Preface vii
1 The Power of Entrepreneurship 1
Entrepreneurship and Small Business in the United States 3
Entrepreneurial Revolution 4
Web: Three Revolutions Converge 9
Entrepreneurship Revolution Strikes Gold 10
Creative Destruction 11
Causes of the Entrepreneurial Revolution 12
Changes in the Entrepreneurial Framework Conditions 14
Churning and Economic Growth 18
Global Entrepreneurship Monitor 19
Principal Findings from GEM 20
Activity 20
Necessity, Opportunity, and Gender 20
Age Distribution of Early-Stage Entrepreneurial Activity 22
Growth Expectations and Job Creation 25
Entrepreneurship Ecosystems and the Importance of Support 27
Conclusion 29
Your Opportunity Journal 29
Web Exercise 30
Notes 30
Case: MightyWell 33
2 The Entrepreneurial Process 41
Critical Factors for Starting a New Enterprise 42
Evaluating Opportunities for New Businesses 47
Determining Resource Needs and Acquiring Resources 52
Profit Potential 56
Ingredients for a Successful New Business 58
Conclusion 59
Your Opportunity Journal 59
Web Exercise 60
Notes 60
Case: Vedavoo 62
3 Opportunity Recognition, Shaping, and Reshaping 70
From Glimmer to Action: How Do I Come Up with a Good Idea? 71
Is Your Idea an Opportunity? 76
The Opportunity Checklist 91
‘‘I Don’t Have an Opportunity’’ 91
Conclusion 93
Your Opportunity Journal 93
Web Exercise 93
Notes 93
Case: ISlide, Inc. 95
4 Prototyping Your Ideas 102
What is Prototyping? 103
Types of Prototyping 106
Conclusion 114
Your Opportunity Journal 114
Web Exercise 114
Notes 114
Case: Balanced Snacking 115
5 The Importance of Business Models 120
Introduction 120
The Core (Steps 1, 2, and 3) 122
The Market (Steps 4, 5, 6, and 7) 125
Customer Segments (Step 4) 126
Marketing Channels (Step 5) 126
Distribution Channels (Step 6) 127
Revenue Streams (Step 7) 128
Product and Operations (Steps 8, 9, 10, and 11) 129
Resources (Step 8) 129
Partners (Step 9) 129
Key Metrics (Step 10) 130
Cost Drivers (Step 11) 130
The External Enviroment and Financial Strategy (Steps 12, 13, and 14) 132
Competitive Environment (Step 12) 132
Industry Attractiveness (Step 13) 132
Financial Strategy (Step 14) 132
Conclusion 133
Your Opportunity Journal 133
Web Exercise 133
Notes 133
Case: Zumba Fitness 134
6 Entrepreneurial Marketing 141
Why Marketing is Critical for Entrepreneurs 142
Entrepreneurs Face Unique Marketing Challenges 142
Acquiring Market Information 143
Marketing Strategy for Entrepreneurs 145
Segmentation, Targeting, and Positioning 145
The Marketing Mix 146
Value Proposition: Articulating the Entrepreneurial Strategy 159
Social Media 162
Guerrilla Marketing 163
Marketing Skills for Managing Growth 165
Understanding and Listening to the Customer 165
Building the Brand 166
Conclusion 166
Your Opportunity Journal 166
Web Exercise 167
Appendix: Customer Interview 167
General Outline: It Needs to Be Tailored to Meet Your Research Needs 167
Notes 168
Case: Theo Chocolate 169
7 Building The Founding Team 184
Power of the Team 185
Where Do You Fit? 187
How to Build a Powerful Team 190
Bootstrapping: Building the Team Based on Stage-of-Venture Life 193
Compensation 194
Equity 194
Salary 198
Other Compensation Considerations 199
External Team Members 200
Outside Investors 200
Lawyers 200
Accountants 201
Board of Advisors 201
Board of Directors 202
Keeping the Team Together 203
Burnout 204
Family Pressure 205
Interpersonal Conflicts 205
Conclusion 205
Your Opportunity Journal 206
Web Exercise 206
Notes 206
Case: Box, Inc.: Preserving Startup Culture in a Rapidly Growing Company 208
8 The Business Planning Process 218
The Planning Process 220
The Story Model 221
The Business Plan 222
The Cover 222
Executive Summary 223
Table of Contents 224
Industry, Customer, and Competitor Analysis 224
Company and Product Description 228
Marketing Plan 229
Operations Plan 233
Development Plan 234
Team 235
Critical Risks 237
Offering 239
Financial Plan 239
Appendices 239
Types of Plans 239
Style Pointers for the Written Plan and Oral Presentation 240
Conclusion 241
Your Opportunity Journal 242
Web Exercise 242
Notes 242
Case: Gravyty: The Art + Science of Better Nonprofit Fundraising 243
9 Building Your Pro Forma 275
Financial Statements 276
Common Mistakes 276
Financial Statement Overview 277
Building Your Pro Forma Financial Statements 278
Build-Up Method 279
Revenue Projections 280
Cost of Goods Sold 281
Operating Expenses 282
Preliminary Income Statement 284
Comparable Method 284
Building Integrated Financial Statements 287
Income Statement 288
Balance Sheet 290
Cash-Flow Statement 291
Putting It All Together 292
Conclusion 292
Your Opportunity Journal 293
Web Exercise 293
Notes 293
Case: Gravyty: Understanding Your Market and Building Realistic Proformas 294
10 Raising Money for Starting and Growing a Business 302
Bootstrapping New Ventures 303
Informal Investors 304
Business Angels 306
Searching for Business Angels 306
Types of Business Angels 307
Putting Together a Round of Angel Investment 308
Amount of Capital Needed to Start a Business 309
Financial Returns on Informal Investment 309
Crowdfunding 310
Venture Capital 311
Classic Venture Capital 312
Mechanism of Venture Capital Investing 312
Financial Returns on Venture Capital 314
Dealing with Venture Capitalists 315
Negotiating the Deal 316
Valuation 317
Earnings Capitalization Valuation 318
Present Value of Future Cash Flows 318
Market‐Comparable Valuation (Multiple of Earnings) 318
Asset‐Based Valuation 319
Example of Market‐Comparable Valuation 319
Asset‐Based Valuation Example 321
Harvesting Investments 322
Initial Public Offering 323
Pros and Cons of an IPO 323
The Process of Going Public 324
BFWS Goes Public 326
Selling the Company 326
Why Be Acquired? 326
Conclusion 327
Your Opportunity Journal 328
Web Exercise 328
Notes 328
Case: MetaCarta: Growing a Company, Do We Take the VC Money? 331
11 Debt and Other Forms of Financing 338
Getting Access to Funds—Start with Internal Sources 339
Start with Credit Cards and Home Equity Lines 340
Cash Conversion Cycle 340
Working Capital: Getting Cash from Receivables and Inventories 342
Using Accounts Receivable as Working Capital 342
The Sales Pattern 343
Cash versus Credit Sales 343
Credit Policies 344
Setting Credit Terms 344
Collection Policies 345
Setting Credit Limits for Individual Accounts 346
Inventory 347
Sources of Short‐Term Cash: More Payables, Less Receivables 348
Cash from Short‐Term Bank Loans 349
Cash from Trade Credit 349
Cash Obtained by Negotiating with Suppliers 349
Cash Available Because of Seasonal Business Credit Terms 350
Advantages of Trade Credit 350
Cash Obtained by Tightening Up Accounts Receivable Collections 350
Obtaining Bank Loans Through Accounts Receivable Financing 351
Pledging 351
Pledging with Notification 351
Factoring 352
Recourse 352
Obtaining Loans against Inventory 352
Obtaining “Financing” from Customer Prepayments 353
Choosing the Right Mix of Short‐Term Financing 353
Traditional Bank Lending: Short‐Term Bank Loans 353
Maturity of Loans 354
Interest Rates 354
Collateral 355
Applying for a Bank Loan 356
Restrictive Covenants 356
General Provisions 357
Routine Provisions 357
Specific Provisions 358
Equipment Financing 358
Obtaining Early Financing from External Sources 359
SBA‐Guaranteed Loans 359
Applying for an SBA Loan 359
Conclusion 360
Your Opportunity Journal 361
Web Exercise 361
Notes 361
Case: FEED Resource Recovery 362
12 Legal and Tax Issues, Including Intellectual Property 373
Why, When, and How to Choose an Attorney 374
Leaving Your Present Position 374
Corporate Opportunity 374
Recruitment of Fellow Employees 375
Noncompetition 375
Intellectual Property 376
The Basics: What is Protectable and How Should It Be Protected? 377
Patents 377
Trade Secrets 383
Trademarks 385
Copyright 387
International Protection for Intellectual Property 388
Choice of Legal Form 390
Control 390
Personal Liability 391
Taxation 392
Initial Investment of the Founders 394
Administrative Obligations 394
Choosing a Name 395
Stockholders’ and Operating Agreements 395
Negotiating Employment Terms 395
Disposition of Equity Interests 396
Legal and Tax Issues in Hiring Employees 398
Employees as Agents of the Company 398
Employment Discrimination 399
Employment Agreements 400
Raising Money 400
Conclusion 401
Your Opportunity Journal 401
Web Exercise 402
Notes 402
Case: Wefunder: Leading the Growth of a New Industry 403
13 Entrepreneurial Growth 411
Making the Transition from Start‐up to Growth 412
Looking Forward: The Choice to Grow, or Not,… or Sell 412
A Model of Driving Forces of Growth 414
The Growth Process 415
Execution 416
Instituting Controls 417
Tracking Performance 418
Managing the Cash Cycle 420
Leveraging the Value Chain 422
Maintaining the Entrepreneurial Organization 423
Opportunity Domain 423
Organizational Resources and Capabilities 426
Obtaining Financial Resources for the Growing Company 427
Intangible Resources and Capabilities 428
Leadership 429
Starting the Delegation Process 430
First‐Level Management 431
From Delegation to Decentralization 431
Professional Management and Boards 432
Coordinating the Driving Forces 432
Leading People; Developing Entrepreneurs 433
Conclusion 433
Your Opportunity Journal 434
Web Exercise 434
Notes 434
Case: Esporte Interativo 436
14 Social Entrepreneurship 442
Introduction 443
The Rise in Social Entrepreneurship 443
Social Entrepreneurship Defined 445
A Social Entrepreneurship Typology 445
Hybrid Ventures 449
Choosing Your Venture Type 451
Measuring Impact 453
Conclusion 455
Your Opportunity Journal 455
Web Exercise 456
Notes 456
Case: InnerCity Weightlifting 457
Glossary G-1
Index I-1
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