I had a boss that used to say: “You don’t get more by asking for less.” And I wholeheartedly agree. Think about it for a minute. When you own a business, go ahead, ask for the sale from an existing or prospective client. If you don’t ask for your clients to support your business by making the purchase of a good or service, you won’t grow your business. Hell, ask for the upsell too. If you don’t at least try to get your clients to spend more, you’ll never know if you could have taken your business growth one step further. There is one exception, however, where I completely disagree with this philosophy and that’s when it’s applied to the crowdfunding concept in business. While crowdfunding has been dubbed revolutionary, it seems pretty bogus to me and misses some key fundamentals of business.
What is crowdfunding? A quick Google search defines crowdfunding as: “The practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.” So, kind of like, begging. But, if you do it on the Internet, all is forgiven because it’s “disruptive.”
There have been a few businesses in my area that have successfully completed crowdfunding campaigns on Kickstarter and then gone on to open their doors. Look, I get it, maybe they were trying to get more publicity or buy-in from the community to validate their opening, but it got me thinking …
Shouldn’t you have to suffer a little bit to go into business? Meaning, shouldn’t you have to shoulder the burden of suffering working a crappy job to support yourself or save enough money before becoming a full-time entrepreneur or small business owner? Does suffering to save up your own funding make you better at running your business and achieving your dreams of being self-employed? I think so. Here’s why …
You Need Experience
Crowdfunding seems to discount some key fundamentals of business including experience and the ability to create a viable business plan. It’s crazy, but you really do need experience to run a business. Even if that experience is guiding you on what not to do, it’s still valuable in shaping how you plan to operate and serve your clients. In addition to experience, you also need to be able to create a viable business plan including your expected sources of revenue, typical customer, identified suppliers, growth factor, and vision, mission and culture statements, just to name a few.
By relying on a crowdfunding campaign, you are looking to get funding from hundreds or thousands of investors all pledging a small amount, sometimes under $100. Are any of these investors vetting your experience or business plan? Probably not. If you’re receiving funding but no one is asking you the hard questions of what makes your business viable or competitive, maybe it’s not. You may have presented a great idea for funding, but ideas are different then an actual business model mapped out in a business plan. Having experience might save you from an embarrassing public failure and putting other people’s money at risk.
You Need Some Skin in the Game
Backing your business with your own money means you will be a better steward of your finances. When you get a gift of money, do you sweat over every penny to make sure you spend them all wisely? No, you probably do the exact opposite and buy something you wouldn’t normally purchase because you are treating yourself or operating under the guise that the unaffordable is now affordable. If you have self-funded your business or are accountable to actual investors, however, your wallet is double padlocked and every purchase is made with calculated intent. Proceeds from a crowdfunding campaign have the potential to be viewed just like that gifted money. Other people’s money is easy to spend. Spending your own money, however, is usually a little harder.
You Need to be Responsible for Your Own Achievements
Maybe I’m just jaded because I did have to “suffer” for several years working in a job that I didn’t especially like before I had enough money to quit and start my first Pure Barre studio. But, I have to ask, when did it become “ok” for other people’s financial assistance to be the critical element for realizing our own dreams and goals of self-employment? Take some responsibility people! Work that crappy job. Make those sacrifices. Save your money by eating peanuts for lunch or surfing reception buffets for dinner (both things I did by-the-way in my first job to supplement my $100/week grocery and meal budget).
When you find yourself sacrificing for the things that you want in life—like being your own boss or opening a business—you know you’re committed to making these dreams a reality. You also start doing everything possible to reach your goals. Call me crazy, but being responsible with your money should open whatever doors you desire. If you haven’t done the hard work and calculated the cost of your self-employed dreams, you haven’t earned the right to pursue them.
Sorry, there’s no easy way to get started opening your own business. You definitely need experience, some skin in the game and to be responsible for your own dreams and achievements to make your business a reality. Forgetting these fundamentals in favor of a trend is only going to expose your business flaws and render your business uncompetitive. If you find yourself with a great idea but no funding to make it happen, take the time to develop a viable business plan and do the work to save the money yourself or find legitimate investors. E-begging isn’t going to get you very far.
I just listened to this great podcast that identified two roles in operating a successful business, the visionary and the integrator. Which one do you think you are? And could you benefit from partnering or employing your counter-part? Exciting stuff! Read more in Thursday’s post.
Until then, stay on your toes!