Entrepreneurship and Small Business (ESB) Certification Practice Exam

When considering the viability of buying a gift shop, which three factors are crucial?

1. Location, infrastructure, customer service

2. Financing requirements, staffing, local competition

3. Financing requirements, revenues and costs, market size

4. Market demand, product variety, promotions

The correct answer is: Financing requirements, revenues and costs, market size

When evaluating the viability of buying a gift shop, determining financing requirements, revenues and costs, and market size are fundamental factors. Financing requirements are critical because understanding how much capital is needed to purchase and operate the business will influence both the buyer's ability to acquire the shop and the sustainability of the business. It's essential to assess the initial investment needed and ongoing operational costs to ensure the business can sustain itself financially. Revenues and costs provide insight into the potential profitability of the gift shop. Analyzing revenue streams helps identify how much income the shop can generate, while understanding costs (fixed and variable) allows for an accurate assessment of the profit margins. Together, these give a clearer picture of the financial health and potential success of the venture. Market size is also a vital consideration because it relates to the potential customer base for the gift shop. Understanding the market size helps gauge whether there are enough customers in the area to support the business and grow it over time. A larger market size typically indicates more opportunities for sales and expansion. In contrast, while factors such as location, customer service, and local competition can be important in the broader context of running the shop successfully, they do not directly address the financial viability at the purchasing stage. Factors like market demand,