why do you need a business plan? · the form of ownership section of a business plan is included...

Name Date Class

5.1 Why Do You Need a Business Plan?

True/False Directions: Place a T for T F f . th f 11 . rue or or False in the Answers column to show whether each of

e O owing statements is true or false. 1. A business plan helps to · b . convince anks and other people to mvest in your business idea. 2· How a business will keep customers is not a part of a business plan.

3. A business plan has four important purposes. 4· A b~sine~s must have a completely new product or service to convince investors that

the idea 1s solid.

S. A good business plan includes sales projections for the short, medium, and long term and sets forth future business plans.

6. The backgrounds and experience of the people who will be running the business help lenders make financing decisions.

7 • A business plan is necessary only if you need to secure financing for your business.

8. Writing a business plan can help you identify problems you might encounter in the future.

9. Lenders require a business plan before they will consider financing a business.

10. After your business is up and running, you will rarely use your business plan in making decisions.

Multiple Choice Directions: For each item below, select the choice that best completes the sentence. Print the letter identifying your choice in the Answers column.

1. A business plan should (a) list your competitors, (b) describe your financing arrangements, (c) detail who will run your business, (d) all of these.

2. One purpose of a business plan is to (a) describe how your business expects to set specific objectives, (b) explain how you will find your target customer, (c) show how your business will be able to keep customers, (d) identify the investors in your company.

3. A business plan explains how your product or service (a) will be produced, (b) will be sold, (c) is either new or better than existing products or services, (d) all of these.

4. Long-term sales projections are (a) for two to four years after start-up, (b) for five years in the future, (c) for ten years in the future, (d) not included in a business plan.

5. Which of the following is not a purpose of a business plan? (a) To describe the backgrounds and experience of your suppliers, (b) To explain the idea behind your business, (c) To explain how you expect to achieve specific objectives, (d) To describe the backgrounds and experience of the people who will be running the business.

6. Before they will consider financing a business, lenders require (a) an organization chart that lists all of your employees, (b) a business plan, (c) the history and background of your product, (d) a retirement plan.

7. After it is completed, you can use your business plan to (a) help manage your business, (b) identify your product or service, (c) identify your target customer, (d) make short-term sales projections.

8. A business plan is important for all of the following reasons except (a) it helps you communicate your ideas to others, (b) it helps you decide what product or service to sell, (c) it may help you secure financing for your business, (d) it makes you think about all aspects of your business.

Answers

1. T

2. F

3. F

4. F

5. T

6. T

7. F --

8. T

9. T

10. F

1. C - -

2. C - -

3. d

4. b --

5. a --

6. b

7. a

8. b

Copyright © South-Western Educational Publishing Chapter 5 • Develop a Business Plan 33

Name Date Class

- What Goes into a Husiness Plan?

True/False Directions: Place a T for True or F for False in the Answers column to show whether each of the following statements is true or false.

1. All business plans have different purposes, so they do not all have the same basic elements. 2. Describing how you came up with the idea for your business can help others

understand how your business will operate. 3. Writing a business plan can force entrepreneurs to think about their short-, medium-,

and long-term goals. 4. You should not cite any sources you use in researching information because it will

increase the length of your plan. 5. The form of ownership section of a business plan is included only if you plan to

organize as a partnership or corporation. 6. Copies of resumes help show that owners are qualified to manage a business. 7. The marketing section of your business plan should describe the location of your business. 8. A financial statement based on projected revenues is called an informal financial statement. 9. The financial section of your business plan should state how much money you need to

borrow and how much you are investing in the business. 10. A business that needs a license should include a legal issues section in its business plan.


Answers

1. F

2. T

3. T

4. F

5. F

6. T

7. F

8. F

9. T

10. T

1. All business plans (a) have seven basic elements, (b) have the same purposes, (c) are not 1. d alike, (d) all of these.

2. The history and background section of a business plan (a) describes the experience of 2. b the people who will be managing the business, (b) describes how you came up with the idea for your business, (c) explains the history of your company's product or service, (d) is not needed for a sole proprietorship.

3 . Expansion plans for your business should be included in which of the following sections? 3. d (a) Products or services, (b) History and background, (c) Marketing, (d) Goals and objectives.

4. You will need to perform research to find the necessary information for (a) the 4. c management and staffing section, (b) the goals and objectives section, (c) the products or services section, (d) the form of ownership section.

5. Your business plan should describe the location of your business because (a) different s. c forms of ownership have different types of locations, (b) every industry has an ideal type of location, (c) location is often a critical factor in a business's success, (d) all of these.

6. The marketing section of your plan explains (a) how you plan to enter the market, (b) who 6. d your prospective customers are, (c) your advantages over the competition, (d) all of these.

7. You should identify risks and explain how you plan to deal with them in (a) the 7. a financial section, (b) the goals and objectives section, (c) the marketing section, (d) the management and staffing section.

8. In the financial section, a new business must include (a) current financial statements, 8. c (b) lease or mortgage statements, (c) projected financial statements, (d) savings account statements.

9. Which of the following is not an element of the financial section of your plan? 9. c (a) Identification of risks (b) Financial statements, (c) Distribution of profits and losses, (d) Funding request and return on investment.

10. In addition to the basic elements of a business plan, some businesses may need to 10. d provide sections about (a) legal issues, (b) safety Issues, (c) liability issues, (d) all of these.

Name Date Class

- Create an Effective Business Plan

True/ False Directions: Place a T for True or F for False in the Answers column to show whether each of the following statements is true or false.

1. To convince readers that you have a practical business plan, you must include information and data from objective sources.

2. Books and government publications are good sources of information for your business plan, but magazines are less helpful.

3. Counselors from Small Business Development Centers and volunteers from SCORE can provide advice and workshops to help you develop your business plan.

4. Entrepreneurs can hire experts from trade associations to help them prepare business plans. 5 . A handwritten business plan is acceptable if it is neat, well organized, and inviting to read. 6 . The first three pages of a business plan should be the statement of purpose, the executive

summary, and the table of contents. 7. The cover letter briefly describes your business, its potential for success, and the amount

of capital you need. . 8. The executive summary is a short restatement of your business plan and should be no

longer than one or two pages. 9. The main body of your plan may be quite long because it should include all available

information and supporting documents. 10. Charts can be effectively used in the main body of the plan to illustrate your points.


Answers

1. T

2. F

3. T

4. F

5. F

6. F

7. T

8. T

9. F

10. T

1. All of the following are helpful resources in researching your business plan except (a) large 1 . a national newspapers, (b) the public library, (c) the Internet, (d) trade associations.

2. The retired executives working with SCORE (a) provide advice for a small fee, (b) hold 2. c inexpensive workshops, (c) are available over the Internet, (d) have offices at the SBA.

3 . All business plans should (a) be printed on standard-size white paper, (b) follow a 3 . d standard format, (c) be word processed, (d) all of these.

4. The introductory elements of a business plan include all of the following except (a) a 4. c cover letter, (b) a statement of purpose, (c) an introduction, (d) an executive summary.

5 . Your business plan should have a cover sheet that includes (a) a statement of the amount 5. b of capital you need, (b) the name, address, and phone number of the company, (c) a listing of the contents of the business plan, (d) a brief description of the business.

6 . The statement of purpose in a business plan should be (a) no more than one or two 6. c pages, (b) followed by the main body of the plan, (c) no more than one or two paragraphs, (d) the first introductory element.

7. A lender may decide not to read your entire business plan if the executive summary 7. c (a) is too long, (b) is too short, (c) is unconvincing, (ct) does not include information from objective sources.

8 . Your executive summary should (a) include your projections for sales, costs, and 8. d profits, (b) state the amount of money you want to borrow, (c) be written after the business plan is completed, (d) all of these.

9 . The main body of your plan should (a) include the eight basic elements, (b) be short and 9. b to the point, (c) immediately follow the statement of purpose, (d) avoid the use of tables.

10. Documents that might be included in the appendix are (a) pro forma financial statements, 10. c (b) further expansion plans, (c) income tax returns, (d) magazine articles.