Sole proprietorship 2. Partnership 3. Corporation (c-corp) 4. LLC (limited liability company)

Question 33

Elements of a new venture team

Answer 33

1. Founders 2. Management team 3. key employees 4. Board of directors 5. Other professionals 6. Lenders and investors 7. Board of advisors

Question 34

Funding sources

Answer 34

1. Personal, familial, friends 2. Debt - creating an obligation 3. Equity - exchanging for ownership

Question 35

Types of funding and financing

Answer 35

1. grant funding - from governmental foundational sources 2. debt financing 3. private equity funding 4. public equity funding 5. organic growth

Question 36

Market segmentation

Answer 36

Niche within selected industry Defined by: product types/benefits, price point, channel and customer definition Sized by: smallest segment which will permit achievement of sales

Question 37

Customer positioning

Answer 37

Customer image and perception of offering | Must differentate from competition

Question 38

Marketing mix

Answer 38

Selection and weighing of marketing tools to maximize positioning and awareness to generate repurchase through 1. product/service (quality/packaging) 2. price (price/value) 3. promotion (communication/advertising/selling/PR) 4. place (channel of distribution)

Question 39

Protecting intellectual property

Answer 39

1. Patents 2. Trademarks 3. Copyright 4. Trade secrets

Question 40

Marketing is a ________ and smart marketers are consistently searching for _______

Answer 40

dynamic activity; optimal mix

Question 41

Patents

Answer 41

Excludes others from using process, business model, and design for 20 years

Question 42

Trademarks

Answer 42

Protects words, symbols, and identifies which distinguish ofering from others, 10 years

Question 43

Copyright

Answer 43

Protects tangible works of provable authorship for 70+ years

Question 44

Trade Secrets

Answer 44

Information providing owner with competitive advantage in marketplace

Question 45

Business Lifecycle

Answer 45

1. Introduction 2. profit/unit 3. GROWTH (critical) 4. Competitive turbulance/sales 5. Maturity 6. Decline or life extension

Question 46

Business opportunity growth is required for these 6 things

Answer 46

1. Capture economies of scale 2. Achieve market leadership 3. Maintain influence with suppliers 4. Accomodate growth of key customers 5. Attract and maintain employees 6. Execute scalable business model

Question 47

Internal Growth

Answer 47

1. New product development 2. Line extensions 3. Geographic channel expansion

Question 48

External growth

Answer 48

1. Mergers/acquisitions 2. Licensing 3. Strategic alliances/joint ventures 4. Franchising

Question 49

Franchisor advantages and disadvantages

Answer 49

1. fast and low cost market expansion 2. secondary income source 3. system beenfits of economies of scale 1. profit sharing 2. loss of control

Question 50

Costs for a Franchisee

Answer 50

1. intital fee 2. capital requirements 3. royalty 4. advertising

Question 51

Franchisee advantages and disadvantages

Answer 51

1. Proven product/service 2. Franchisor experience 3. Support for financing 1. Cost 2. restrions on creativity 3. lack of franchisor comittment

Question 52

Milestones

Answer 52

1. Idea 2. Opportunity 3. Develop 4. Launch 5. Grow 6. Exit (tahiti)