ENTREPRENEURIAL FINANCE

A Practical Approach

by Lee

ISBN: 978-1-948426-12-1 | Copyright 2020

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The Need for a New Approach to Entrepreneurial Finance

Having taught entrepreneurial finance for five years and having reviewed or used almost every available entrepreneurial finance textbook, I have found most of them have the following shortcomings:
  • They ignore the circular nature of entrepreneurship.
  • They ignore the fact that most entrepreneurs make decisions for their businesses based on their personal financial realities and goals. 
  • They do not explain how to do the research to create—or demonstrate how to create—the pro forma financial statements an entrepreneur needs to get his business funded.

Meanwhile, I’ve found that entrepreneurship students have these things in common:
  • They are enthusiastic, creative problem solvers.
  • They are nervous around numbers.
  • They don’t feel they can learn to understand financial statements and the different forms of financial analysis that are essential to sound business decision-making.

The Perspective of a Teacher, Accountant, and Entrepreneur

This is an entrepreneurial finance textbook written by someone who is both a serial entrepreneur and a CPA. It is based on the practices and processes I found worked well in the real world and hence consistently adopted for use in the companies I co-founded and helped manage. This book does not attempt to teach entrepreneurship students everything they need to know about finance. It attempts to teach entrepreneurship students what they need to know about finance in order to succeed as entrepreneurs.
It is important to note that this textbook is based on content I developed over the course of five years while teaching undergraduate entrepreneurial finance classes at a major university. In other words, I’ve been teaching the majority of the content of this book in the classroom for years. My own entrepreneurial experience helped me decide what material is most important to entrepreneurs and should therefore be included in this book. The teaching process helped me  determine how the relevant material can be successfully taught to entrepreneurship students.

Approach

Most people like checklists they can complete that ensure the successful achievement of a goal. Over the years, I’ve often tried to devise such a checklist for entrepreneurship. What I’ve found is that such a list is not possible, because entrepreneurship is not linear—like a list is—entrepreneurship is circular. Entrepreneurship is circular because, when starting a new venture, the decisions made in the beginning must very carefully consider the desired ending. This is true because a lot of what can or will ultimately happen with regard to a new venture depends very much upon the decisions made at the new venture’s start.
Due to the circular nature of entrepreneurship, I’ve taken a 360 degree approach to writing this textbook in two different ways. First, in chapter 1 of the book, I alert the student to refer to chapter 11 of the book for guidance before making any major decisions regarding the company he is about to start. Chapter 11 discusses—among other topics—how to position a company for sale. Proper positioning involves activities the entrepreneur should ideally engage in before starting a company and also issues to consider when initially setting up the company. The second way I’ve taken a 360 degree approach to writing this textbook is that I start the book by talking about the entrepreneur as an individual, before he starts a company. I then focus on how to start, fund, grow, manage, and harvest cash from the business. I end the book by
again talking about the entrepreneur as an individual, but this time as an individual who has achieved personal wealth as a result of building a successful company.
Expand/Collapse All
Table of Contents / Preface (pg. i)
Chapter 1 Proper Preparation and the Nascent Entrepreneur (pg. 1)
Chapter 2 Sources of Funding (pg. 21)
Chapter 3 Legal Forms of Business, Taxation, and Business Owner Compensation (pg. 41)
Chapter 4 Financial Statements (pg. 65)
Chapter 5 Traditional Financial Statement Analysis and Breakeven Analysis (pg. 89)
Chapter 6 Pro Forma Financial Statements (pg. 117)
Chapter 7 Pro Forma Balance Sheets for Year 2 and Subsequent Years and Pro Forma Statements of Cash Flows (pg. 183)
Chapter 8 Working Capital Management, Bootstrapping, and Controls over Assets (pg. 211)
Chapter 9 Time Value of Money (pg. 237)
Chapter 10 Capital Budgeting (pg. 279)
Chapter 11 Cash Harvest, Business Valuation, and Business Exit (pg. 309)
Chapter 12 Personal Finance and Wealth Management (pg. 343)
Glossary (pg. 377)
Index (pg. 387)

Denise Lee

Denise is an entrepreneur who has co-founded five start-up companies whose outcomes have included the outright sale of a company to a large corporation, the sale of her interest in a company to a private buyer, business shuttering after success in order to pursue a different opportunity, and business shuttering after failure to get a product to market. Two of the businesses were in the medical industry, two were in the construction industry, and one was in the education industry. Denise is also a CPA with 6 years of public accounting experience. 

Denise is currently a faculty member at Kent State University in the Department of Marketing and Entrepreneurship where she is involved in teaching and coaching entrepreneurship students. In 2011, Denise received the Kent State University College of Business Teaching Excellence Award. In 2014, she was nominated for the same award. In 2015, she received a Faculty Recognition Award from the Kent State University Teaching Council.

Denise has developed and taught a variety of traditional and online entrepreneurship courses at Kent State University, including Introduction to Entrepreneurship, Entrepreneurial Experience I & II, Entrepreneurial Tools, Entrepreneurial Marketing, New Venture Creation and Entrepreneurial Finance. She is also Coordinator for Kent State University's Undergraduate Entrepreneurship Curriculum.

Specialties: As an entrepreneur, Denise has specialized in overall business strategy, business planning, process and procedure development, and overall company management. Denise has extensive experience in all phases of the administrative development and proper exit of new business ventures. As a CPA, Denise specialized in audit, business valuation and corporate taxation.



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