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BSEH SS Entrepreneurship study materials
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BSEH SS Entrepreneurship practice questions

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Question 1Entrepreneurial Opportunities and the Entrepreneurial Mindset

In entrepreneurship, an opportunity is best described as which of the following?

  1. a published long-term economic forecast that guarantees steady demand for an existing product line in every regional market it serves
  2. a favourable set of circumstances that creates a need for a new product or venture with profit potential Correct answer.
  3. any personal hobby or interest that a founder enjoys enough to convert into a full-time business
  4. a government grant or subsidised loan that covers the full cost of starting a new manufacturing unit

Explanation

An opportunity exists when a set of conditions creates a real need that a new product, service or venture can satisfy at a price customers accept while covering costs. A hobby, a subsidy or a forecast may support a venture, but none of them is by itself a need with profit potential.

Question 2Entrepreneurial Opportunities and the Entrepreneurial Mindset

A student says: "Whether my venture succeeds depends mainly on how hard I work and the choices I make, not on luck." This statement best illustrates which entrepreneurial characteristic?

  1. a strong preference for external funding
  2. an internal locus of control Correct answer.
  3. a high tolerance for ambiguity and uncertainty
  4. an external locus of control

Explanation

Locus of control describes where a person believes the causes of outcomes lie. Someone with an internal locus of control credits their own effort and decisions rather than luck, fate or powerful outsiders, which supports persistence after setbacks.

Question 3Entrepreneurial Opportunities and the Entrepreneurial Mindset

A team meets to generate as many new product ideas as possible. Every suggestion is written on the board, and nobody comments on or criticises any idea during the session. This technique is called which of the following?

  1. SWOT analysis
  2. break-even analysis
  3. brainstorming Correct answer.
  4. cost-benefit analysis

Explanation

Brainstorming is a group creativity technique in which quantity of ideas is encouraged and judgement is postponed so that participants build freely on each other's suggestions. Criticism during the session suppresses the flow of ideas, so evaluation is delayed until afterwards.

Question 4Entrepreneurial Opportunities and the Entrepreneurial Mindset

A founder has an idea for a mobile app that reminds users to water their plants. Before treating this idea as an entrepreneurial opportunity, she should confirm which of the following?

  1. her friends and family all say they would probably download it once it is published
  2. the app already has a logo, a name and a social media account with a large following of users
  3. the app can be built using only free software tools and no paid staff at any stage
  4. enough customers face this problem and will pay more than the cost of serving them Correct answer.

Explanation

An idea becomes an opportunity only when it is attractive, timely and durable enough that customers will pay a price above the cost of delivering the solution. Branding, cheap tools and friendly encouragement do not show that a paying market exists.

Question 5Entrepreneurial Opportunities and the Entrepreneurial Mindset

A bakery owner notices that local offices now allow remote work two days a week and that home delivery orders have risen sharply. Treating these shifts as a possible business opportunity is an example of which of the following?

  1. scanning the environment for emerging trends and changing customer needs Correct answer.
  2. waiting for a government agency to announce a new subsidy scheme before making any decision
  3. copying a competitor's product line without making any changes to it
  4. reducing product quality so that the selling price can be lowered

Explanation

Environmental scanning means systematically watching social, technological, economic and regulatory changes for signals of unmet or changing customer needs. Recognising that remote work changes where and when people buy baked goods is exactly this kind of trend-based opportunity spotting.

Question 6Entrepreneurial Opportunities and the Entrepreneurial Mindset

Before launching, an entrepreneur tests a small batch of her product at one weekend market and keeps her spending low enough that losing it would not damage her finances. This behaviour best illustrates which of the following?

  1. taking a calculated risk with a limited downside Correct answer.
  2. avoiding risk entirely by staying in paid employment
  3. transferring all risk to a bank through a large loan
  4. gambling on an untested idea with all of her savings

Explanation

A calculated risk is one where the possible loss has been estimated and capped in advance, so the venture can be tested without threatening the founder's security. A small paid trial generates real market evidence while keeping the worst-case outcome affordable.

Question 7Entrepreneurial Opportunities and the Entrepreneurial Mindset

An entrepreneur interviews 25 potential buyers about how they currently solve a problem and what they spend on it, before building any product. This activity is best described as which of the following?

  1. registering the company and filing the required tax documents
  2. recruiting senior staff for a future sales team
  3. designing a logo and choosing a brand colour scheme
  4. customer discovery to validate demand Correct answer.

Explanation

Customer discovery is the process of talking to real potential buyers to confirm that a problem exists, how it is currently handled and whether people will pay to solve it. It reduces the risk of building a product that nobody wants by testing assumptions before spending on development.

Question 8Entrepreneurial Opportunities and the Entrepreneurial Mindset

Two founders have limited savings. Instead of forecasting a ten-year return, they first decide the maximum amount of money and time they can afford to lose, and they proceed only within that limit. Which effectuation principle does this reflect?

  1. the pilot-in-the-plane principle that the future is made rather than predicted
  2. the lemonade principle of treating surprises as sources of new opportunity
  3. the crazy-quilt principle of building partnerships with self-selected stakeholders
  4. the affordable-loss principle Correct answer.

Explanation

Effectuation replaces predicted returns with affordable loss: the entrepreneur decides in advance how much resources can be exposed and commits no more than that. This keeps the venture going even when the outcome is uncertain, because the worst case has already been judged acceptable.

Question 9Entrepreneurial Opportunities and the Entrepreneurial Mindset

A nurse with ten years of experience in elder care notices that families struggle to coordinate medication schedules and starts a service to solve this. Her ability to spot this opportunity is best explained by which of the following?

  1. prior domain knowledge and entrepreneurial alertness Correct answer.
  2. an external locus of control combined with low self-efficacy
  3. a strong personal preference for avoiding all forms of risk
  4. a high need for external validation from investors

Explanation

Opportunity recognition is strongly shaped by prior knowledge of a market: people notice gaps in fields they already understand because they can interpret what others overlook. Entrepreneurial alertness is the readiness to connect that knowledge to an unmet need and act on it.

Question 10Entrepreneurial Opportunities and the Entrepreneurial Mindset

A founding team builds a simple landing page describing its proposed service and measures how many visitors join a waiting list. This is best described as which of the following?

  1. a full-scale product launch across all target markets
  2. a minimum viable product used to test assumptions Correct answer.
  3. a patent application to protect an invention
  4. a break-even calculation for the first year of trading

Explanation

A minimum viable product is the smallest version of an offering that lets a team test its key assumptions with real users at low cost. A landing page with a sign-up measure tests whether the value proposition attracts interest before the full service is built.

Question 11Entrepreneurial Opportunities and the Entrepreneurial Mindset

A founder has only partial competitor pricing data and vague feedback from two pilot stores, yet decides to run a limited launch next month instead of waiting for complete information. Which entrepreneurial characteristic does this behaviour best illustrate?

  1. Confirmation bias
  2. Tolerance of ambiguity Correct answer.
  3. Risk aversion
  4. Planning fallacy

Explanation

Tolerance of ambiguity is the capacity to act on incomplete, contradictory or uncertain information rather than freezing until certainty arrives. The founder here accepts that the data is partial and still commits to a bounded next step. Risk aversion would push toward delay, while planning fallacy and confirmation bias are reasoning errors, not comfort with uncertainty.

Question 12Entrepreneurial Opportunities and the Entrepreneurial Mindset

A student entrepreneur's first pitch is rejected. She says: "Pitching is a skill I can build; the rejection tells me what to practise, not what I am incapable of." Which construct does this statement best reflect?

  1. Fixed mindset
  2. Risk propensity
  3. Growth mindset Correct answer.
  4. Overconfidence

Explanation

A growth mindset holds that abilities are developable through effort, feedback and practice, so failure carries information rather than a verdict on innate talent. The student treats rejection as diagnostic feedback about a skill she can improve. A fixed mindset would instead treat the rejection as proof that pitching ability is a permanent trait.

Question 13Entrepreneurial Opportunities and the Entrepreneurial Mindset

A facilitation technique asks a team to list an industry's unstated rules - for example, "customers must pay before delivery" - and then describe the business model that would exist if each rule were inverted. This technique is best described as which of the following?

  1. Mind mapping
  2. Assumption reversal Correct answer.
  3. Weighted scoring of ideas
  4. Benchmarking

Explanation

Assumption reversal is a creativity technique that surfaces taken-for-granted rules in a market and deliberately negates them to open unfamiliar solution space. Inverting "pay before delivery" into "delivery before payment" forces the team to redesign the model rather than refine the existing one. Benchmarking copies others' practice, mind mapping organises related ideas, and weighted scoring evaluates ideas after they exist.

Question 14Entrepreneurial Opportunities and the Entrepreneurial Mindset

A team assessing a meal-kit venture asks three questions: Will target households actually want this enough to switch from their current habits? Can we source and deliver reliably within our budget? Will the price cover costs and leave a margin? These questions correspond respectively to which set of evaluation lenses?

  1. Viability, desirability, feasibility
  2. Feasibility, desirability, viability
  3. Desirability, viability, feasibility
  4. Desirability, feasibility, viability Correct answer.

Explanation

Opportunity evaluation separates three tests: desirability asks whether customers genuinely want the offer, feasibility asks whether the team can actually deliver it with available resources and capability, and viability asks whether the economics sustain the venture. The meal-kit questions follow that order. Treating them separately prevents a team from validating demand and then discovering it cannot deliver profitably.

Question 15Entrepreneurial Opportunities and the Entrepreneurial Mindset

A wedding photographer loses her main venue when it cancels the whole season. Rather than abandoning the year, she uses the freed weekends to run pop-up portrait sessions at a local market, which becomes her most profitable line. In effectuation terms, this response illustrates which principle?

  1. Crazy-quilt partnering
  2. The lemonade principle Correct answer.
  3. Pilot-in-the-plane
  4. Affordable loss

Explanation

The lemonade principle describes entrepreneurs leveraging surprises and contingencies instead of spending effort avoiding or predicting them. The cancelled venue is an unexpected event that the photographer converts into a new revenue line. Affordable loss limits downside exposure, crazy-quilt partnering builds with self-selected stakeholders, and pilot-in-the-plane concerns acting on controllable factors rather than forecasting.

Question 16Entrepreneurial Opportunities and the Entrepreneurial Mindset

A student who has never sold anything spends a summer assisting an experienced market vendor and, watching her mentor handle rejections and close sales, becomes confident she could run her own stall. In self-efficacy theory, her confidence is mainly built through which source?

  1. Vicarious experience Correct answer.
  2. Physiological arousal
  3. Mastery experience
  4. Verbal persuasion

Explanation

Self-efficacy beliefs strengthen through four main sources, and observing a similar person succeed is vicarious experience, especially powerful when the observer has little prior performance of their own. The student's confidence comes from watching the mentor model the task. Mastery experience would require her own repeated successful selling, verbal persuasion would be encouragement, and physiological arousal refers to interpreting one's own bodily states.

Question 17Entrepreneurial Opportunities and the Entrepreneurial Mindset

A founder forecasts that one in ten residents of a city of 800,000 will pay for his app within a year, basing this on one enthusiastic conversation with a friend and no further evidence. The main flaw in his reasoning is which of the following?

  1. Anchoring on a competitor's price
  2. Underestimating the total market
  3. Sunk-cost reasoning
  4. Overconfidence in his own demand estimate Correct answer.

Explanation

Overconfidence is overestimating the precision or reliability of one's own judgement, and it commonly appears when a founder extrapolates a large adoption rate from a single anecdote. One friendly conversation cannot support an 80,000-customer forecast. The flaw is not the size of the market but the unwarranted certainty attached to the estimate.

Question 18Entrepreneurial Opportunities and the Entrepreneurial Mindset

After a pop-up shop loses money, the owner records which products sold, which price points failed and what she will test next, then relaunches with a narrower range. This response is best described as which of the following?

  1. Escalation of commitment
  2. Risk aversion
  3. Learning-oriented resilience Correct answer.
  4. Confirmation bias

Explanation

Resilience in entrepreneurship is not simply persistence; it is recovering from a setback and adapting using what the failure revealed. By documenting results and narrowing the range, the owner converts a loss into testable knowledge and changes course. Escalation of commitment would be repeating the same losing approach simply because resources were already spent.

Question 19Entrepreneurial Opportunities and the Entrepreneurial Mindset

Founder A sets a five-year revenue target, builds a detailed forecast, then raises the resources needed to reach it. Founder B begins from the customers, skills and contacts she already has and lets direction emerge from what partners commit to. How should Founder B's approach be characterised?

  1. Effectual reasoning, because she refuses to plan at all
  2. Causal reasoning, because she reuses existing resources
  3. Causal reasoning, working backwards from a set goal
  4. Effectual reasoning, starting from means and partners Correct answer.

Explanation

Effectuation is means-driven: the entrepreneur starts with who she is, what she knows and whom she knows, then co-creates the venture with self-selected stakeholders as commitments accumulate. Founder A's goal-then-resources sequence is the causal pattern. Effectuation does not forbid planning, so rejecting planning entirely misstates the logic.

Question 20Entrepreneurial Opportunities and the Entrepreneurial Mindset

In one region two rivals compete. Firm X is consistently first to introduce a new service; Firm Y waits until demand is proven but substantially redesigns its offer before entering. Using entrepreneurial orientation dimensions, which pairing best describes the two firms?

  1. X: competitive aggressiveness; Y: risk-taking
  2. X: risk-taking; Y: competitive aggressiveness
  3. X: proactiveness; Y: innovativeness Correct answer.
  4. X: innovativeness; Y: proactiveness

Explanation

Proactiveness is the first-mover, opportunity-seeking posture of acting ahead of competitors, which fits Firm X. Innovativeness is the propensity to generate and introduce novelty in offerings or processes, which fits Firm Y's substantial redesign even though it enters later. Competitive aggressiveness concerns out-competing rivals directly, and the scenario gives no evidence of head-to-head tactics from either firm.

Question 21Entrepreneurial Opportunities and the Entrepreneurial Mindset

An engineer develops a working device that has never existed before, but it stays in her workshop and is never sold or used by customers. A separate firm later brings a similar device to market and gains paying users. In entrepreneurship terms, the engineer produced a(n) ____, while the firm achieved a(n) ____.

  1. prototype; feasibility study
  2. innovation; invention
  3. invention; innovation Correct answer.
  4. opportunity; idea

Explanation

An invention is the first creation of a new product, process or device, whether or not anyone adopts it. An innovation is the first successful commercial or practical application of a new idea, which requires adoption by users or the market. The engineer created something new but did not commercialize it; the firm did.

Question 22Entrepreneurial Opportunities and the Entrepreneurial Mindset

According to Kirzner, the entrepreneur's distinctive role in a market is best described as which of the following?

  1. Introducing government-approved standards for a new product category
  2. Noticing and acting on profit opportunities that others have overlooked Correct answer.
  3. Organizing production factors so that average cost falls in a stable industry
  4. Bearing all financial risk in a venture in exchange for residual profit

Explanation

Kirzner emphasized entrepreneurial alertness: the ability to spot disequilibria, such as price differences or unmet needs, that other market participants have missed. The entrepreneur acts on that awareness, often through arbitrage, and thereby moves the market toward equilibrium. Organizing production and bearing risk describe other views of the entrepreneur.

Question 23Entrepreneurial Opportunities and the Entrepreneurial Mindset

In Sarasvathy's effectuation, the "bird in hand" principle means that an entrepreneur begins with which starting point?

  1. A detailed market forecast and a five-year financial plan
  2. The amount of capital investors are willing to commit
  3. Who they are, what they know and whom they know Correct answer.
  4. A comparison of competitors' prices and product features

Explanation

In effectuation, entrepreneurs start from their means - their identity, knowledge and networks - rather than from a predetermined goal and forecast. They then imagine what can be created with those means and with the stakeholders who commit to the venture. Detailed forecasts and competitor comparisons belong to a causal, predictive approach.

Question 24Entrepreneurial Opportunities and the Entrepreneurial Mindset

A founder with almost no capital builds a working delivery service by repurposing bicycles from a closing rental shop, using free scheduling software and recruiting friends as riders. This approach is best described as which of the following?

  1. Bricolage Correct answer.
  2. Market segmentation
  3. Crowdfunding
  4. Franchising

Explanation

Bricolage is making do by recombining resources that are already at hand - repurposed equipment, free tools and personal contacts - to address a new problem or opportunity. It is a resource-constrained form of entrepreneurial action rather than a financing method or a market-entry strategy.

Question 25Entrepreneurial Opportunities and the Entrepreneurial Mindset

Rather than researching the market alone, a founder shares early designs with suppliers and customers. Those who see value contribute materials, test sites and introductions, and become partners in the venture. In effectuation this strategy is called which of the following?

  1. The affordable loss principle
  2. Competitive benchmarking
  3. Causal forecasting
  4. The crazy quilt Correct answer.

Explanation

The crazy quilt principle describes how effectuators build partnerships with self-selecting stakeholders who make real commitments to the venture. Each committed stakeholder adds resources and reduces uncertainty, so the venture's shape emerges from these relationships rather than from prior market forecasts. It is not a pricing or competitor-analysis technique.

Question 26Entrepreneurial Opportunities and the Entrepreneurial Mindset

A founder evaluating a new service talks only with friends who already like the concept and ignores a former customer who explains why she would not pay. The founder's reasoning is most clearly affected by which of the following?

  1. Anchoring
  2. Confirmation bias Correct answer.
  3. Loss aversion
  4. Sunk cost fallacy

Explanation

Confirmation bias is the tendency to search for, interpret and remember information that supports one's existing belief while discounting contradictory evidence. By consulting only supportive friends and dismissing a skeptical customer, the founder insulates the concept from disconfirming market feedback. Anchoring and loss aversion involve different mechanisms.

Question 27Entrepreneurial Opportunities and the Entrepreneurial Mindset

After two years and most of his savings, a founder's meal-kit service still has fewer than 30 subscribers, and every test shows demand is weak. He continues because of the money and time already invested. This is best described as which of the following?

  1. Bootstrapping
  2. Escalation of commitment Correct answer.
  3. Effectuation
  4. Opportunity recognition

Explanation

Escalation of commitment occurs when decision-makers continue a failing course of action because of resources already invested, even though future prospects are poor. The rational question is whether further investment is justified by expected future returns, not by past spending. Persistence becomes a bias when it is driven by sunk costs.

Question 28Entrepreneurial Opportunities and the Entrepreneurial Mindset

A former factory worker starts a small cleaning business mainly because she needs income after a layoff, while a software engineer leaves his job to build a product he believes solves a large unmet need. These two cases are best classified respectively as which of the following?

  1. Intrapreneurship; necessity entrepreneurship
  2. Opportunity entrepreneurship; necessity entrepreneurship
  3. Social entrepreneurship; commercial entrepreneurship
  4. Necessity entrepreneurship; opportunity entrepreneurship Correct answer.

Explanation

Necessity entrepreneurship is driven by the absence of better income options, whereas opportunity entrepreneurship is driven by the pursuit of an identified market opportunity. The cleaning business reflects the first motive and the software venture the second. Social and commercial entrepreneurship describe the venture's mission, not the founder's motivation.

Question 29Entrepreneurial Opportunities and the Entrepreneurial Mindset

A founder enters a market where no comparable product has ever existed, so neither she nor any expert can assign reliable probabilities to demand outcomes. In entrepreneurship theory, this situation is best described as which of the following?

  1. Calculable risk
  2. Knightian uncertainty Correct answer.
  3. Diseconomies of scale
  4. A sunk cost

Explanation

Frank Knight distinguished risk, where outcomes have known or estimable probabilities, from uncertainty, where the situation is so novel that no reliable probability distribution can be assigned. A product with no comparable precedent creates uncertainty, so standard expected-value calculations rest on guesses. This is neither a sunk cost nor a scale effect.

Question 30Entrepreneurial Opportunities and the Entrepreneurial Mindset

Before launching, a team spends an hour imagining that the venture has already failed and writing down every plausible reason. The main value of this exercise is to do which of the following?

  1. Replace the need for customer interviews and market tests
  2. Surface overlooked risks and reduce overconfidence Correct answer.
  3. Calculate the exact probability of each identified failure
  4. Guarantee that the venture will avoid all of the listed failures

Explanation

A pre-mortem uses prospective hindsight: by imagining that the venture has already failed, team members generate specific failure causes that are easier to overlook when they are optimistic. It reduces overconfidence and planning fallacy and can guide experiments, but it cannot guarantee success or replace real market evidence. Its output is a risk list, not precise probabilities.

Question 31Entrepreneurial Planning and Business Idea Development

A founding team wants to generate a wide range of business ideas before judging any of them. Which technique is designed specifically to separate idea generation from evaluation?

  1. Break-even analysis, where the team calculates the sales volume needed to cover costs
  2. Bootstrapping, where the founder funds the venture from personal savings
  3. Brainstorming, where participants defer criticism until later Correct answer.
  4. Benchmarking, where the team copies a competitor's published pricing

Explanation

Brainstorming deliberately separates divergent idea generation from convergent evaluation, so participants build on one another's suggestions without early criticism. The other techniques are planning or financing tools and do not generate a broad set of new venture ideas.

Question 32Entrepreneurial Planning and Business Idea Development

A business plan section states that the venture will earn money by charging restaurants a monthly subscription for waste-tracking software. Which planning element does this describe?

  1. The revenue model Correct answer.
  2. The risk register
  3. The organizational structure
  4. The milestone schedule

Explanation

A revenue model explains how the venture captures value from customers, including the pricing mechanism and payment frequency. Organizational structure, milestones, and the risk register describe internal roles, timing, and threats rather than the source of income.

Question 33Entrepreneurial Planning and Business Idea Development

Before committing to a full product build, a founder releases a stripped-down version that lets a small group of target customers complete the core task. What is the main purpose of this minimum viable product?

  1. To test the riskiest assumptions with the least effort and learn from real use Correct answer.
  2. To secure every operating licence required for national expansion
  3. To maximize production scale and drive down unit costs immediately
  4. To finalize the brand identity before any customer feedback

Explanation

An MVP is a learning tool: it exposes the venture's riskiest assumptions to real customer behavior at low cost. Brand finalization, licensing, and scale economies are later concerns and do not require an early stripped-down product.

Question 34Entrepreneurial Planning and Business Idea Development

A team has a detailed concept for a meal-kit service but no evidence that target customers will pay. Which action best tests willingness to pay before a full launch?

  1. Commission a logo and packaging design
  2. Run a staff poll to confirm that employees like the concept
  3. Offer a paid pilot or pre-sale deposit to a small group of target customers Correct answer.
  4. Register the company name and buy a domain

Explanation

Willingness to pay is revealed by actual purchase commitments, so a paid pilot or refundable pre-sale deposit provides direct evidence. Internal polls, branding, and registration do not show that customers will exchange money for the offer.

Question 35Entrepreneurial Planning and Business Idea Development

A founder estimates that the total market for a service is 50 million users, the serviceable market is 5 million users, and the obtainable market in the first year is 250,000 users. Which figure is the SOM?

  1. 250,000 users Correct answer.
  2. 55 million users
  3. 5 million users
  4. 50 million users

Explanation

SOM, the serviceable obtainable market, is the realistic share the venture can capture in a defined period, here 250,000 users. TAM is the total market and SAM is the serviceable portion, so 50 million and 5 million describe broader layers rather than the obtainable share.

Question 36Entrepreneurial Planning and Business Idea Development

Which value proposition statement is most likely to persuade a target customer?

  1. Our team has a strong passion for innovation and customer service.
  2. We aim to become the leading provider in our industry.
  3. We help independent restaurants reduce food waste by 20% within one month. Correct answer.
  4. Our platform uses a modern technology stack and was founded in 2024.

Explanation

A strong value proposition names a specific customer, a meaningful outcome, and a credible measure or timeframe. Statements about technology, founding year, ambition, or passion do not by themselves show the customer what benefit they will receive.

Question 37Entrepreneurial Planning and Business Idea Development

In the Business Model Canvas, which block identifies the assets and capabilities the venture must have to deliver its offer?

  1. Key Resources Correct answer.
  2. Revenue Streams
  3. Channels
  4. Customer Relationships

Explanation

Key Resources lists the physical, intellectual, human, and financial assets required to create and deliver the value proposition. Customer relationships, revenue streams, and channels describe customer interaction, income, and distribution rather than the underlying assets.

Question 38Entrepreneurial Planning and Business Idea Development

A lean startup's MVP attracts sign-ups, but few users return after the first week. The team has interviewed users and confirmed that the retention problem is real. What is the most appropriate next step?

  1. Scale paid advertising immediately to hide the retention weakness
  2. Discard all customer feedback because early users are unreliable
  3. Pivot or revise the product based on the validated learning Correct answer.
  4. Add every requested feature before measuring retention again

Explanation

Validated learning should drive a deliberate pivot or product revision when evidence shows the current approach is not retaining users. Scaling advertising, ignoring feedback, or expanding features without testing does not address the confirmed problem.

Question 39Entrepreneurial Planning and Business Idea Development

A venture's market research shows strong demand, but its financial analysis shows that customer acquisition cost exceeds customer lifetime value. What is the most defensible planning decision?

  1. Proceed to aggressive expansion because demand is strong
  2. Raise prices without checking customer price sensitivity
  3. Assume acquisition costs will fall automatically after launch
  4. Redesign the revenue or acquisition model before scaling Correct answer.

Explanation

If acquisition cost exceeds lifetime value, each new customer destroys value, so scaling would worsen the problem. The team should first change pricing, retention, or acquisition channels and retest the unit economics.

Question 40Entrepreneurial Planning and Business Idea Development

A startup's only differentiator is a feature that competitors can copy in a few weeks. Which strategy is most likely to build a durable competitive advantage?

  1. Keep the feature secret and avoid all customer contact
  2. Rely on being first to market as the sole defense
  3. Develop network effects or switching costs that grow with usage Correct answer.
  4. Cut prices permanently below cost to discourage entrants

Explanation

Durable advantages are hard to copy because they strengthen with scale or use, such as network effects, switching costs, or proprietary data. Secrecy, first-mover status alone, and below-cost pricing are fragile or unsustainable defenses.

Question 41Entrepreneurial Planning and Business Idea Development

A founder notices that independent pharmacies in her city still track inventory on paper and lose stock to expiry. She begins to define a venture around this gap. In entrepreneurial planning, a gap between an unmet customer need and a feasible way to serve it is best described as a(n):

  1. advertising slogan
  2. audited balance sheet
  3. staffing plan
  4. business opportunity Correct answer.

Explanation

An opportunity is a favorable set of circumstances that creates a customer need the venture can serve profitably; it is more than a raw idea because it is grounded in a real problem and a feasible solution. A slogan, staffing plan, or audited statement is an output or tool used later, not the recognition of a market gap.

Question 42Entrepreneurial Planning and Business Idea Development

Before writing a full business plan, a founder tests whether the proposed product can be built, whether target customers actually want it, and whether the economics can work. This preliminary assessment is known as:

  1. feasibility analysis Correct answer.
  2. liquidation analysis
  3. brand audit
  4. payroll reconciliation

Explanation

Feasibility analysis examines the viability of a venture before major resources are committed, typically covering product or service feasibility, market demand, and financial feasibility. It reduces the risk of writing a detailed plan for a concept that cannot be built or sold.

Question 43Entrepreneurial Planning and Business Idea Development

A lender asks a founder for a document that describes the venture's target market, operating model, management team, and projected financial statements. The document that best satisfies this request is a:

  1. purchase order
  2. lease agreement
  3. business plan Correct answer.
  4. tax return

Explanation

A business plan is the standard document that integrates market analysis, strategy, operations, team, and financial projections for investors and lenders. A purchase order, lease, and tax return each record a single transaction or compliance matter rather than the whole venture.

Question 44Entrepreneurial Planning and Business Idea Development

A subscription-box venture has annual fixed costs of $60,000, a price of $50 per box, and variable cost of $30 per box. What is the annual break-even quantity?

  1. 3,000 boxes Correct answer.
  2. 1,500 boxes
  3. 2,000 boxes
  4. 1,200 boxes

Explanation

Break-even quantity equals fixed costs divided by contribution margin per unit. The contribution margin is $50 minus $30, or $20, so $60,000 divided by $20 equals 3,000 boxes. At that volume total contribution covers fixed costs exactly.

Question 45Entrepreneurial Planning and Business Idea Development

A founder groups prospective customers by household size, purchase frequency, and monthly food budget in order to tailor the offer. This activity is best described as:

  1. supplier selection
  2. prototype testing
  3. market segmentation Correct answer.
  4. cash-flow forecasting

Explanation

Market segmentation divides a broad market into groups of buyers with shared characteristics or needs so the venture can target them with a tailored offer. Cash-flow forecasting, supplier selection, and prototype testing are later operating or development tasks, not the grouping of customers.

Question 46Entrepreneurial Planning and Business Idea Development

A founder evaluating a new ride-hailing service studies the number of rival apps, drivers' ease of switching platforms, the bargaining power of large corporate clients, and the availability of substitute transport. These factors are the focus of which framework?

  1. break-even analysis
  2. SWOT analysis
  3. lean canvas
  4. Porter's Five Forces Correct answer.

Explanation

Porter's Five Forces assesses industry attractiveness through rivalry, supplier power, buyer power, threat of new entrants, and threat of substitutes. The listed factors map directly onto rivalry, switching costs, buyer power, and substitutes, whereas the other tools serve different planning purposes.

Question 47Entrepreneurial Planning and Business Idea Development

A business plan section explains the channels, sales process, and promotional activities the venture will use to reach its first 1,000 customers. This section is best labeled:

  1. risk register
  2. capitalization table
  3. production schedule
  4. go-to-market plan Correct answer.

Explanation

A go-to-market plan specifies how the venture will reach and convert target customers, including channels, sales motion, pricing communication, and promotion. A production schedule, risk register, and capitalization table address operations, risks, and ownership respectively.

Question 48Entrepreneurial Planning and Business Idea Development

A founder wants to validate that small accounting firms struggle with collecting client documents before building software. Which research approach provides the strongest evidence?

  1. Asking prospects whether they would probably buy the software once it becomes available
  2. Surveying friends and family about their general level of interest in accounting software
  3. Interviewing prospects about the last time the problem occurred Correct answer.
  4. Showing prospects a logo and asking whether it looks professional and trustworthy

Explanation

Questions about past behavior and actual workarounds reveal whether the problem is real, frequent, and costly, which is stronger evidence than hypothetical purchase intent. Friends, family, and logo reactions do not establish that the target segment experiences the problem.

Question 49Entrepreneurial Planning and Business Idea Development

An angel investor offers $250,000 for a venture at a $1,000,000 pre-money valuation. What ownership percentage will the investor receive after the investment?

  1. 40%
  2. 10%
  3. 20% Correct answer.
  4. 25%

Explanation

Post-money valuation equals pre-money valuation plus the new investment: $1,000,000 plus $250,000 equals $1,250,000. The investor's ownership is $250,000 divided by $1,250,000, which equals 20%.

Question 50Entrepreneurial Planning and Business Idea Development

A software venture has high fixed development costs and almost zero marginal cost per additional user. It wants to win adoption quickly against an established rival. Which pricing approach best supports that goal?

  1. Prestige pricing
  2. Cost-plus pricing
  3. Penetration pricing Correct answer.
  4. Skimming pricing

Explanation

Penetration pricing sets a low initial price to accelerate adoption and build share, which fits a market with near-zero marginal costs and a need for rapid user growth. Cost-plus and prestige pricing tend to raise price, while skimming deliberately starts high to capture early adopters.