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Second edition
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ISBN: 978-0-12-401666-8
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Dedication
To Susan
John B. Vinturella
To Warren, Shannon, and Ryan
Suzanne M. Erickson
Preface
This book is about financing the entrepreneurial venture. Why devote a whole book just to financing? The answer is that financial choices, especially those made early on, can affect future growth opportunities and strategic options. To avoid precluding desirable strategic actions later on, the entrepreneur needs to carefully structure the business from the beginning. Many potential entrepreneurs have great ideas for businesses, but without sound financial roadmaps on which to execute, they remain only ideas.
The second edition of this book is updated to reflect current data and trends and to include the impact of social media on financing. We take a somewhat broader look at financing than most texts do. In this book, we consider financing issues at all stages of the ventures life, from the birth of the company through growth, culminating in the exit from or sale of the business. We consider internal financial management and risk management as strategies to garner or conserve resources internally. We also look at franchising as an entry to entrepreneurship that involves somewhat less risk than the traditional start-up method.
This book is intended to be a guide that will increase the odds of success for the potential entrepreneur. To that end, the book is detailed and more experiential than theoretical. It is based on standard financial theory, but it also benefits from the experiences of many entrepreneurs and lessons learned the hard way. It is our hope that the book will provide useful, practical advice to all aspiring entrepreneurs in the all-important task of funding their new businesses.
Additional Resources including instruction manuals, teaching suggestions, and case study solutions, can be found on the companion website: http://booksite.elsevier.com/9780124016668/.
Acknowledgments
Suzanne M. Erickson
Many thanks to Kent Johnson of Alexander Hutton Capital and Doug Brown for sharing their wisdom and experience. Thanks to Harriet Stephenson for encouraging me down the entrepreneurial path. Especially, thanks to my wonderful family: Warren, Shannon, and Ryan.
John B. Vinturella
My wife, Susan Howell, improved the product by proofreading and by suggesting more objective and less inside-the-industry views and explanations. Her continuing encouragement was invaluable.
Introduction
John Vinturella and Suzanne Erickson
Getting Started
This book is about financing the entrepreneurial venture. Why devote a whole book just to financing? Financial choices, especially ones made early on, can affect future growth opportunities and strategic options. To avoid precluding desirable strategic actions later on, the entrepreneur needs to carefully structure the business from day 1. Many potential entrepreneurs have a great idea for a business, but without a sound financial road map to execute it, the idea will remain simply an idea.
In this book, we consider financing issues at all stages of the ventures life, from the birth of the company through its growth the sale of the business or its shutdown. We consider internal financial management and risk management as strategies to garner or conserve resources internally. We look at franchising as an entree to entrepreneurship that involves somewhat less risk than the traditional method of start-up.
This book is intended to be a guide that will increase the odds of success for the potential entrepreneur. To that end, the book is detailed and more experiential than theoretical. It is based on standard financial theories, but it also benefits from the experiences of many entrepreneurs and from lessons learned the hard way. Our hope is that the book will provide useful, practical advice to aspiring entrepreneurs in the all-important task of funding their new businesses.
It is important at the outset to distinguish between entrepreneurial ventures and other types of small business. Broadly speaking, new and/or privately held businesses can be divided into entrepreneurial ventures and the so-called lifestyle businesses.
Entrepreneurial ventures can be defined as new business start-ups with high growth aspirations. Typically, the entrepreneur is passionate about an idea or product, is willing to bear substantial risk to see his or her vision brought to market, and is willing to work incredibly long hours to realize the vision.