Finance and Entrepreneurship

Aimed at assisting potential entrepreneurs decide whether the entrepreneurial career is for them, this monograph shows how they can test their vocation and avoid falling into the most common and dangerous traps of insufficient cash flow. First however a simple break-even test based on contribution analysis should be applied to estimate when profitability can be reached and to verify that the implied volume of activity can be handled. Only if this simple test is passed is it worth going on to develop a full business plan, with its many dimensions of management, marketing and financial structure. The last mentioned must be sufficient to met the cash flow needs of a growing enterprise. Two sample cases, involving spreadsheet work, are presented to show how pro forma cash needs can be determined in the light of other balance sheet and income statement items and relations. Finally two appendices take student readers through essential business mathematics and remind them of the three pillars of each flow.