Deck 3: Business Idea Generation and Initial Evaluation

Question 1

A small business owner must have the necessary skills to operate a business, and he or she must also clearly understand the marketplace.

Answer 1

True

Question 2

Assume that an opportunity exists in northern Minnesota.A customer needs a "hand warmer" packet.Mary, a new business owner, decides she has the ability to address this gap because she knows how to produce hand warmer packets.This process is called gap analysis.

Answer 2

True

Question 3

The generation of ideas for new businesses often occurs spontaneously and automatically.

Answer 3

False

Question 4

A new business owner could easily become frustrated if he or she has no passion for the business he or she has decided to start.

Question 5

When brainstorming, the true potential for each idea is often fully evaluated before the process moves onto generating the next one.

Question 6

A good way to generate new business ideas is to think about the things that frustrate you or cause you problems and then identify solutions.

Question 7

Brainstorming is a creative process in which a group of individuals are brought together and asked to generate ideas related to a specific topic or problem.

Question 8

The first step in developing a quality business idea is to analyze the market.

Question 9

One way to identify a gap in the marketplace is to examine trends around the region, nation, or world that may not yet have reached your geographic location.

Question 10

A person's past work experience is a source of skills and ideas for new businesses.

Question 11

Some small business owners find a patent, and then get permission from the owner to develop marketable products based on it.

Question 12

A person who is passionate about a hobby might be able to turn that hobby into a successful business.

Question 13

Entrepreneurs must quickly react to any business opportunities they identify to maximize their gains.

Question 14

Potential entrepreneurs often overlook family experiences as a source of knowledge and skills.

Question 15

The process of generating new business ideas is something that occurs automatically.

Question 16

When performing a gap analysis, an entrepreneur must describe business ideas in detail in the first column.

Question 17

A gap analysis identifies any differences between the demand by customers and the supply provided by firms currently in the market.

Question 18

Gap analysis involves identifying an opportunity between the demand for a product or service and the availability of the product or service that you can buy from vendors to be resold to your customers.

Question 19

A rule of thumb in the founding of businesses has always been that an owner whose business is both a vocation and an avocation is difficult to beat.

Question 20

When a potential business owner has several ideas for a business, he or she needs to identify one on which to perform a due diligence analysis.

Question 21

The second column in a gap analysis is devoted to listing the market need.

Question 22

Successful new business ideas can come from

A)books and magazines.
B)an individual's background.
C)hobbies.
D)all of these.

Question 23

The founders of a small business need to be involved in which of the following tasks when starting the new business?

A)Design
B)Funding
C)Operating
D)All of these

Question 24

Potential owners should examine all of these specific areas before choosing a business idea EXCEPT

A)work experience.
B)financial history.
C)education.
D)family history.

Question 25

Qualitative gap analysis charts require extensive research into markets and business practices to complete.

Question 26

A gap analysis identifies potential gaps in a market, but it does not provide individuals with the capability to fill those gaps.

Question 27

The threats to sales generation schemes refer to an organization not being able to generate sufficient sales required to make it profitable.

Question 28

The first column in a gap analysis is devoted to various business ideas.

Question 29

A small business owner must possess all of the following EXCEPT

A)necessary skills to run the business.
B)an in-depth understanding of the market.
C)passion for starting a business.
D)a sequential formula.

Question 30

The third column in a gap analysis is where the potential owner should provide a realistic estimation of his or her present resources.

Question 31

________ is defined as the connection between an entrepreneur's skills, understanding of an industry, and the ability to create a competitive advantage such that the sum of the parts of the new business is greater than the individual parts alone.

A)Gap analysis
B)Brainstorming
C)Opportunity analysis
D)Synergy

Question 32

Firms that have low initial capitalization have an opportunity to grow faster.

Question 33

Before establishing a new business, the first thing founders should do is

A)analyze the market.
B)list their personal skill sets.
C)obtain financial support.
D)hire a lawyer.

Question 34

The fourth column in a gap analysis is used to list the resources required for the successful operation of a business.

Question 35

Identify a true statement about the process of generating business ideas.

A)Potential business owners must now become personally involved in their new ventures, and they should look at it as a purely financial endeavor.
B)Individuals should quickly exploit opportunities they identify before competitors can identify the same gaps.
C)Entrepreneurs should limit themselves to generating business ideas based on their education and work experience.
D)After analysis, the opportunity identified might be very different from the business idea initially conceived.

Question 36

In the context of generating new ideas, which of the following is an example of a personal hobby developed into a business venture?

A)A sports card collector becomes a dealer who specializes in the trade of rare and valuable trading cards.
B)A plumber opens a new business that sells piping coated in special anticorrosive paint.
C)A web designer decides to invest in a firm that produces security software.
D)A baker decides to involve various members of his family in the operation of his baking business.

Question 37

While developing a quality business idea, what should potential business founders ideally do after evaluating their personal skill sets?

A)Interview successful entrepreneurs to generate business ideas
B)Brainstorm for potential business ideas with family
C)Propose a business idea to potential investors
D)Carefully analyze the market and look for a gap

Question 38

Threats to operational financing states that there are a number of obstacles to a new venture in obtaining the necessary financing for its growth.

Question 39

Which of the following experiences can entrepreneurs evaluate when generating business ideas based on their education?

A)The courses they took that were particularly enjoyable
B)The most difficult material in the courses they took
C)The classmates who made their experience enjoyable
D)The professors whose teaching they enjoyed the most

Question 40

The last column of a gap analysis is used to list the categories that are used to analyze each idea.

Question 41

All of these are threats to business success EXCEPT

A)profit margins.
B)sales generation schemes.
C)operational financing.
D)deficit gaps.

Question 42

Mark brings his friends together to generate ideas on his new business.Mark identifies his skills and then asks his friends to generate a list of business ideas that he might start.This is called ________.

A)business meeting
B)gap analysis
C)brainstorming
D)focus group

Question 43

Threats to ________ are threats to the new business in financing its growth, including high development cost.

A)profit margins
B)sales generation schemes
C)operational financing
D)deficit gaps

Question 44

A type of analysis that examines opportunities in the marketplace compared to the individual's ability to address those gaps is called

A)opportunity analysis.
B)difference analysis.
C)market analysis.
D)customer analysis.

Question 45

Threats to ________ are threats to the success of a new business related to its ability to establish and maintain a high-margin product or service.

A)profit margins
B)sales generation schemes
C)operational financing
D)deficit gaps

Question 46

In the context of business risks, how can an entrepreneur identify competitors to a new potential business?

A)By observing what potential customers do to satisfy their current needs or wants
B)By performing a gap analysis evaluation to identify potential competitors
C)By conducting a brainstorming session with other entrepreneurs
D)By observing the market and identifying companies that have seen the maximum growth in the past quarter

Question 47

All of the following are ways to identify gaps or business opportunities EXCEPT

A)discussing opportunities with family members.
B)interviewing successful entrepreneurs.
C)reading government documents.
D)examining trends.

Question 48

Threats to ________ are threats to the success of a business regarding its opportunity to sell to too many customers and to obtain repeat business.

A)profit margins
B)sales generation schemes
C)operational financing
D)deficit gaps

Question 49

What term is used to describe the process of systematically examining the difference between what is expected and what occurs?

A)Economic analysis
B)Gap slack analysis
C)Difference analysis
D)Gap analysis

Question 50

Which of the following is NOT included in the second column of labeled categories in a gap analysis?

A)Finances
B)Nonfinancial resources
C)Time
D)Inventory resources

Question 51

When conducting a gap analysis, the first column should include the ________.

A)business ideas
B)categories
C)resources
D)resources required

Question 52

The process of generating ideas should occur in a(n)________ environment and not in a(n)________ environment.

A)process; interactive
B)interactive; linear
C)linear; interactive
D)linear; process

Question 53

A potential business owner needs to convey his or her business idea to a prospective investor or lender in ________ minutes.

A)2
B)5
C)10
D)12

Question 54

An entrepreneur identifies a gap in the market for camping goods.He recognizes that ropes with high stress tolerances would be very popular with campers.He gathers a group of his friends, many of whom go camping regularly, and asks them to generate ideas for the best application of ropes with high stress tolerances in camping.In this scenario, the entrepreneur

A)performs a due diligence analysis.
B)performs a gap analysis.
C)conducts a brainstorming session.
D)conducts a risk evaluation.

Question 55

As a result of conducting a gap analysis, a potential entrepreneur proved there was a need for the business.This is known as

A)operational financing.
B)performing a due diligence analysis.
C)formulating a basic market plan.
D)generating potential business ideas.

Question 56

In the context of risks to new businesses, identify a true statement about risk tolerance.

A)What constitutes a risk is determined by an entrepreneur by observing his or her own tolerances.
B)Risks must be determined by entrepreneurs based on the findings of focus groups with other entrepreneurs in the same industry.
C)In new markets, entrepreneurs must be willing to put up with risks that outweigh their personal risk tolerance.
D)Entrepreneurs can avoid a majority of the risks associated with new start-ups by allowing competitors to invest in their new businesses.

Question 57

Identify a true statement about the potential founder of a new business.

A)The founder of a new business needs to be intimately involved in its designing, funding, and running.
B)An individual who wishes to start a new business should not confine himself or herself to generating ideas based on skills he or she already has.
C)An entrepreneur must avoid involving his or her family in a new venture, because such a partnership has a negative impact on the running of the business.
D)An entrepreneur must quickly act on any opportunity he or she identifies to maximize profits.

Question 58

Brainstorming works well in ________ groups.

A)technical
B)advisory
C)formal
D)informal

Question 59

In the context of identifying new business opportunities, which of the following is the definition of brainstorming?

A)A creative process whereby an individual is asked to develop ideas based on gaps in a market identified by venture capitalists
B)A simple process of systematically examining the difference between what is expected in a business and what actually occurs during its operation
C)A creative process whereby a group of individuals are brought together and asked to generate numerous ideas, with little or no effort made to evaluate the potential for each idea
D)A rational process by which a group of an entrepreneur's peers evaluates his or her business ideas based on several parameters, such as financial risk and capability gaps

Question 60

In the context of generating new business ideas, which of the following is an example of brainstorming?

A)A family gathers after dinner to discuss the various small industries they can set up on their family land.
B)A family gets together over a meal to discuss the possibility of selling the family business to a larger player in the industry.
C)An entrepreneur brings his friends to a bar to celebrate the success of the first year of his business.
D)An author approaches a publisher with a list of ideas for a book he or she intends to write.

Question 61

List and describe the three threats to business success.

Question 62

All of these are examples of nonfinancial resources EXCEPT

A)special contacts with suppliers or customers groups.
B)physical location of the business.
C)experience.
D)all of these.

Question 63

How does a potential business owner decide that a new business opportunity exists?

Question 64

________ is defined as the connection between an entrepreneur's skills, understanding of an industry, and the ability to create a competitive advantage such that the sum of the parts of the new business is greater than the individual parts alone.

Question 65

The ability of a competitor to meet or exceed the quality of your product or service is an example of a threat to ________.

Question 66

High development costs, rapid expansion plans, and high inventory needs are all threats to ________.

Question 67

________ are examples of avocational pursuits that an individual can use to inspire new business ideas.

Question 68

________ is a creative process where a group of individuals are brought together and asked to generate ideas.

Question 69

In the context of opportunity identification, briefly describe how entrepreneurs can use global trends to inform entrepreneurial efforts.

Question 70

All small businesses have an inherent amount of risk associated with starting the business.List and explain two types of specific risks.

Question 71

Identify and describe three ways of identifying gaps or business opportunities in the marketplace.

Question 72

Miriam starts a new boutique that specializes in fashionable clothing made from environmentally friendly materials.She prices her products competitively to attract customers.However, she discovers that the revenue earned from each piece of clothing the boutique sells barely makes back its labor and material costs.In this scenario, the threat to business success experienced by Miriam's boutique is

A)threat to profit margin.
B)threat from competitors.
C)threat to sales generation schemes.
D)threat to operational financing.

Question 73

What is synergy?

Question 74

When conducting a(n)________, a potential business owner examines the demand by customers and the supply provided by competing firms in the marketplace.

Question 75

The process of determining if you have the resources necessary to take advantage of a business opportunity is called ________.

Question 76

Identify a true statement about the process of generating new business ideas.

A)As a business idea evolves, an entrepreneur must be willing to develop a new set of skills to make it successful.
B)While generating business ideas, an entrepreneur needs to focus on exploitable market trends rather than use personal experience to inform the process.
C)Family is generally the best source of ideas for a new business.
D)Entrepreneurs should focus on generating ideas and funding a new business based on them, but they must not become personally involved in its success.

Question 77

Assume you have a hobby that you are passionate about.List and describe other kinds of skills that are needed to turn your hobby into a successful business.

Question 78

The ability to attract customers to your business instead of your competitors is an example of a threat to ________.

Question 79

How can patent files help a potential business owner come up with ideas for new businesses?

Question 80

Describe how someone comes up with an idea for a new business.