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BROKER EXAM > LESSON 7 > Flashcards

LESSON 7 Flashcards

1
Q

The entrepreneurial process begins with an ____. The _________ comes next.

A

The entrepreneurial process begins with an idea. The business concept comes next.

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2
Q

What is the business concept?

A

The Business Concept:

It elaborates on the business idea and outlines critical information behind the execution of the idea.

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2
Q

WHAT IS A BUSINESS PLAN?

A

BUSINESS PLAN?

Is the comprehensive strategy that outlines the details behind the idea and the execution of the business.

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3
Q

What is the most common source for business ideas?

A

One of the most common sources of ideas is work experience: business ideas often stem from experience in the same industry or in a related industry.

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4
Q

Explain what is contained in the business concept document?

A

The business concept is usually a one-page business case that highlights the overriding reasons that the idea will succeed – or will reveal the reasons that it will not.

The business concept usually includes:

a brief description of the business idea;

a brief description of the products and/or services

the business’s intended market;

potential competitive advantages; and

a high level financial revenue and cost analysis.

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5
Q

TRUE OR FALSE?
In most cases, a business plan should aim to be 5 to 9 pages in length,

A

FALSE: In most cases, a business plan should aim to be 20 to 30 pages in length

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6
Q

TRUE OR FALSE?

There is no single template that will fit all business plans. Entrepreneurs should adapt it as needed to fit with their particular venture.

A

ANSWER: TRUE

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7
Q

WHAT IS THE OUTLINE OF A TYPICAL BUSINESS PLAN?

A

A typical business plan will have the following sections:

1-3 Pages Executive Summary

3-4 Pages Customer and Market Analysis

1-3 Pages Product/Service Description

3-4 Pages Business Model and Competitive Strategy

2-3 Pages Competitor Analysis

2-4 Pages Implementation Plan

1-2 Pages Risk Section

1-2 Pages Financial Highlights and Assumptions

may vary Detailed Financial Projections (in Appendix)

may vary Founder(s) Résumés (in Appendix)

may vary Other Appendices (as needed)

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8
Q

What is the objective of the executive summary?

A

The executive summary has one simple objective: to convince the reader to continue to read the rest of the business plan in its entirety.

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9
Q

This section must clearly articulate the needs of the customers within the target market and their ability and willingness to pay for the product or service in question.

A

The CUSTOMER AND MARKET ANALYSIS section must clearly articulate the needs of the customers within the target market and their ability and willingness to pay for the product or service in question.

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10
Q

_________ research is new research that has been completed firsthand, including surveys, focus groups, individual interviews, etc

A

PRIMARY research is new research that has been completed firsthand, including surveys, focus groups, individual interviews, etc

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11
Q

______ research involves an open-ended approach to better understand the situation at hand, whereas _______ research is focused on resolving a particular problem.

A

EXPLORATORY research involves an open-ended approach to better understand the situation at hand, whereas SPECIFIC research is focused on resolving a particular problem.

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12
Q

_____ research consists of market research that has already been conducted by other sources.

A

SECONDARY research consists of market research that has already been conducted by other sources.

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13
Q

NOTE ONLY / RISK

Risks
The risk section of the business plan identifies all major risks pertaining to the business venture. Disclosing risks is important: if the entrepreneur glosses over real and major risks, the reader will conclude that the entrepreneur has not done his or her research.

Though risks often carry a negative connotation, this section can still be positive. It provides the opportunity to discuss mitigation strategies towards the risk. It proves to the reader that the entrepreneur has thought through the potential issues and has plans in place to cope with them.

A

NOTE ONLY / RISK

Risks
The risk section of the business plan identifies all major risks pertaining to the business venture. Disclosing risks is important: if the entrepreneur glosses over real and major risks, the reader will conclude that the entrepreneur has not done his or her research.

Though risks often carry a negative connotation, this section can still be positive. It provides the opportunity to discuss mitigation strategies towards the risk. It proves to the reader that the entrepreneur has thought through the potential issues and has plans in place to cope with them.

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14
Q

Potential investors often scrutinize the ______ section more than any other section of the business plan, and the entrepreneur must therefore ensure that it is immaculate.

A

Potential investors often scrutinize the ______ section more than any other section of the business plan, and the entrepreneur must therefore ensure that it is immaculate.

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14
Q

Financial Highlights and Assumptions

If the entrepreneur is requesting funding for the enterprise, a cash flow pro forma statement must be included. The degree of detail of financial statements depends on the type of business; as a rule of thumb, most investors will want to see five-year projections.

Generally, the following financial pro forma statements will be required at a minimum:

[LIST 3 FINANCIAL STATEMENTS]

A

Generally, the following financial pro forma statements will be required at a minimum:

- Balance sheets for the first five years;

​- Income statements for the first five years; and

- Cash flow statements for the first five years.

15
Q

Explain what sensitivity analysis is?

A

Sensitivity analysis is the use of multiple what-if scenarios to model a range of possible outcomes.

The technique is used to evaluate alternative business decisions, employing different assumptions about variables.

For example, a financial analyst could examine the potential profit levels that may be achieved as a result of an investment in machinery by altering the expected demand level, material costs, equipment downtime percentage, crewing costs, and residual value of the equipment.

16
Q

Completing the _ _ _ _ _ _ overview will give the entrepreneur a better idea of whether or not there is true potential behind the initial idea. This document serves as an initial “go/no-go” decision point, helping determine whether or not it is worth developing a complete business plan for the idea.

A

Completing the BUSINESS CONCEPT overview will give the entrepreneur a better idea of whether or not there is true potential behind the initial idea. The business concept serves as an initial “go/no-go” decision point, helping determine whether or not it is worth developing a complete business plan for the idea.

17
Q

In this section, the entrepreneur explains what the company actually does.

A

In the product and service description section, the entrepreneur explains what the company actually does.

The product or service is described in some detail and, if necessary, related examples are given (especially to clarify if the idea is complex or unfamiliar to most).

This section highlights the underlying process and related technology as well as any new, novel, or unusual aspects of the company.

The entrepreneur must explain any technical or industry terms used in this section that might not be familiar to the reader – remember the grandparent/child test.

17
Q

Which section of the business plan can we find the revenue model for the business?

A

Business Model and Strategy

18
Q

The _ _ _ _ _ _ section makes a realistic assessment of existing and potential competitors.

A

The COMPETITIOR ANALYSIS SECTION makes a realistic assessment of existing and potential competitors.

18
Q

Who are angel investors?

A

Angels are privately wealthy people who wish to help new businesses

19
Q

TRUE OR FALSE?

A business plan is not static; it evolves as the business grows and as circumstances and resources change.​

A

ANSWER: TRUE!

19
Q

NOTE ONLY / BUSINESS PLANS

Developing a business plan requires that an entrepreneur take a long-term perspective for setting goals. This perspective will help foster smarter decisions in the short term.

A

NOTE ONLY / BUSINESS PLANS

Developing a business plan requires that an entrepreneur take a long-term perspective for setting goals. This perspective will help foster smarter decisions in the short term.

20
Q

TRUE OR FALSE?

A good business plan will avoid drawing attention to weaknesses in the plan?

A

ANSWER: FALSE!

A solid business plan with honest assessments of strengths and weaknesses will help identify what parts of the business really need to be worked upon. It can help bring attention to potential problems – and corresponding solutions – before they even happen.

21
Q

What is sensitivity analysis?

A

ANSWER:

Sensitivity analysis is the use of multiple what-if scenarios to model a range of possible outcomes. The technique is used to evaluate alternative business decisions, employing different assumptions about variables.

For example, a financial analyst could examine the potential profit levels that may be achieved as a result of an investment in machinery by altering the expected demand level, material costs, equipment downtime percentage, crewing costs, and residual value of the equipment.

22
Q

_ _ _ _ _ _ _ is the practice of organizing the different components of a project to best meet explicit objectives.

A

ANSWER:

Project management is the practice of organizing the different components of a project to best meet explicit objectives.

22
Q

The project _____ is the definition of what the project is supposed to accomplish. This should be as detailed and specific as possible.

A

ANSWER:

The project scope is the definition of what the project is supposed to accomplish. The scope should be as detailed and specific as possible.

23
Q

NOTE ONLY

Business Model and Strategy

The business model and strategy section demonstrates how thoroughly the entrepreneur has thought through the proposed business. At a minimum, the strategy statement should refer to:

the basic business logic that will be deployed

the defined scope of the business

the revenue model for the business

the long-term goals for the business

competitive positioning for the business, using the 4Ps model of marketing – product, price, place, and promotion

competitive advantages

A

NOTE ONLY

Business Model and Strategy

The business model and strategy section demonstrates how thoroughly the entrepreneur has thought through the proposed business. At a minimum, the strategy statement should refer to:

the basic business logic that will be deployed

the defined scope of the business

the revenue model for the business

the long-term goals for the business

competitive positioning for the business, using the 4Ps model of marketing – product, price, place, and promotion

competitive advantages

23
Q

______ and ______ are the primary readers who need to be convinced of the merits of the business plan

A

ANSWER: Lenders and investors are the primary readers who need to be convinced of the merits of the business plan

24
Q

In this section of the business plan we can find competitive positioning for the business, using the 4Ps model of marketing – product, price, place, and promotion

A

The Business Model and Strategy Section

25
Q

NOTE ONLY / SECONDARY RESEARCH

Secondary research consists of market research that has already been conducted by other sources. It is often more eficient for an entrepreneur to obtain secondary research than it is to undertake primary research, given his or her limited resources.

Secondary research can be procured from a variety of sources, including government agencies, industry organizations and associations, trade publications, and other businesses in the field. This information is useful in providing context for the reader, which includes addressing the following questions:

  • *- What is the current size of the target market?
  • What is the estimated size and growth potential of the target market?
  • What trends are affecting (or likely to affect) the target market?
  • How has the entrepreneur segmented the market and why is the chosen method appropriate?**
A

NOTE ONLY / SECONDARY RESEARCH

Secondary research consists of market research that has already been conducted by other sources. It is often more eficient for an entrepreneur to obtain secondary research than it is to undertake primary research, given his or her limited resources.

Secondary research can be procured from a variety of sources, including government agencies, industry organizations and associations, trade publications, and other businesses in the field. This information is useful in providing context for the reader, which includes addressing the following questions:

  • *- What is the current size of the target market?
  • What is the estimated size and growth potential of the target market?
  • What trends are affecting (or likely to affect) the target market?
  • How has the entrepreneur segmented the market and why is the chosen method appropriate?**
26
Q

This document is equivalent to a “back-of-envelope” analysis in real estate, requiring the undertaking of a short feasibility analysis, examining the technical and financial feasibility of the concept, and briefly testing the market.

A

The Business Concept

27
Q

The focus of this section should be on the honest assessment of the strengths and weaknesses of each competitor.

A

ANSWER: Competitor Analysis

28
Q

TRUE OR FALSE?

Stakeholders will often make adjustments to the scope as a project progresses.

A

ANSWER: TRUE

29
Q

Project Management generally involves the following pattern of steps:

A

ANSWER:

Project Management generally involves observing the following pattern of steps:

1. Initiation (or Definition)

2. Planning (or Design)

3. Execution (or Production)

4. Monitoring and Controlling

5. Closure

30
Q

Lenders and investors are the primary readers who need to be convinced of the merits of the business plan.

OTHER READERS OF A BUSINESS PLAN INCLUDE:

A

ANSWER:

The team of founders

Potential employees

Suppliers

Customers

BROKER EXAM (9 decks)

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