Business Plan Business Plan 2 — Questions and Answers
Question 1: Which section of a business plan is typically written last but appears first in the document?
- Financial projections
- Market analysis
- Appendix
- Executive summary (Correct answer)
Correct answer: Executive summary
The executive summary condenses the entire plan, so it is drafted after all other sections are complete.
Question 2: A startup projects it will run out of cash in month 8 despite showing accounting profits. Which business plan component would best reveal this problem in advance?
- Organizational chart
- Mission statement
- Cash flow projection (Correct answer)
- Income statement
Correct answer: Cash flow projection
Cash flow projections track the timing of cash in and out, exposing shortfalls that profit statements can hide.
Question 3: In a SWOT analysis included in a business plan, a new competitor entering the market would be classified as a(n):
- Weakness
- Strength
- Opportunity
- Threat (Correct answer)
Correct answer: Threat
External factors that could harm the business, such as new competitors, are threats in SWOT.
Question 4: Which financial metric tells an entrepreneur the sales level at which total revenue equals total costs?
- Gross margin
- Return on investment
- Break-even point (Correct answer)
- Current ratio
Correct answer: Break-even point
The break-even point is where revenue exactly covers fixed and variable costs, producing zero profit or loss.
Question 5: A business plan states the total market is $2B, the reachable segment is $400M, and the realistic first-year capture is $8M. The $400M figure represents the:
- Total addressable market (TAM)
- Serviceable obtainable market (SOM)
- Compound annual growth rate (CAGR)
- Serviceable available market (SAM) (Correct answer)
Correct answer: Serviceable available market (SAM)
SAM is the portion of the total market the company's products and geography can actually serve.
Question 6: Which of the following belongs in the appendix of a business plan rather than the main body?
- The value proposition
- The executive summary
- The pricing strategy
- Founders' full resumes and detailed legal documents (Correct answer)
Correct answer: Founders' full resumes and detailed legal documents
Supporting documents like resumes, contracts, and permits go in the appendix to keep the main body concise.
Question 7: An investor reading a business plan asks about the 'exit strategy.' What are they trying to learn?
- How the founder plans to fire underperforming staff
- How the company will leave its current office lease
- How investors will eventually realize a return, such as through acquisition or IPO (Correct answer)
- How the company will discontinue unprofitable products
Correct answer: How investors will eventually realize a return, such as through acquisition or IPO
An exit strategy explains how investors and owners will convert equity into cash, typically via sale, merger, or public offering.
Business Plan Business Plan 2
Which section of a business plan is typically written last but appears first in the document?