SBA Business Planning & Development Strategies 3 — Questions and Answers
Question 1: In financial projections, which statement shows a business's revenues, expenses, and net profit or loss over a period?
- Balance sheet
- Cash flow statement
- Income statement (Profit & Loss) (Correct answer)
- Statement of retained earnings
Correct answer: Income statement (Profit & Loss)
The income statement (also called a Profit & Loss statement) summarizes revenues and expenses to show net profit or loss for a specific period.
Question 2: A business owner uses Porter's Five Forces to assess:
- Internal employee performance
- Industry competitiveness and profitability potential (Correct answer)
- Cash reserves and liquidity
- SBA loan eligibility
Correct answer: Industry competitiveness and profitability potential
Porter's Five Forces framework analyzes industry structure by examining competitive rivalry, supplier power, buyer power, threat of substitutes, and threat of new entrants.
Question 3: Which milestone in a startup's business development is known as 'product-market fit'?
- When the product is first manufactured
- When the business secures its first bank loan
- When the product satisfies a strong market demand (Correct answer)
- When the business hires its first full-time employee
Correct answer: When the product satisfies a strong market demand
Product-market fit occurs when a product effectively meets the needs of a target market, evidenced by strong customer retention and organic growth.
Question 4: What does the term 'bootstrapping' mean in the context of business development?
- Applying for the maximum SBA loan amount
- Funding a business using personal savings and internal revenue without outside investment (Correct answer)
- Licensing a franchise from an established brand
- Securing venture capital in the early stages
Correct answer: Funding a business using personal savings and internal revenue without outside investment
Bootstrapping means building and scaling a business using the founder's own resources and generated revenue, avoiding external debt or equity financing.
Question 5: In strategic planning, a company's 'mission statement' differs from its 'vision statement' because the mission statement:
- Describes the long-term aspirational future state of the company
- Defines the company's current purpose and how it serves customers (Correct answer)
- Lists specific financial targets for the next fiscal year
- Outlines the organizational chart and reporting structure
Correct answer: Defines the company's current purpose and how it serves customers
A mission statement defines why the company exists and what it does today, while a vision statement describes where the company aspires to be in the future.
Question 6: Which pricing strategy sets a high initial price for a new product to maximize revenue from early adopters before lowering it?
- Penetration pricing
- Cost-plus pricing
- Price skimming (Correct answer)
- Value-based pricing
Correct answer: Price skimming
Price skimming involves launching at a premium price to capture early adopters willing to pay more, then gradually reducing the price to reach broader market segments.
Question 7: A sole proprietorship business development plan should specifically address which unique risk not shared by corporations?
- Double taxation on business profits
- Unlimited personal liability of the owner (Correct answer)
- Complex shareholder governance requirements
- Mandatory board of directors approval for decisions
Correct answer: Unlimited personal liability of the owner
Sole proprietors face unlimited personal liability, meaning their personal assets can be seized to satisfy business debts and legal judgments.
SBA Business Planning & Development Strategies 3
In financial projections, which statement shows a business's revenues, expenses, and net profit or loss over a period?