Business Plan Trivia 3 — Questions and Answers
Question 1: What does a value proposition explain in a business plan?
- How much the company is worth at exit
- The company's tax strategy
- Why customers should choose your product over alternatives (Correct answer)
- The salary structure for executives
Correct answer: Why customers should choose your product over alternatives
A value proposition states the unique benefit that makes customers pick your offering over competitors.
Question 2: A startup projecting sales by estimating total market size and taking a percentage is using which method?
- Top-down forecasting (Correct answer)
- Zero-based budgeting
- Bottom-up forecasting
- Sensitivity analysis
Correct answer: Top-down forecasting
Top-down forecasting starts with the overall market size and works down to an estimated share.
Question 3: What does TAM stand for when sizing a market in a business plan?
- Target Acquisition Model
- Trade Association Membership
- Total Addressable Market (Correct answer)
- Typical Annual Margin
Correct answer: Total Addressable Market
TAM represents the total revenue opportunity if a product captured 100% of its market.
Question 4: Which section of a business plan would list resumes and permits as supporting documents?
- Marketing plan
- Executive summary
- Mission statement
- Appendix (Correct answer)
Correct answer: Appendix
The appendix holds supporting materials like resumes, licenses, permits, and detailed data.
Question 5: In a business plan, what is a milestone?
- A supplier contract clause
- A type of equity share
- A one-time tax payment
- A specific, dated goal marking measurable progress (Correct answer)
Correct answer: A specific, dated goal marking measurable progress
Milestones are concrete, scheduled achievements used to track a company's progress against its plan.
Question 6: What is the main purpose of a competitive analysis?
- To choose an office location
- To set employee performance reviews
- To identify rivals' strengths and weaknesses and position against them (Correct answer)
- To calculate quarterly tax liability
Correct answer: To identify rivals' strengths and weaknesses and position against them
Competitive analysis examines rivals so a business can differentiate and position itself effectively.
Question 7: Which pricing approach sets prices based on what customers believe the product is worth?
- Penetration pricing
- Loss-leader pricing
- Cost-plus pricing
- Value-based pricing (Correct answer)
Correct answer: Value-based pricing
Value-based pricing anchors the price to the customer's perceived worth rather than production cost.
Business Plan Trivia 3
What does a value proposition explain in a business plan?