Chapter 5 pg. 123 #1 & 4

1. When choosing a business to enter, it is important that any unattractive ideas are eliminated from consideration. This enables to concentrate on selecting the most desirable businesses. Furthermore, it is important to consider the challenges, opportunities and rewards; financially and personally when choosing the type of business to enter. Being ruthless is key; such as “What’s in it for me?” are key questions to gain more information and interest in the business. Any entrepreneur must ask questions, whether it is to buy an existing business, creating a new business or even extending a franchise.

4. To begin with, one must look at the potential for each product. If the market does not exist or cannot be developed; the book states to not pursue the project any further. However, the market must be large enough to accommodate a newcomer. Therefore, asking questions such as: How large is the industry? What are the number and size of competitors? What is the success rate for competing businesses? These questions will help a newcomer make his/her decision but must ask further questions. Questions will most likely decrease the failure of your new business.

Chapter 7 pg. 195 #1 & 7

1. According to the Small Business Administration, it suggests that newcomers determine the seed money needed to star-up, onetime costs, ongoing costs, separating costs into fixed (that doesn’t change) or variable with sales, renovation costs must also be included if necessary, and also identifying which costs are essential or optimal.

7. Equity financing will serve as a buffer that will protect creditors from loss in case of any difficulties financially. Equity financing also takes preference over claims of the common and preferred stockholders, in the event od default on a contractual obligation such as interest payment, creditors have a