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The Entrepreneurial Engineer

Book Description

Authors, educators and successful entrepreneurs wrote this textbook with the primary goal of maximising your chance of entrepreneurial success. It is designed to encourage those wanting to start a business and those who have already begun. It includes guidance, instruction and practical lessons for the prospective entrepreneur. The book focuses on early stage financing of a start-up company, beginning with an emphasis on constructing an effective business plan, including writing techniques to help convey your message, and preparing solid financial statements. This 'why' and 'how' of writing a business plan is followed by recommendations on raising outside capital. Important topics include developing your marketing strategy, recruiting and managing creatives and managers, and retaining effective employees. Legal structures, negotiation strategies, and economic evaluation of opportunities are also discussed. The book concludes with a chapter on project management. It includes many engineering economy topics, sufficient for those taking the FE exam.

Table of Contents

  1. Coverpage
  2. The Entrepreneurial Engineer
  3. Title page
  4. Copyright page
  5. Dedication
  6. Frontispiece
  7. Contents
  8. Preface
  9. About the Authors
  10. 1 Entrepreneur’s Primer
    1. 1.0 Entrepreneur’s Diary
    2. 1.1 So You Want to Be an Entrepreneur?
      1. Core Values of an Entrepreneur
    3. 1.2 Fundamental Rules for Success
    4. 1.3 Rules to Raise Capital
      1. An Often-Missed Point
    5. 1.4 Keeping Your Focus
      1. Staying on Plan
    6. 1.5 Advice to Students
    7. 1.6 When Do You Quit the Day Job?
    8. 1.7 Additional Resources and References
    9. 1.8 Video Clips
    10. 1.9 Classroom Exercises
    11. 1.10 Engineering Economics
      1. Evaluating Alternatives
    12. 1.11 Interest, Compounding, and Cash Flow Diagrams
      1. Simple Interest and Compound Interest
    13. 1.12 Nominal Interest and Effective Interest
    14. 1.13 Problems
  11. 2 Recognizing Opportunity
    1. 2.0 Entrepreneur’s Diary
    2. 2.1 Disruptive Technology
    3. 2.2 Application to Start-Ups
      1. Examples of Disruptive Technology
      2. Large Company Weakness
    4. 2.3 Technology Cycle and the S-Curve
      1. Era of Ferment
      2. Era of Incremental Change
      3. The Era of Diminishing Returns
      4. Product Evolution
    5. 2.4 Additional Resources and References
    6. 2.5 Video Clips
    7. 2.6 Classroom Exercises
    8. 2.7 Engineering Economics
      1. Uniform Series Compound Formulas and Present and Future Value of Single Payments
      2. Annuities
    9. 2.8 Bonds
      1. The Bond Equation
      2. Parameter Conversion
    10. 2.9 Problems
  12. 3 Defining Your Opportunity
    1. 3.0 Entrepreneur’s Diary
    2. 3.1 Mission Statements
      1. How to Do It: Crafting a Mission Statement
      2. Mistakes to Avoid
      3. Styles of Mission Statements
      4. Examples of Successful Mission Statements
      5. Examples of Unsuccessful Mission Statements
      6. Final Comments
    3. 3.2 SWOT Analysis
      1. Specific Steps to a SWOT Analysis
      2. Strengths and Weaknesses
      3. Opportunities and Threats
    4. 3.3 Intellectual Property
      1. Trade Secrets
      2. Patents
      3. Trademarks and Service Marks
      4. Copyrights
    5. 3.4 Conducting Market Research
      1. Gathering Primary Data
      2. Gathering Secondary Data
    6. 3.5 Primary Market Research: Using Surveys and Focus Groups
      1. Surveys versus Focus Groups
      2. Types of Surveys
      3. Generating Survey Questions
      4. Reporting the Results in Your Business Plan
    7. 3.6 Additional Recommended Resources
      1. General
      2. Mission Statements
      3. Survey Work
      4. Market Research
      5. Tools
      6. Other
      7. Focus Group Work
    8. 3.7 Video Clips
    9. 3.8 Engineering Economics
      1. Summary on Inflation
    10. 3.9 Problems
  13. 4 Developing Your Business Concept
    1. 4.0 Entrepreneur’s Diary
    2. 4.1 Overview
    3. 4.2 Market Analysis
      1. Is the Target Market Definable?
      2. Is the Target Market Reachable?
      3. Legal Issues
      4. Can the Target Market Be Profitably Served?
    4. 4.3 Formulating Your Business Concept
      1. Business Concept: Core Strategy
      2. Business Concept: Marketing Strategy
      3. Business Concept: Strategic Resources and Intellectual Property
      4. Business Concept: Value Network
    5. 4.4 Names, Slogans, and Logos
      1. Names
      2. Slogans
      3. Logos
    6. 4.5 Additional Resources
      1. Business Concept and Core Strategy
      2. Business Law
    7. 4.6 Video Clips
    8. 4.7 References and Bibliography
    9. 4.8 Classroom Exercises
    10. 4.9 Engineering Economics
      1. Arithmetic and Geometric Gradients
      2. Breakeven Analysis, Payback Period, and Benefit-Cost-Ratio Analysis
    11. 4.10 Problems
  14. 5 Creating Your Team
    1. 5.0 Entrepreneur’s Diary
    2. 5.1 The Start-Up Team
      1. Evaluation of Start-Up Team
      2. Friends and Family and the 50/50 Approach
    3. 5.2 The Board of Directors and CEO
    4. 5.3 Building and Managing Your BOD
      1. Board Structure
      2. Selecting Your Board
      3. How to Recruit Board Members
      4. Board Compensation
      5. Managing the Board
      6. Automatic Board Seats
    5. 5.4 How to Hire and Retain Good Employees
      1. Background Factors
      2. Recruitment: Pitching Your Company
      3. Common Mistakes
      4. How to Hire
    6. 5.5 Contracts
    7. 5.6 Employee Contracts: Hiring
      1. Noncompete Clauses
    8. 5.7 Employee Contracts: Restrictions During Employment
      1. Restrictions by Types of New Venture
      2. Solicitation of Coworkers
    9. 5.8 Leaving a Company
    10. 5.9 Additional Resources
      1. Choosing and Managing Small-Business Consultants
      2. Assessing Personal Management Abilities
    11. 5.10 Video Clips
    12. 5.11 References and Bibliography
    13. 5.12 Classroom Exercises
    14. 5.13 Engineering Economics
    15. 5.14 Problems
  15. 6 Creating Your Company
    1. 6.0 Entrepreneur’s Diary
    2. 6.1 Types of Ownership Structures
      1. Sole Proprietorship and Partnerships
      2. Corporations and LLCs
      3. Nonprofit Corporations
      4. Cooperatives
    3. 6.2 Sole Proprietorship Basics
      1. Personal Liability for Business Debts
      2. Paying Taxes on Business Income
      3. Registering Your Sole Proprietorship
    4. 6.3 Partnership Basics
      1. Personal Liability for All Owners
      2. Partnership Taxes
      3. Creating a Partnership
      4. Ending a Partnership
      5. The Uniform Partnership Act
      6. What to Include in Your Partnership Agreement
    5. 6.4 Limited Liability Company (LLC) Basics
      1. Number of Members
      2. Limited Personal Liability
      3. Exceptions to Limited Liability
      4. Business Insurance
      5. LLC Taxes
      6. LLC Management
      7. Choosing a Name for Your LLC
      8. Forming an LLC
      9. Ending an LLC
      10. Creating an LLC Operating Agreement
      11. Protecting Your Limited Liability Status
      12. Licenses and Permits
    6. 6.5 Corporations
    7. 6.6 Corporations versus LLCs
      1. Self-Employment Taxes Can Tip the Balance
    8. 6.7 Summary of Company Structure Issues
    9. 6.8 Additional Resources
      1. Ownership Structure
    10. 6.9 Forming Your Company
    11. 6.10 Video Clips
    12. 6.11 Classroom Exercises
    13. 6.12 Engineering Economics
      1. Capitalization Costs
      2. Opportunity Cost and Infinite Life Calculation
    14. 6.13 Problems
  16. 7 Financial Accounting
    1. 7.0 Entrepreneur’s Diary
    2. 7.1 Getting Started
      1. Scope of This Issue
      2. Top-Down versus Bottom-Up Financials
      3. The Financial Story
    3. 7.2 Basic Financial Terms
      1. Capital Expenditure
      2. Fixed, Variable, and Total Cost
      3. Breakeven Point
      4. Gross Revenue and Net Sales
      5. Gross Margin and Gross Margin Percentage
      6. Cost of Goods Sold (CGS)
      7. SGA or SG&A
      8. Profit Margin
      9. Sunk and Opportunity Costs
    4. 7.3 Pro Forma Income Statement
      1. Forecasting Revenue
      2. Predicting Expenses
      3. Typical Categories in the Income Statement
      4. Start-Up Costs
      5. EBITDA
    5. 7.4 Pro Forma Statement of Cash Flow
      1. Sources and Uses of Funds
    6. 7.5 Pro Forma Balance Sheet
    7. 7.6 Example: Pro Forma Analysis
    8. 7.7 Typical Pro Forma Mistakes
    9. 7.8 Tax and Economic Issues
      1. Depreciation and Amortization
      2. Modified Accelerated Cost Recovery System
      3. Amortization
    10. 7.9 Income Taxes
      1. Introduction to Taxes
      2. Taxable Income
      3. Tax Period
      4. Taxing Methods
      5. Withholding
      6. Calculating Income Tax
      7. Calculating Gross Income
      8. Taxing Companies
      9. Business Taxes
      10. Cash Flow with Taxes
      11. Capital Gains and Losses
    11. 7.10 Deducting Losses from an LLC
    12. 7.11 Additional Resources
    13. 7.12 Video Clips
    14. 7.13 Bibliography
    15. 7.14 Problems
  17. 8 Business Plans, Presentations, and Letters
    1. 8.0 Entrepreneur’s Diary
    2. 8.1 The Business Plan – A Necessity
    3. 8.2 Strategies for Investor Type
    4. 8.3 Recommendations on Writing Strategies
      1. Final Tip
      2. Help in Writing Your Business Plan
    5. 8.4 Writing Your Business Plan
    6. 8.5 Reference Styles
    7. 8.6 The Pitch: Creating and Giving Oral Presentations
      1. Content of Your Presentation Pitch
      2. A Professional Presentation Is a Performance
      3. Guidelines for Oral Presentations
    8. 8.7 Writing an Effective Investor Letter
      1. The Angel Investor Letter
      2. Business Form Letters: Style
    9. 8.8 Additional Resources
    10. 8.9 Video Clips
    11. 8.10 References and Bibliography
    12. 8.11 Problems
  18. 9 Fund-Raising
    1. 9.0 Entrepreneur’s Diary
    2. 9.1 Financing the New Venture
      1. The Importance of Financing
      2. Types of Financing
      3. Funding Strategies and Sources
      4. Equity Investments
    3. 9.2 Financing Sequence
      1. Personal Funds
      2. Friends and Family
      3. Angel Investors
      4. Banks
      5. Venture Capitalists
      6. Public Offerings
      7. Government
    4. 9.3 The Venture Fair Process
    5. 9.4 Additional Resources
    6. 9.5 Video Clips
    7. 9.6 References and Bibliography
    8. 9.7 Classroom Exercises
    9. 9.8 Engineering Economics
      1. Present Worth Analysis
      2. Payback Period
      3. Replacement Analysis
      4. Annual Cash-Flow Analysis
      5. Capital Recovery and Sinking Fund Methods
    10. 9.9 Problems
  19. 10 Rules of Investing
    1. 10.0 Entrepreneur’s Diary
    2. 10.1 Overview
    3. 10.2 Investment Capital Principles
      1. Investment Laws
      2. Venture Capital Expected Rates of Return
    4. 10.3 Due-Diligence Process
      1. No-Deal Routine
    5. 10.4 Company Valuation
      1. Advice
    6. 10.5 Company Valuation Methods
      1. Pre-Value Determination Methods
      2. Methods to Calculate Ownership Percentage
    7. 10.6 Ownership Positions
      1. Ownership, Majority, and Valuation
      2. Pre- and Post-Ownership Positions
      3. Meanings of Full Dilution
      4. Maximum Dilution: The Cram Down
    8. 10.7 Types of Stock and Value Protection
      1. Stock Value Protection Methods and Antidilution
      2. Preferred Stocks
      3. Defining Preferred Stock Preferences
      4. Right of First Refusal or Preemptive Rights
    9. 10.8 Term Sheet Definitions
      1. Additional Term Sheet Definitions
    10. 10.9 Raising Capital through an IPO
    11. 10.10 Additional Resources
    12. 10.11 Video Clips
    13. 10.12 References and Bibliography
    14. 10.13 Classroom Exercises
    15. 10.14 Engineering Economics
    16. 10.15 Problems
  20. 11 Negotiation
    1. 11.0 Entrepreneur’s Diary
    2. 11.1 Negotiation and Deal Making
    3. 11.2 Four Phases of the Negotiation Process
      1. Phase 1: Preparation
      2. Phase 2: Setting the Stage
      3. Phase 3: Making the Deal
      4. Phase 4: Closing the Deal
    4. 11.3 Negotiation Basics: Common Tactics
      1. Tactics for Phase 2 – Setting the Stage
      2. Tactics for Phase 3 – Deal Making
      3. Tactics for Phase 4 – Deal Closing
    5. 11.4 Best Practices
      1. Ten Attributes
      2. Some Dos and Don’ts
    6. 11.5 Summary
    7. 11.6 Video Clips
    8. 11.7 Problems
  21. 12 Management
    1. 12.0 Entrepreneur’s Diary
    2. 12.1 Overview
      1. Is This Good Counsel?
      2. Engineering versus Art
      3. Make a Decision
      4. What Does a Manager Manage?
    3. 12.2 The Art of Effective Management
      1. What Is Management?
    4. 12.3 The Five Aspects of Management
      1. Planning Aspect
      2. Coordination Aspect
      3. Implementation Aspect
      4. Monitoring Aspect
      5. Evaluation Aspect
      6. Laws of Engineering: Is the Project Ever Finished?
      7. System Specification
    5. 12.4 The Five Management Competencies
      1. Cluster 1: Specialized Knowledge
      2. Cluster 2: Goal and Action Management
      3. Cluster 3: Directing Subordinates
      4. Cluster 4: Focus on Others
      5. Cluster 5: Leadership
    6. 12.5 Roles of Management
      1. Correcting Performance Errors
      2. Positive Motivation
      3. Treating Employees with Respect
      4. Choosing Managers
      5. Take Responsibility
      6. Managing Compromise: Solving Arguments
    7. 12.6 Types of Leadership
    8. 12.7 Attitude
    9. 12.8 Holding a Successful Meeting
    10. 12.9 Basic Human Resource Skills
      1. Job Descriptions
      2. Job Performance and Review
      3. Wages and Motivation
      4. Secrecy of Wage Rate
    11. 12.10 Business Etiquette
    12. 12.11 Additional Resources
    13. 12.12 Video Clips
    14. 12.13 References and Bibliography
    15. 12.14 Problems
  22. 13 Project Scheduling: Critical Path Methods, Program Evaluation, and Review Techniques
    1. 13.0 Entrepreneur’s Diary
    2. 13.1 Project Scheduling
      1. Background
      2. Overview
      3. Simple Example for Developing a CPM Chart
    3. 13.2 The Techniques of Implementing the Critical Path Method
      1. CPM Networks
      2. Project Duration and Activity Start and Finish Times
      3. Critical Path
      4. Total, Interfering, and Free Slack
      5. Resource Allocations
      6. Example 13.1: Interior Building Construction
    4. 13.3 Program Evaluation and Review Technique
      1. Example 13.2: Interior Building Construction Continued
      2. Example 13.3: Construction Project (pert)
      3. Example 13.4: Project Bidding
      4. Application to Entrepreneurship: Risk of Losing Company
    5. 13.4 References and Bibliography
    6. 13.5 Video Clips
    7. 13.6 Problems
  23. Appendix
    1. Summary of Interest Formulae and Compound Interest Tables
    2. Single Payment
    3. Uniform Series
    4. Arithmetic Gradient
    5. Geometric Gradient
    6. Continuous Compounding at Nominal Rate r
    7. Compound Interest Variable Definitions
  24. Index