BMGT 2309 Small Business Management Fall 2008

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BMGT 2309 Small Business Management Fall 2008 ...

    BMGT 2309 Small Business Management Fall 2008

    Due Date: October 6, 2008

    Lesson Five

    Chapter 6 The Business Plan

INSTRUCTIONS: Follow the instructions found on the course website including

    ? creating an answer sheet,

    ? putting your name and the course name on the answer sheet,

    ? using complete sentences for essay and/or discussion questions.

    Submission of this lesson indicates that you have read and understand ALL of the information

    found on the course website.

Multiple Choice 4 points each

    1. The answer to the question of whether you need a business plan is

    a. “It just depends.”

    b. “It’s imperative.”

    c. “It’s requisite for success.”

    d. “It’s a no-brainer.”

2. A business plan should generally project financial and operational aspects of the proposed

    business for the first

    a. six months.

    b. one year.

    c. three to five years.

    d. seven years.

    3. Which of the following is not one of the basic objectives of the business plan?

    a. It identifies the nature and context of the business opportunity.

    b. It outlines the approaches other entrepreneurs have taken in the same industry.

    c. It serves as a tool for raising financial capital.

    d. It highlights factors that will determine whether the venture will be successful.

4. Writing a business plan should be thought of as

    a. the means to an end product.

    b. an ongoing process.

    c. an absolute essential to the startup of businesses.

    d. a mental exercise.

    5. Which of the following in not one of the benefits of developing a business plan?

    a. This forces the entrepreneur to consider systematically all of the factors in starting a business.

    b. It ensures that the startup's cash flows are manageable, especially in the first 5-7 years.

    c. This imposes needed discipline on the entrepreneur and the management team.

    d. This can be helpful in selling the new venture to those within the company.

6. Investors who read business plans can be described as

    a. one-minute investors.

    b. two-hour investors.

    c. half-day investors.

    d. weekend investors.

7. John Keeler is a prospective entrepreneur who has just presented his business plan to a venture

    capitalist, enthusiastically pointing out the unique features of a new invention he is promoting.

    The most likely question in the venture capitalist's mind is:

    a. How strong is the patent protection?

    b. How costly will it be to produce the product?

    c. What is the demand for the product?

    d. What management skills does this venture have?

8. Prospective investors are likely to consider a new business proposal to be unfavorable if it

    a. focuses on the product or service and provides minimal analysis of marketplace needs.

    b. is brief, even if it touches on all of the critical details of the startup.

    c. presents financial projections that show the startup will not exceed industry norms.

    d. fails to call for custom or applications engineering.

9. Business plan software packages

    a. focus mostly on preparing slides to present the business concept to prospective investors.

    b. spawn creativity and flexibility on the part of the entrepreneur.

    c. help an entrepreneur think through the important issues in starting a new company.

    d. offer a simple formula that leads startups to success.

10. When dealing with weaknesses in a business plan the owner should

    a. Use technical jargon to confuse reader

    b. Ignore the weakness as this might not attract investors

    c. Assume that investors will not find them

    d. Be straightforward with them and have an action plan

11. In a business plan, the key statement in the financial plan is the

    a. break-even analysis.

    b. estimate of returns and allowances.

    c. salary expense statement.

    d. cash flow statement.

12. A poorly conceived business concept

    a. is likely to be accepted if the business plan is well written.

    b. will not be recognized if the business plan is well written.

    c. cannot be rescued by a well written business plan.

    d. can still be justified, as long as the entrepreneur can prove that strong market demand exists.

Discussion Questions 17 points

    1. Describe the mistakes that entrepreneurs make in writing a business plan. Do not merely copy

    from the book use your own words and examples.

You Make the Call 20 points

    John Martin and John Rose decided to start a new business to manufacture noncarbonated soft drinks.

    They believed that their location in East Texas, close to high quality water, would give them a competitive

    edge. Although Martin and Rose had never worked together, Martin had 17 years of experience in the soft

    drink industry. Rose had recently sold his firm and had funds to help finance the venture; however, the

    partners needed to raise additional money from outside investors. Both men were excited about the

    opportunity and spent almost 18 months developing their business plan. The first paragraph of their

    executive summary reflected their excitement:

    The “New Age” beverage market is the result of a spectacular boom in demand for drinks with

    nutritional value from environmentally safe ingredients and waters that come from deep, clear

    springs free of chemicals and pollutants. Argon Beverage Corporation will produce and market

    a full line of sparkling fruit drinks, flavored waters, and sports drinks that are of the highest

    quality and purity. These drinks have the same delicious taste appeal as soft drinks while using

    the most healthful fruit juices, natural sugars, and the purest spring water, the hallmark of the

    “New Age” drink market.

With the help of a well-developed plan, the two men were successful in raising the necessary capital to

    begin their business. They leased facilities and started production. However, after almost two years, the

    plan’s goals were not being met. There were cost overruns, and profits were not nearly up to expectations.

    Question 1 What problems might have contributed to the firm’s poor performance? Question 2 Although several problems were encountered in implementing the business plan, the

    primary reason for the low profits turned out to be embezzlement. Martin was diverting

    company resources for personal use, even using some of the construction materials

    purchased by the company to build his own house. What could Rose have done to avoid

    this situation? What are his options after the fact?

Exploring the Web 15 points

    Be aware that websites may have been updated since the textbook was published and since the lesson

    was written. Usually the information you are looking for is still available, but you may have to navigate

    the website a bit to locate it. If you have questions about this, please contact your instructor.

As you might imagine, the Web is full of resources that can help you develop a business plan. One such

    business plan site is the Entrepreneur’s Center at The Beehive.

     Go to The Beehive website at and click on “Entrepreneur’s Center” and

    then on “Start Your Business” and then follow the “Build a Business Plan” link.

     You will need to register on the site it’s free. Navigate this site. Go to each of the business plan

    sections and see how the site is organized.

Discuss what you find on the site. Did you find the site helpful? Would you consider using this site in the

    future how and why or why not?

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