Page numbers followed by f and t refer to figures and tables, respectively.
Accounts payable, 121–123
Accounts receivable (A/R), 64, 112–121
about, 112–114
average daily sales, 120
collection system of, 114–119
days receivable, 119
days sales outstanding, 121
and debt financing, 217
dollars saved, 121
Accrual accounting, 45–49, 45f, 47f, 48f
Acid-test ratio, 68t
AirTran Airways, 153
Allen, Paul, 31–32
ALS (Amicus Legal Staffing, Inc.), 150
Altoids, 303
Amazon.com:
cash gap, 126
gross margins, 89t
Mechanical Turk service, 326
raising capital, 185
valuation of, 174
Amelio, Gil, 132
America Online (AOL), 175–176
American Express, 278
Amicus Legal Staffing, Inc. (ALS), 150
Angel Capital Association, 234
Angel investors, 195–197, 230–234, 231t
and crowdfunding, 323–324
for women-owned businesses, 280f
AngelList, 322–323
AOL (America Online), 175–176
Apple Computer, 32–33, 132, 173t
A/R (see Accounts receivable)
Armstrong, J. Scott, 88–89
Arthur Andersen and Co., 27–28
Assets:
on balance sheet, 50
intangible, 153
long-term, 50–51
valuation of, 167
Auctions, 151
Automated Equipment Inc., 64–65
AutoNation, 31
Autonomy, 18
AvalonBay Communities Inc., 96t
Average daily sales, 120
Bain, Bill, 131
Bain Consulting Group, 131–132
Baker, Larry, 323
Balance sheet, 49–53, 49f, 50f
Balderston, Tomas, 183
BCF (Business Consortium Fund, Inc.), 273
BCGI (Boston Communications Group, Inc.), 85
BE (breakeven) analysis, 75–79
Bechtolsheim, Andy, 184
Benchmark (company), 185
Bennett, Larry, 210
Besselman, Bill, 84
Bessemer Venture Partners, 260
Best Buy, 308–309
Bezos, Jeff, 19–20, 194, 230, 259, 267, 268f
Blockbuster Video, 30, 307–308
Blosser, Jim, 29–30
Boeing, 12
Boston Communications Group, Inc. (BCGI), 85
Braccia, Andrew, 244
Breakeven (BE) analysis, 75–79
Brodsky, Norm, 23
Bruce Company, 39
balance sheet, 49f
ratios for, 76t
Burkhard, Alan, 113
Burn rate, 43
Business Consortium Fund, Inc. (BCF), 273
Business Reference Guide, 163
BusinessWeek magazine, 6
CAGR (see Compounded annual growth rate)
Cain, James, 11
Canonical Software Company, 315
Capital access programs (CAP), 199–200
Caretaker (intrapreneurship), 303
Carmedelle, Bruce, 178
Cash accounting, accrual vs., 45–49, 45f, 47f, 48f
Cash conversion cycle (see Cash gap)
Cash flow:
capitalization of, 167–172
cycle of, 69t
management of (see Cash flow management)
multiples of, 156–158
sources/uses of, 109–110
and valuations, 141–143
Cash flow debt coverage ratio, 69t
Cash flow ledgers, 54–55, 55f, 110–112
Cash flow management, 103–130
about, 109–112
accounts payable, 121–123
accounts receivable, 112–121
cash flow forecasts, 106–109
cash flow types, 103–106
cash gap, 123–127
finding cash, 128–130
working capital, 128
Cash flow ratios, 69t
CDCs (community development corporations), 197–198
CDFIs (community development financial institutions), 211
CDLFs (Community Development Loan Funds), 273
Center for Venture Research, 195–196
Center for Women & Enterprise (CWE), 281
Center for Women in Business (CWB), 281
CFO magazine, 128
CIT Small Business Lending, 205
Citi Bank, 278
Clancy, Kevin, 5
Cognetics Consulting, 22–23
COGS (cost of goods sold), 40–41
Collection ratio, 69t
Collins, Derrick, 248
Commonwealth Worldwide Chauffeured Transportation, 74
Community banks, 210–211, 210f
Community development corporations (CDCs), 197–198
Community development financial institutions (CDFIs), 211
Community Development Loan Funds (CDLFs), 273
Compounded annual growth rate (CAGR), 75–79, 78f, 78t, 79t
Connelly, Mike, 323
Contribution margin, 87
Cook, Scott, 185
Cooper, Max, 28
Corporate venture capital, 238–239, 239t
Corporations (entrepreneurial spectrum), 26–27
Costs:
of debt capital, 191–192
fixed vs. variable, 41–42
of goods sold, 40–41
Council on Competiveness, 13
Cox, Tom, 249
Crain’s Chicago Business, 24–25
Credit score, 324–325
Crowdfund Act, 321
Crowdfunding, 313–328
alternative approaches to, 322–325
crowdsourcing vs., 325–328
and JOBS Act, 319–322
Crowdsourcing, 325–328
Cuban, Mark, 14
Current ratio, 68t
Customer analysis, 85–89, 86f, 87f, 114–115
Customer financing, 219–220
CWB (Center for Women in Business), 281
CWE (Center for Women & Enterprise), 281
Days inventory carried, 69t
Days payable, 69t
Days receivable, 119
Days sales outstanding (DSO), 121
Debt:
financing with (see Debt financing)
mezzanine, 190
short-term, 191
sub, 190
Debt financing, 189–225
cost of debt capital, 191–192
long-term debt structuring, 215
for minority-owned businesses, 272–274
pros and cons of, 190–191
sources of (see Debt financing sources)
tips for, 215–216
for women-owned businesses, 277–279
for working capital (see Working capital sources)
Debt financing sources, 192–214
angel investors, 195–197
banks without SBA loan programs, 209–210
capital access programs, 200
CDFIs, 211
community banks, 210–211
family and friends, 193–195
foundations, 197–199
government, 199
nonbank financial institutions without SBA loan programs, 213
P2P lending, 214
personal guarantees, 211–213
personal savings, 192–193
SBA loan programs, 200–208
Debt/equity ratio, 68t
Decca Recording Company, 23
Dell, Michael, 84
Depreciation, 42–43
Developer (intrapreneurship), 303
Direct public offerings (DPO), 265–267
Dodd-Frank Wall Street Reform and Consumer Protection Act (2010), 223
Dollars saved, 121
DPO (direct public offerings), 265–267
DSO (days sales outstanding), 121
Duell, Charles H., 23
Dun & Bradstreet, 112
Dunkelberg, Bill, 210–211
Dunlap, Craig, 313
Durbin Amendment, 223
Earnings, retained, 44
Earnings before interest, taxes, depreciation, and amortization (see EBITDA)
Earnings before interest and taxes (EBIT), 42
Earnings before taxes (EBT), 42
EBIT (earnings before interest and taxes), 42
EBITDA (earnings before interest, taxes, depreciation, and amortization):
and company valuations, 156–158
example, 40f
by sector, 149t
EBT (earnings before taxes), 42
ECL (Edelman, Combs & Latturner), 65–66
Economy:
and company valuations, 151
entrepreneurial impact on, 24–25
Edelman, Combs & Latturner (ECL), 65–66
Emerging Growth Company (ESG), 320–322, 320t
Employee theft, 64
Enabler model, 305
Enron, 97
Entrepreneurial firms, 283–299
about, 283
case study analysis, 294–299
Entrepreneurial spectrum, 3–35, 26f
acquisitions, 28–32
corporations, 26–27
franchises, 27–28
gender and race impacted by, 25–33
start-ups, 32–33
Entrepreneurs, 3–35
defining, 4–8
economy impacted by, 24–25
and entrepreneurial finance, 34–35
and entrepreneurial spectrum (see Entrepreneurial spectrum)
gender and race impacted by, 25
motivation for, 8–15
traits of, 15–24
“Entrepreneurship, American Style” (Cain), 11
Epigraph, 174
Equity:
financing with (see Equity financing)
international private, 247–248, 248f
private, raising, 248–250
return on, 68t
stake calculation, 139–140, 139f, 140f
sweat, 229
and valuations, 138–139
Equity financing, 227–268
about, 227–228
corporate venture capital, 238–239
direct public offerings, 265–267
and financing spectrum, 267–268
initial public offerings (see Initial public offerings)
international private equity, 247–248
for minority-owned businesses, 274–277
private equity firms, 239–247
and private placements, 234–238
pros and cons of, 228
raising private equity, 248–250
small-business investment companies, 250–253
sources of, 229–234
for women-owned businesses, 279–282
Equity Residential, 96t
ESG (Emerging Growth Company), 320–322, 320t
Euler Hermes, 118
Expenses, 40–44
operating, 41–43
External benchmarking, 41
Facebook, 151
Failure, importance of, 7–8
Family and friends financing, 193–195, 229
FCF (see Free cash flow)
Financial statement analysis, 63–101
breakeven, 75–79
case study of, 80–89
gross margins in, 89–96
income, 67
issues to consider in, 99–101
net margins in, 96–99
proactive, 63–66
ratio, 67–75
Financial statements, 37–61
analysis of (see Financial statement analysis)
balance sheet, 49–53
checklist of financial information, 60–61
income statement (see Income statement)
pro formas, 57–60
statement of cash flows, 53–57
Financing:
customer, 219–220
debt (see Debt financing)
equity (see Equity financing)
family and friends, 193–195, 229
purchase order, 221–222
sources of, 188f
supplier, 220
504 (CDC) loan programs, 204–205
Fixed cost, variable vs., 41–42
Ford, Henry, 7
Ford Motor Company, 260
Foundations, 197–199
Free cash flow (FCF), 158–159, 167–172, 171f–172f
Freedman, Joseph, 150
Fundable, 322–323
Funding, series of, 108
Fundly, 315t
Future value (FV), 76, 79, 79t
Gallo, Ernest, 192–193
Gallo, Julio, 192–193
Ganesarajah, Dinesh, 328
Gartner Group, 105
Gassée, Jean-Louis, 132–133
GEM (Global Entrepreneurship Monitor), 187, 192
Gender, 25–33
General partners (GPs), 241
Gerstner, Lou, 308
Global Entrepreneurship Monitor (GEM), 187, 192
Godin, Seth, 103
GoFundMe, 315t
Goizueta, Roberto, 11
Goltz, Jay, 121–122
Google, 160
gross margins, 89t
and intrapreneurship, 305, 309
raising capital, 183–184
Gordy, Berry, 7
Government financing, 199
GPs (general partners), 241
Grant, Ariel, 288
Green, Kesten C., 88–89
Griggeth, Jeffrey, 313
Gross margins:
company, 89t
in financial statement analysis, 89–96
multiple of, 162
percentage of, 68t
Growth:
and customer analysis, 85–89
Gumbel, Bryant, 17
Harper, Kristen, 316
Harris Interactive, 8
HCP, Inc., 96t
Helmsley, Leona, 98
Henneberry, David, 313–314
Henry Schein, Inc., 46
Hewlett-Packard, 89t
High returns, high-market share vs., 88, 88f
High-market share, high returns vs., 88, 88f
Hillenmeyer, Hunter, 318–319
Hinkle, Brandon, 274
Hoy Company, 129
Hughes, Cathy, 29
Hughes, Dorothy Pittman, 266
Huizenga, Wayne, 29–31
IB (investment banker), 263–265
Ideal inventory calculation, 129
Income statement, 38–49
about, 38–40
cash vs. accrual accounting, 45–49
cost of goods sold, 40–41
example, 39f
expenses, 40
operating expenses, 41–43
other expenses, 43–44
retained earnings and shareholders’ dividends, 44
revenues, 40
Independence, 18
Indiegogo, 315t
Initial public offerings (IPO), 253–265, 255t
1990s boom, 254–256
about, 253–254
choosing investment banker for, 263–265
and company valuation, 172–173
process for, 260–263
public equity markets and, 256–257
reasons for, 257–259
reasons to avoid, 259–260
Innovator (intrapreneurship), 303
Intangible assets, 153
Intel, 12
Intercontinental Exchange, Inc., 96t
Interest, simple, 76
Internal benchmarking, 41
Internal Rate of Return, 228
Internal Revenue Service (IRS), 45, 47–48
International Franchise Association, 27–28
International private equity, 247–248, 248f
Internet-based portals, 273–274
Intrapreneurship, 301–311
about, 301–305
activities for, 306–309
high-growth, 305–306
mistakes in, 311
spectrum of, 302f
standard operating procedures for, 309–310
successful, 309
Intrastate program, 266
Intuit QuickBooks Financing, 274
Inventory ratios, 71t
Inventory turnover, 69t, 70t, 126–127
Investment banker (IB), 263–265
Investor Questionnaire, 235
Investors:
sophisticated, defined, 145
value-added, 185
IPO (see Initial public offerings)
IRS (Internal Revenue Service), 45, 47–48
JOBS Act, 319–322
Johnson, Alton, 218
Johnson, John H., 193
Johnson, Nailah, 283–293, 286f–287f
Johnson, Sam, 304
Karlgaard, Rich, 232
Kauffman Foundation, 270
Kelly, Patrick, 13
Kelvin, Lord, 23
Kenney, John, 32
KeyBank, 278
Kildall, Gary, 32
Knight, Phil, 309
Kodak, 311
KPCB, 185
Kracum, Richard, 3
Krieg, Peter, 5
Kristiansen, Kjeld Kirk, 11
Kroc, Ray, 22
Kroger, 89t
Kurtz, Thomas, 32
Labor, cutting, 91–94
Lauer, Dan, 229
Layoffs, 12–13
Lee, Spike, 314–315
Leverage ratios, 68t
Levitt, Steven, 90
Liabilities, balance sheet, 51
LIBOR (London Inter Bank Offering Rate), 192
Limited partners (LPs), 241, 243
Lippitz, Michael, 304
Liquidity ratios, 68t
Livent, Inc., 58
Loan Guaranty program, 203
Loans:
and crowdfunding, 324
504 (CDC) loan programs, 204–205
micro loan program, 204
prequalification for, 204
Logan, Lyle, 26
London Inter Bank Offering Rate (LIBOR), 192
Long-term assets, 50–51
Long-term debt (LTD), 191, 215
LPs (limited partners), 241, 243
Manage for Profit, Not for Market Share, 89
Management teams, 155
Markkula, A.C. “Mike,” 230
Mars, 158
Martinez, Jeffrey, 221
MasterCard Incorporated, 96t
Material costs, cutting, 91–94
McDonald’s Corporation, 22, 307
McMahon, Vince, 254
Meadow, Scott, 144
Meckler, Alan, 177
Mentzer, Josephine Esther, 16
Merck KGaA, 72
Mezzanine debt, 190
Micro loan program, 204
revenue analysis, 83
valuation of, 173t
The Millionaire Next Door, 9
Minority-owned businesses, 269–282, 270t, 271t
debt financing for, 272–274, 272t
equity financing for, 274–277
Moon, Rick, 266
Moritz, Michael, 7
Morrison, Bob, 302
Morse Industries, 85–86
Myspace, 160
Nasdaq, 257
National Association of Investment Companies (NAIC), 275, 275f
National Association of Women Business Owners (NAWBO.org), 281
National Federation of Independent Business (NFIB), 112
National Minority Angel Network (NMAN), 276, 276f
NBC Universal, 160
Net operating income return, 68t
New York Stock Exchange (NYSE), 256–257
News Corporation, 160
Newsletter of Corporate Renewal, 163
NFIB (National Federation of Independent Business), 112
Niche equity investment firms, 272f
Nintendo, 88
NMAN (National Minority Angel Network), 276, 276f
Nonbank financial institutions, 213
Northwestern University, 310
NYSE (New York Stock Exchange), 256–257
NYSE MKT LLC, 257
NYU Stern, 73
Office of Women Owned Small Businesses (WOSB), 281
Olsen, Ken, 23
Omidyar, Pierre, 185
Operating expenses, 41–43
Operating ratios, 69t
Opportunist model, 304
Optimism, 17
OverDog, Inc., 318–319
Packard, Warren, 8
Page, Larry, 309
Paglia, John, 186
Paper-rich, cash-poor situations, 104–105
P/E ratio (see Price/earnings ratio)
Pepperdine Private Capital Markets Project, 186
Pepperdine University, 112
Perez, Bill, 307
Perkins Company, 225
Perlman, Steve, 5
Perot, Ross, 17
Personal guarantees, 211–213
Personal savings, 192–193, 229
Peterman, John Henry, 19
Pfizer, 303
Pinterest, 173t
P&L statement (see Income statement)
Platform strategy, 29
Poof strategy, 29
Postmoney valuations, 136–137, 136f
Pratt’s Guide to Private Equity and Venture Capital Sources, 250
Premier Laser Systems, Inc., 46
Premoney valuations, 136–137, 136f
Present value (PV), 76
Price/earnings (P/E) ratio, 69t, 154, 154f, 161–162, 161f
Prices, raising, 94–96
Prime, 191–192
PRIs (program-related investments), 198, 198f
Private company, valuation of, 144–145
Private equity:
firms for, 239–247, 246t, 247t
partnerships for, 152t
raising, 248–250
Private placements offering, 234–238
Pro formas, 57–60
Proactive financial statement analysis, 63–66
Problem solving, 23
Producer model, 305
Profit and loss (P&L) statement (see Income statement)
Profitability ratios, 68t
Program-related investments (PRIs), 198, 198f
Prospectus, 262
Prosper Marketplace, 325
Public company, valuation of, 144–145
Public equity markets, 256–257
Public Storage, 96t
Puccini, Rae, 65–66
Purchase order financing, 221–222
Purchase price multiples, 147t
PV (present value), 76
Qahhaar, Eugene, 19
Quaker Oats, 159–160
Quick ratio, 68t
Race, 25–33
Radio One, 29
Raising capital, 183–188, 186f, 187t
Ratio analysis, 67–75, 68t–69t
of Bruce Company, 76t
Ratio financial statement analysis, 67–75
Real Goods Trading Company, 266
Recessions, 6–7
Redstone, Sumner, 307–308
Regeneron Pharmaceuticals, Inc., 96t
Regulation A Offering, 266
Retained earnings, 44
Return on equity, 68t
Rhythms NetConnections, 176
Rich Food Holdings, 220
Richardson Company, 54f
Risk Management Association, 127
Road show, 262–263
Robbins, Alan, 20–21
Robertson, Douglas, 106
Robinson, Raymond, 288–289
Rockefeller, John D., 10
Rogers, John, Jr., 10–11
Rogers, Ollie Mae, 270
Roll-up strategy, 29
Rosenberg, Bill, 27
Roy Morgan Research, 112
Rule-of-thumb valuations, 163, 164t
Rutter, Dawson, 74
Ryan, Ken, 21
Sacrifice, 19–20
Sales, multiple of, 159–160
Saribekian, Tatiana, 14–15
SBA (Small Business Administration), 5
SBA express loan program, 204
SBA loan programs (see Small Business Administration loan programs)
SBDCs (Small Business Development Centers), 208
SBICs (small-business investment companies), 250–253, 252f
Schlein, Ted, 239
Schultz, Howard, 28–29, 84, 184
Schumpeter, Joseph Alois, 9, 13, 301
SCOR (Small Corporate Offering Registration), 265–266
SCORE, 208
Sculley, John, 24
SEC (see Securities and Exchange Commission)
Securities and Exchange Commission (SEC), 145, 240, 265
Selling, general, and administration expenses (SG&A), 41
Shareholders’ dividends, 44
Shorey, Roger, 218
Short-term debt (STD), 191
Sildenafil, 303
Silverman, Richard, 310
Silverman, Ron, 311
Simmons, Cal, 234
Simple interest, 76
SLM Corporation, 96t
Small Business Administration (SBA), 5
Small Business Administration (SBA) loan programs, 199, 200–208, 203f
Small Business Development Centers (SBDCs), 208
The Small Business Financial Resource Guide, 199
Small Business Jobs Act (2010), 231–232, 273
Small Business Learning Center, 208
Small Corporate Offering Registration (SCOR), 265–266
Small-business investment companies (SBICs), 250–253, 252f
Smith, Nick, 132
Snapple, 159–160
Sophisticated investors, defined, 145
Spade, Kate, 33
Specialization, 249
Speculation, 149–150
Springboard Enterprises, 280–281
Stafford, J. B., 11
Standard Oil, 10
Standard & Poor, 176–177
Staples, 144
Starbucks Coffee, 28–29, 84, 89t, 90
Start-ups:
in entrepreneurial spectrum, 32–33
financial projects of, 59–60
Statement of revenues and expenses (see Income statement)
STD (short-term debt), 191
Stemberg, Thomas G., 8, 143–144
Stewart, Wayne, 18
Stockard, Robert, 219
Stockholders’ equity, defined, 51–52
Sub debt, 190
Supplier financing, 220
Sutter, Bill, 134, 156–157, 172
Sweat equity, 229
Tax Cuts and Jobs Act, 48–49, 232
Tax loss carryforward, 43
Technology-related companies, valuation of, 172–181, 173t, 179t, 180t
Television shows, FAQs of, 1–2, 329–333
Tenenbaum, Bernie, 84
Theft, employee, 64
Theglobe.com, 179
Townsend, Robert, 222
Triarc Cos., 159–160
Tribbett, Charlie, 323
Tricoci, Cheryl, 33
Tricoci, Mario, 33
Trump, Donald, 43
Tsarnaev, Dzhokhar, 313
Turner, Ted, 17
Turner Company:
financial statement analysis, 80–89, 99
income statement, 80f
pro forma income statement, 100f
revenues, 100–101
valuation of, 134–135
Tyson, Mike, 6
Unique monthly visitors, 160
University of Nebraska, 9
US Department of the Treasury, 273
US Forest Service Eastern Region, 309–310
US Securities Act (1933), 235, 236f
US Small Business Administration, 200
about, 131–134
factors influencing, 140–155
importance of, 137–140
by industry, 154f
methods of (see Valuation methods)
premoney and postmoney, 136–137
of technology-related companies, 172–181
and Turner Company, 134–135
Valuation methods, 155–172
asset valuation, 167
capitalization of cash flows, 167–172
multiples, 156–166
Valuation ratios, 69t
Value-added investors, 185
Variable costs, fixed vs., 41–42
Venkatesh, Sudhir, 90
Venture capital funds, 146
Verisign, Inc., 96t
Viacom, 307
Visionary, defined, 21–22
WACC (weighted average cost of capital), 169
Wald, Liz, 316
Wang, Gene, 183
Waste Management, Inc., 30
Watson, Thomas, 23
WBDC (Women’s Business Development Center), 282
WBENC (Women’s Business Enterprise National Council), 282
Weather Channel, 160
WebTV Networks, 5
Weighted average cost of capital (WACC), 169
Welch, Jack, 11
Wells Fargo, 278
Westinghouse, 158
Wildermuth, Bette, 64–65, 117–118
William Blair & Company, 260
Wired Ventures, 263
Wolcott, Robert C., 304
Women-owned businesses, 269–282
debt financing for, 277–279, 279f
equity financing for, 279–282, 280f
prevalence of, 25
Women’s Business Development Center (WBDC), 282
Women’s Business Enterprise National Council (WBENC), 282
Working capital, 128
calculating, 169f
sources of (see Working capital sources)
Working capital sources, 216–225
credit cards, 222–225
customer financing, 219–220
factoring firms, 217–219
purchase order financing, 221–222
supplier financing, 220
WOSB (Office of Women Owned Small Businesses), 281
Wozniak, Steve, 11, 32–33, 311
Wrigley, 158
X-Cell, 291
YouTube, 160
Zell, Sam, 143
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