Can You Really Use Crowdfunding to Finance Your Small Business?

Over the past few years, crowdfunding has been steadily climbing the charts of ubiquitous Internet buzzwords. It’s inclusion in last year’s JOBS Act only added fuel to the fire and on the surface seems to give a nod of legitimacy to crowdfunding as a source of business capital.

teamwork-1-1254520-mAt first glance, it’s not hard to see the allure in harnessing the crowd to potentially raise significant amounts of money. But, if you were hoping that crowdfunding would bring the end to your financing woes, make sure you know all the facts. Raising money from this kind of model may actually not be an option for the vast majority of small businesses.

Up until this point, crowdfunding platforms have mostly subsisted on a perks-and-gifts model. This is the version popularized by Indiegogo and Kickstarter in which individuals donate their money in exchange for small gifts, honors, or products, but not stock.

In theory, the crowdfunding provision in the JOBS Act was supposed to allow ordinary investors the opportunity to invest in small or early stage start-ups online in exchange for company equity. The provision provides for entities to connect companies raising money with people who want to invest. These can be existing securities brokers, or they can be so-called “funding portals.”

Currently, only individuals who meet certain wealth or income requirements are allowed to invest in private companies in exchange for ownership. The Securities and Exchange Commission was tasked with creating the rules surrounding the proposed new form of equity-based crowdfunding, but the “final product” as part of the JOBS Act was so watered down and warped that it caused industry experts to proclaim “Investment Crowdfunding in the U.S. is Dead Before Arrival.

In a nutshell, the resulting legislation on a federal level will do little to nothing to create a new capital market of non-Accredited investors nor help “formalize” and grow the friends and family funding market.

The good news, however, is that there has been a growing adoption of state-wide crowdfunding legalization. A handful of U.S. states have recognized the value of forging ahead with their own state-wide crowdfunding legalization, something they are allowed to do as long as the investors and businesses operate within their states. Georgia, Kansas, and Wisconsin have already signed off on crowdfunding legalization, and North Carolina and Washington have followed suit with their own proposals.

So where does that leave your small business? If you happen to live in one of the states mentioned above, and you are operating a small or early stage startup, then crowdfunding may be a viable financing option to look into. If, however, you live outside these states and your business is not related to the arts, your chances of drawing money from the crowd are pretty slim. Crowdfunding may not be your financing silver bullet after all.

10 Factors that Can Be Preventing Your Business from Growing

Even though most topics in business tend to be rather technical and dry, the truth is a business is a lot like a living organism. It’s why many organic terms, such as growth, development, and maturity have found their way into the business vocabulary. An implicit aspect of the organic business model is that you have to make sure that your business gets what it needs to survive and thrive or else it will just whither away.

But, how can you tell if your business is being nurtured enough? Here are 10 factors to be on the lookout for that can quickly stunt the growth and development of your business:

1. You’re too focused on short-term gain. At their core, many of the factors below really can be traced back to a lack of long range foresight. Business owners end up eying instant payouts and in the process compromise on their long term gain. Sometimes this happens because the owners are too financially dependent on their business’ performance; other times owners just aren’t considering the long-term ramifications of the decisions (or lack of decisiveness) they are making today.

2. You have no or limited access to outside financing. If you don’t have ready access to funds- whether it’s a line of credit, a business loan, or even a pool of your personal financial resources- then you will have any extremely hard time growing and developing your business. You won’t have the capital needed to cover a cash shortfall and you won’t have the money to invest in necessary equipment, supplies, and even additional workers.

3. You’re not investing enough in your employees. Your employees make your business go round. If your employee satisfaction is at an all-time low, then it will hold your business back in several ways: your employees will be less productive, they’ll be less likely to offer their ideas about how to do things better and they will in general take less initiative on the job; their dissatisfaction will also effectively push customers away.

4. You’re not investing enough in your equipment and furnishings. Your physical assets, such as equipment and furniture, will eventually, become outdated, obsolete, or just plain too old to be put into service. If you don’t make a sufficient effort to revamp or replace those assets that have gone past their prime, then you may be exposing your business to an assortment of added expenses, such as repair costs, down time and lost productivity.

5. You’re not paying enough attention to the competition. There are two main reasons why you will be missing out by not looking at what your competitors are doing: looking at the strengths and weaknesses of these companies and how this is effecting their performance can give you vital information about your target market’s preferences; you can also use the information you get about your competition to help you differentiate your products and services from those of your competitors.

6. You aren’t cultivating customer feedback. If you aren’t actively trying to get your customers to tell you how they are feeling about your business as well as what the overall customer experience is like, then you are missing out on a golden opportunity to improve your business and strengthen customer engagement and loyalty.

7. You aren’t delegating enough. If you want your business to grow then that automatically includes bringing in other people to help you run your operations. These people will take care of the tasks that you have neither the time, interest, nor the expertise to complete. There are several ways to delegate jobs: You can give your current employees more autonomy and input; you can hire additional workers to complete certain roles: you can hire contractual workers for specific jobs.

8. You aren’t reaching out to other businesses and professionals. Similar to the factor mentioned above, if you are not actively perusing a bit of synergy with other business and/ professionals, then you may be missing out on countless, amazing opportunities to expand your reach ( via co-promotion), reduce costs (via group purchasing), and increase your product or service offerings via some strategic partnership.

9. You are not paying enough attention to industry trends. The minute you take your eye off the road, you are susceptible to crashing. If you don’t have your eyes and earns trained on key market and industry trends, then you will be setting yourself up to miss the boat on significant industry shifts and leave a wide opening for competitors to gain valuable market share.

10. You have a negative attitude. Last, but certainly not least, your own attitude can hold your business back big time. It doesn’t matter how talented you are, if you are putting out negative vibes, if you are cynical, argumentative, and unyielding then rest assured your employees and customers will pick up on it and send that same negative energy right back at you. That is most definitely not the kind of environment that will foster your business’ growth and development.

11 Things a Small Business Can Do to Survive Today’s Economy

With a little discipline, good organization, and planning, small businesses can safely survive an economic downturn. Here are a few suggestions:

1. Stay in touch with your cash flow. Focus on the areas where your cash is being held up, such as inventory, equipment purchases, and accounts receivable. By doing so, you will be in a position to improve your current cash flow and predict a future shortfall.

2. Consolidate or restructure your debts. Bring together debt from loans, credit cards, or any other lines of credit. Negotiate with creditors for a longer repayment period.

3. Look for ways to cut costs. You could, for example, cut down on old and obsolete inventory, and save on paper and postage through the direct deposit of payroll.

4. Streamline your billing system. You need to on top of your customer receivables. There are several accounting software programs on the market, such as QuickBooks, that can help you keep track of who has paid and automatically alert you when bills are overdue.

5. Tighten your credit policy. Set stricter terms and conditions for receiving credit. You could require a down payment at purchase, shorten the payment period, and only extend credit to select customers.

6. Use assertive debt collection techniques. Know when to make phone calls, send written requests for payment, and statements, and know when it is time to hand it over to a collection agency.

7. Put off any plans for expansion. It is better to stick to what you are already good at and just try to make it better.

8. Negotiate with your suppliers. You can try to barter down what you are paying your suppliers. If you have a long term relationship with any of your suppliers then you may be able to get better credit terms.

9. Outsource certain jobs or tasks. Business owners can take advantage of a growing pool of professional freelance workers for any job or project that will take away from the business. This is a cheaper option to hiring employees, and you can get some quality work.

10. Focus on customer satisfaction. Work on retaining the customer base that you have built up with follow-through, good customer service, and quality control.

11. Know your financing options. Know where to get money before you need it. Some financing options are based on future sales and have flexible repayments, such as invoice factoring or merchant/ business cash advances. Focus on building relationships with current lenders, and do not forget about any family or friends who may be able to help you out in a pinch.

How to Turn Your Business into a Multi-Million Dollar Operation

business successIt is possible for a small business to make it big, even in an economy that is slowing down, and even with stiff competition from big corporate competitors. By paying attention to the following five areas, you will be able to bring out the best in your small business:

business planning1. Plan it out. Business planning is not just for start-ups, and it is not something that happens only once a year. It is a continual process of setting goals, developing plans, and working every day to achieve them. Proper business planning includes: financial budgeting and forecasting, tax planning, monitoring daily cash flow, and planning promotions and marketing strategies.

If you are not familiar with certain business terms, concepts, or tools, then you can turn to plenty of on-line guides, articles, and tutorials that can increase your business acumen. Alternatively, you could hire a business planning consultant.

business financing2. Know how and where to get financing. One of the biggest reasons why small businesses fail is that they are unable to get adequate financing. Due to bad credit, slow or inconsistent sales, or being part of an industry that is considered more risky, many small business owners experience difficulty acquiring a standard business loan.

The first thing to keep in mind is that you will greatly increase your chances of getting approved for a business loan if you come to the application process fully prepared. Make sure to become familiar with the requirements necessary to secure a loan before applying.

You should also keep in mind that there are other financing methods available to small businesses aside from a standard loan, such as equipment leasing, invoice factoring, vendor financing, and business cash advances.

Customer Focus3. Be customer-focused. One thing that many small businesses have over big corporations is the personal relationship they can maintain with their customers. Do not overlook this vital asset! Customer-service goes beyond saying,”Have a nice day.” It means focusing on quality products and service, and monitoring customer satisfaction; it means actively asking your customers for suggestions or improvements and then following through on anything that can be implemented.

Cultivate Employees4. Cultivate your employees. Many small business owners do not realize the potential hidden within their own workforce. When your workers are happy that means increased productivity and a positive customer experience that can increase sales. Your workers are also a source of business-improving suggestions and problem-solving ideas.

Make sure to have in place a system for employee advancement as well as a system that recognizes consistent and outstanding work performance.

Create Opportunity5. Create opportunities to expand. Do not just sit around and wait for an expansion idea to fall into your lap… create one! You should be investing some time and resources to research and development to determine possible areas of expansion and to implement cost-cutting techniques. Not only will this ensure that your business is running efficiently, but it will help your small business to be flexible in response to market demand.

Following these tips combined with a lot of hard work and a bit of luck is the key success!