Chapter 3 is an introductory look at sources of equity, with a focus on
angel investors and the Small Business Administration.
Chapter 4 provides a guide to preparing a business plan. A sample plan is
provided in the Appendix, and several issues are discussed to aid the entre-
preneur in preparing and writing a successful business plan. Special attention
is paid in this chapter to the financial section of the business plan.
Chapter 5 discusses various methods used in practice to establish valu-
ations for firms. We demonstrate discounted cash flow methodology but
also discuss other more simple methods widely used in practice, such as the
market multiple approach to valuation. We discuss issues that arise in buying
and selling a business and a method for valuing intellectual property.
Chapter 6 discusses venture capital and the venture capital method of
valuation. We discuss the structure of the venture capital industry, criteria
for firms seeking venture capital, and what VCs are looking for in portfolio
Chapter 7 describes various exit strategi es that can be used to provide
liquidity for equity investors in the business.
Chapter 8 extends a case used in earlier chapters through the detailed
process of achieving exit goals.
Chapter 9 looks at franchising as an entre
e to self-employment. Type s of
franchises, requirements of the franchise relationship, and methods for
financing the initial investment are discussed. Several case studies are in-
cluded to illustrate the range of franchising arrangements available.
Chapter 10 is important for all entrepreneurs, whether or not they seek
external capital. We discuss internal financial management, including man-
agement of the cash flow cycle and cash budg eting.
Chapter 11 discusses risk management for entrepreneurs. Part of prudent
financial management, the conservation of capital, is structuring the busi-
ness so that it is protected from unnecessary risks. This chapter discusses the
fundamental risk management strategies the entrepreneur should employ to
reduce the probability of adverse financial consequences.
Chapter 1 2 is a look at the global equity market and opportunities for
entrepreneurs to raise capital internationally, as well as expand their busi-
ness internationally.
We can be better prepared to succeed in small business by knowing what
it is and where it is headed. One of the best sources of this information is the
Office of Advocacy of the U.S. Small Business Administration (SBA); see
34 Introduction—In the Beginning

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