When speaking to people about the company we are building, the first thing that they usually share with me is that 50 percent of businesses fail within the first year, then they share advice on how to operate so that we survive. And when they find out it is an art-related business their “optimism” often turns into a look of sadness followed by a deep breath and a comment like, “artists don’t make money,” or “what’s important is that you tried and have a master’s degree that you can use.”
I do not hold anything against people for not understanding entrepreneurship or art – and it is true that 50 percent of businesses fail within the first year – but to me it simply means that the other 50 percent survive. As far as the art comments – well, I’m a risk- taker but understand that traditional thought is that certain types of businesses do not do well. But I believe that people can do well in business or their chosen career if they are passionate and are willing to work for their success. Besides…I have been “non-traditional” for a long time, and being married to an artist only amplifies my lack of tradition. (Imagine if people like Walt Disney, J.K. Rowling, and Richard Branson listened to the naysayers).
In addition to hard work, a business needs money to survive. A company needs to – at the least – pay inventory and any overhead costs, (even if their company only has an online presence). And it would be nice if the business owner got paid so that they could pay their personal expenses. Many people that I talk to would prefer not needing money to start a business, but the reality is that they most-likely will. A business may not require a lot of money, but it will require some. (Like the saying goes, “you need to spend money to make money”). According to Gallup, the two top reasons why people do not start their own business is because they like the security of a steady income and because they don’t have “adequate” personal savings. So the question becomes how someone funds their business if they cannot use their own money, especially if it is a micro-business.
There are three avenues of securing outside funding for a business. The first is to secure loans and donations from family and friends. The advantages of borrowing from family and friends include that they already know you very well; they will listen to your pitch because of their feelings about you; they are inclined to say, “yes;” and they can give you the time to build your business. Of course there are disadvantages, which include that your friends and family may know you too well; they may not appreciate or approve of your entrepreneurial drive; you may put the people closest to you at risk; and you may damage close relationships.
The second option is to seek traditional financing either directly through a lender or through the Small Business Administration, (SBA), which guarantees loans that are provided by select lenders. (This guarantee is the amount of money that the SBA will pay the lender should the business default on the loan). Lenders are more likely to give loans to businesses if they are guaranteed to at least recover a portion of their money. SBA loans are a good option for many small businesses. One of the many options available through the SBA is their MicoLoan Program, which helps entrepreneurs secure very small loans of up to $35,000. MicroLoans are a good option for micro-businesses as well as for borrowers who generally do not meet traditional lenders’ credit standards.
The third option is fairly new, the modern version having first been successfully used for funding back in 1997. This option, known as crowdfunding, is a method of raising capital through the collective effort of individuals. Crowdfunding taps into the collective efforts of a large pool of individuals, primarily via social media and crowdfunding platforms. The benefits of crowdfunding include that it hedges risk; it serves as a marketing tool; it gives proof of concept; it introduces prospective loyal customers; you get customer feedback; it’s free PR; and it’s easier to secure funding than traditional options. Like any other option, crowdfunding does have its drawbacks, not the least of which is that crowdfunding campaigns don’t often meet their fundraising goals.
According to a recent report, between 69 and 89 percent of projects – depending on the platform – fail to reach their targets. According to the report, the most well-known of crowdfunding sites, Kickstarter, only saw 31 percent of its campaigns reach their fundraising goals in 2015. Other disadvantages of crowdfunding include that it often requires more work than traditional funding options and one can pay out as much as 8-12 percent of funding raised.
Even though there are disadvantages, and the stated success rates are low, I’m not in any way discouraging my readers from using crowdfunding as an option. (As many people know, I believe that with passion and hard work anything is possible). I just wanted to include the rates in order to offer all sides of presented ideas.
There is a crowdfunding idea that was found during my article research that I personally really like – and may explore as we build our company. The idea is selling customized T-shirts and receiving the profits as funding for your project. This idea appeals to me personally because the individual who is giving money receives a tangible item in return. It is also advertising for the project because the t-shirts are customizable so can include graphics and company logos. The company is called BonfireFunds and all the details are on their website.
Because of the internet and the explosion of social media it is easier than ever for people to raise money for their ventures, especially for those launching micro-businesses. If one has the passion and is willing to work hard, they have a good chance of being successful in business and in fundraising for their venture or project.
Born in Nashua, Brian Chicoine spent his early years in Raymond before moving to Manchester at the age of 9. A few years after graduating from West High School, Brian moved to Providence to complete his undergraduate degree at Rhode Island College. After college Brian got married then he and his new wife Jackie spent a little more than five years in New Hampshire, where their two boys were born. The Chicoine family then returned to Jackie’s home state of Rhode Island and have been living there since. Brian has merged his passion for entrepreneurship and innovation with his love of new and bold ideas to bring fresh perspectives on the way things are done. Brian, Jackie, and their two boys currently live in Rhode Island, but their hearts are in New Hampshire.
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