Entrepreneurial Finance: Finance and Business Strategies for the Serious Entrepreneur

400 Pages·2009·1.48 MB·English

by  Steven Rogers

ENTREPRENEURIAL
FINANCE
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ENTREPRENEURIAL
FINANCE
Finance and Business Strategies
for the Serious Entrepreneur
Second Edition
STEVEN ROGERS
Gordon and Llura Gund Family Professor of Entrepreneurship
Director, Larry and Carol Levy Institute for Entrepreneurial Practice
J.L. Kellogg School of Management, Northwestern University
WITH ROZA MAKONNEN
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ISBN: 978-0-07-159127-0
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C O N T E N T S
Preface xi
Chapter 1
The Entrepreneurial Spectrum 1
Introduction 1
Entrepreneurial Finance 2
Types of Entrepreneurs 3
The Entrepreneurial Spectrum 5
Chapter 2
The Entrepreneur 17
Introduction 17
Success Rates of Entrepreneurs 17
Why Become an Entrepreneur? 24
Traits of an Entrepreneur 35
Impact on the Economy 45
Impact on Gender and Race 48
Chapter 3
The Business Plan 55
Introduction 55
The Dual-Purpose Document 56
Business Plan Development and Advice 57
The Business Plan 58
Development of Pro Formas 71
Checklist of Financial Information 74
v
vi Contents
Most Important Business Plan Sections 75
Business Plan Development Sources 76
After the Business Plan Is Written 78
Chapter 4
Financial Statements 81
Introduction 81
The Income Statement 82
The Balance Sheet 92
The Statement of Cash Flows 97
Chapter 5
Financial Statement Analysis 103
Introduction 103
The Proactive Analysis 103
Income Statement Analysis 107
Ratio Analysis 108
Breakeven Analysis 116
Measuring Growth 117
Case Study—Clark Company 121
Gross Margins 131
Net Margins 139
Other Issues to Consider 143
Chapter 6
Cash Flow Management 149
Introduction 149
Types of Cash Flow 149
Cash Flow Forecasts 153
Cash Flow Management 155
Accounts Receivable 158
Accounts Payable 168
The Cash Gap 170
Working Capital 174
Finding Cash 175
Contents vii
Chapter 7
Valuation 179
Introduction 179
Valuing the Clark Company 182
Premoney and Postmoney Valuations 183
Why Value Your Company? 185
Key Factors Influencing Valuation 187
Valuation Methods 203
Multiples 203
Multiples of Gross Margin 210
Different Industries Use Different Multiple Benchmarks 210
Asset Valuation 214
Capitalization of Cash Flows 214
Valuing Technology and Internet Companies 220
Chapter 8
Raising Capital 229
Introduction 229
Value-Added Investors 231
Sources of Capital 232
The Investment Is in the Entrepreneur 233
Chapter 9
Debt Financing 237
Introduction 237
Types of Debt 238
Sources of Debt Financing 239
Creative Ways to Structure Long-Term Debt 262
Long-Term Debt Rules to Live By 263
Debt Financing for Working Capital 264
Chapter 10
Equity Financing 275
Introduction 275
viii Contents
Sources of Equity Capital 276
Private Placements 281
Corporate Venture Capital 284
Private Equity Firms 285
International Private Equity 291
Advice for Raising Private Equity 292
Increasing Specialization of Private Equity Firms 293
Identifying Private Equity Firms 294
Small-Business Investment Companies 295
Initial Public Offerings 297
Public Equity Markets 300
The IPO Process 304
The Financing Spectrum 309
Direct Public Offerings 310
Chapter 11
Financing for Minorities and Women 315
Introduction 315
Minorities—Debt Financing 318
Minorities—Equity Financing 319
Women—Debt Financing 321
Women—Equity Financing 322
Chapter 12
Taking a Job with an Entrepreneurial Firm 327
Introduction 327
Case Study: Considering a Job Offer from an Early-Stage Company 328
Case Study Analysis 338
Chapter 13
Intrapraneurship: Corporate Entrepreneurship 345
The Intrapreneurship Spectrum 346
Contents ix
Intrapreneurship Models 348
Traits of the High-Growth Intrapreneur 349
Acts of Intrapreneurship 350
Signs of Intrapreneurial Success 352
Standard Operating Procedures 353
Intrapreneurship Blunder 354
Conclusion 357
Appendices 359
Appendix A: Industry Profitability 359
Appendix B: U.S. Funds Focused on Minority Markets 367
Index 373