Name:

Progress Check: Chapter 4

Directions
After reading each question carefully, choose the best answer based on information
learned in this chapter. You will find the answers with explanations on the final page.
1. John has evaluated several concepts and decided that a shaved ice beverage business
meets his personal vision better than any other concepts. He is now ready to test the concept
for feasibility. Using the Model Business Feasibility Checklist should help John determine
a. a location that would best support his business.
b. how well the business matches his entrepreneurial characteristics.
c. an exit strategy that matches his personal goals.
d. potential weaknesses in product/service, market, or financial criteria.
2. The concept of a Model Business describes an ideal business with perfectly feasible
characteristics. Although this type of business doesn't exist, using The Model Business
Feasibility Checklist helps entrepreneurs
a. establish areas of improvement for a business concept.
b. compare one concept against another.
c. identify potential concepts for products/services.
d. all the above.
e. a and b above.
3. Which of the following health care products related to poison ivy would most likely be rated as
Customers perceive a need for product/service on the Model Business Feasibility Checklist?
a. Lotion that prevents people from getting a reaction to poison ivy
b. Cream that relieves the symptoms of poison ivy
c. Allergy testing to determine a person's sensitivity to poison ivy
d. Medical book about poison ivy cases
4. When reviewing business concepts against the Model Business Feasibility Checklist, which of
the following products would score best on Product/Service has unlimited life?
a. Grocery produce
b. Womens clothing
c. Computer software
d. Snow skis
e. Carpenters hand tools

2012 Ewing Marion Kauffman Foundation. All Rights Reserved.

Planning the Entrepreneurial Venture

Progress Check 4 Page 1 of 3

5. Trevor plans to open a clothing retail shop. He will use vertical integration to market his
products/services to different levels throughout the distribution channel. Due to this strategy,
his products/services will rate fairly well against which of the following criteria?
a. Product/service is unique and protectable
b. Product/service is not regulated by the government
c. Product/service line has expansion potential
d. Product/service has no liability risk
e. Product/service has great news value

6. As Beth evaluates the market feasibility for her horse breeding business concept, she will
compare her concept to the model business. Against the market criteria, the business should
rate fairly well, since the model business has a market that is
a. general. Almost everyone is a potential customer for its products/services.
b. unclear, since innovative product/services open up new markets.
c. easy to recognize and measure. Customers can be identified and measured.
d. unknown. New products/services sell to yet unidentified markets.
7. Alex knows that having a well-planned distribution system is a key factor in the success of his
restaurant marketing and promotions business. He believes his business will rate high on
market feasibility since the criterion for the model business is that the distribution channel
a. is established and receptive.
b. is created from new distribution sources.
c. eliminates intermediaries.
d. provides a broad approach that reaches more customers.
8. Because of potential liability risks in an accounting and tax preparation business, Libby is
concerned about how her business concept will rate against the model business criterion,
"Legal problems do not exist." To improve her feasibility in this area, Libby would be wise to
a. hire a CPA to audit her books.
b. purchase insurance.
c. do nothing. This type of business involves very little risk.
d. reduce risks by carefully checking her work.
9. The model business has gross margin of 100 percent. This number means that the model
business has
a. no direct material or labor costs.
b. high profit margin.
c. low operating costs.
d. high materials and product costs.
e. all of the above.
10. In the model business, "Wealth is generated through exit strategy." For Sean's software
development business to rate fairly well against this criterion, Sean must establish a plan to
a. sell the business.
b. merge the business with another.
c. sell shares of stock to the public.
d. all of the above.
e. a and b above.

2012 Ewing Marion Kauffman Foundation. All Rights Reserved.

Planning the Entrepreneurial Venture

Progress Check 4 Page 2 of 3

Answers
1

d
Comparing the business concept to the Model Business may reveal additional
strengths and weaknesses to consider in the Product/Service, Marketing, and
Financial Plans.

e
Entrepreneurs can use the Model Business Feasibility Checklist score to compare
one concept against another. The score can also be used to identify areas of
improvement.

b
The model business has customers who perceive a need for what the business has
to sell. An example of a product/service with a strong perceived need is a cream that
relieves the symptoms of poison ivy.

e
The model business has a product/service with an unlimited life. That is, the
product/service does not become unsalable because it is obsolete, out of fashion,
perishable, or affected by weather.

c
For Trevor's clothing retail shop, vertical integration refers to an expansion strategy
that could include designing and manufacturing clothes and marketing them to
different levels throughout the existing distribution channel.

c
The model business has a market for its products/services that is easy to recognize
and measure. Beth should be able to identify and measure her market as those
individuals interested in horses.

a
The model business has an established and receptive distribution system. The
advantage of tapping into an established distributor is that it can immediately begin
marketing new product/service lines to its existing customers.

b
When rating low against The Model Business Feasibility Checklist, entrepreneurs
should take action to improve feasibility. Libby should reduce legal risks by
purchasing insurance, becoming self-insured, or seeking the assistance of riskavoidance advisors.

a
Gross margin (also called gross income or gross profits) is the amount of money
businesses have left after they pay direct material and labor costs. It represents the
dollars available to cover the operating costs of the business. Gross margin minus
operating costs results in a profit or loss for the business.

10 d
The model business is structured from its inception to create wealth for the
entrepreneur through selling, through merging with another business, or by selling
shares in the business to the public at large. Planning the harvest is the key.

2012 Ewing Marion Kauffman Foundation. All Rights Reserved.

Planning the Entrepreneurial Venture

Progress Check 4 Page 3 of 3