The proverbial floodgates may have opened for small businesses when it comes to access to capital (crowdfunding) and selling securities to a previously-untapped source (average Americans, not just wealthy, accredited investors), but those two elements alone aren’t enough to take your business to the next level.
Capital and Crowdfunding
It’s true that companies can now raise up to $1 million in capital from unaccredited investors in exchange for a stake in the company or a share of profits. It’s also true that this relatively new source of capital is a much needed boost in the arm for entrepreneurs and the businesses they start. But innovation, job creation, and other tangible economic benefits that crowdfunding promises will only accrue if those businesses become profitable and return money to their crowdfunded investors. And that’s a tougher proposition.
Scalability
The key to success in the world of small business, in fact all business, is the ability to scale: to increase profitability and drive the volume of sales up. The challenge commonly encountered with traditional growth models is that an increase in sales usually means bringing on new clients, which in turn necessitates bringing on more staff – and adding costs – to manage the higher volume of clients. Costs are added at almost the same pace that new sales come in the door. Scaling in a manner whereby profits outpace expenses is the key to running a successful enterprise.
The Software Example
Companies in the business of developing and selling software offer a perfect example of scalability: after the development phase, it becomes relatively inexpensive to reproduce their product to multiple customers with marginal additional business cost. Companies in other industries can scale too, even if it might seem more difficult.
Simplified Business Model
One of the best ways to prepare for and achieve successful scalability is by creating consistent, systematic processes and approaches that allow you to deliver products and services efficiently and effectively. Setting up repeatable and consistent processes should help deliver a high standard and reliable experience for customer after customer. Beware the tendency to rely heavily on the talents or contributions of a specific individual or individuals – when you notice that happening, you know you need to beef up your processes so that losing one key staff member won’t tank your performance.
Thinking about and planning to scale before you initiate your crowdfunding campaign will help ensure that your new-found capital will truly fuel your growth.
Businesses need to raise capital to scale. New laws allow you to generally solicit for investors if you take reasonable steps to verify them. VerifyInvestor.com is the safe, secure and confidential accredited investor verification service provider.
