Crowdfunding: Pros and Cons

Posted On September 20, 2017 By Brianna Hall In Business Articles /  

Crowdfunding has become a popular way of obtaining capital among entrepreneurs. Everything from movies to bottle cutters have gone through the financing process on sites such as Indiegogo and Kickstarter. Many have achieved success this way. Others have failed. Today I want to explain what exactly crowdfunding is, and what the pros and cons of using this method are.

According to investopedia.com, “Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture.” The purpose of crowdfunding is to increase the availability of funds for entrepreneurs by putting them in contact with a larger pool of potential investors. On the other side of the equation, investors can avoid the risk of putting large sums of money into a single venture, and instead only donate amounts as low as $10. Entrepreneurs are required to provide updates to investors periodically, protecting the investors’ interests. Crowdfunding is sometimes rewards-based, meaning investors will “get to participate in the launch of a new product or receive a gift for their investment,” according to Investopedia. Equity-based crowdfunding is another option. This option works more like a typical investment, where funders become partial owners of the company. Equity-based funding is fully regulated by the SEC.

Crowdfunding comes with its own set of problems. According to floship.com, there’s “a huge amount of uncertainty when it comes to the accounting rules for funds raised through crowdfunding.” Because crowdfunding doesn’t work like a typical investment (such as a loan), there is confusion as to whether funds received in this manner should be declared as capital or income. Additionally, each state will have different rules on taxing this money. Some legal experts are also concerned that the lack of regulation will lead to scammers using crowdfunding sites to grab free money (Forbes). This is due to the businesses seeking funding not being required to provide financial statements to investors. This may cause many investors to put a lot of money in the hands of irresponsible business owners. There are other problems with crowdfunding, but these are some of the most widespread.

Despite the risks, crowdfunding has considerable benefits that come with it. After all, there have been a number of successful ventures that have used crowdfunding to reach their goals (onlinemba). Notably, all-or-nothing crowdfunding platforms have no participation fee, and return funds to investors if the project doesn’t reach 100% of its goal. It can also be a valuable marketing tool. According to Tanya Prive on Forbes, “an active crowdfunding campaign is a good way to introduce a venture’s overall mission and vision to the market, as it is a free and easy way to reach numerous channels.” This is because “many crowdfunding platforms incorporate social media mechanisms, making it painless to get referral traffic to your website and other social media pages.” Another attractive aspect of crowdfunding, according to nibusinessnessinfo.co.uk, is that “your investors can often become your most loyal customers.” After taking part in the financing process, it is likely that they will not only buy whatever you are selling, but also will refer their friends to the product or service. This makes your investors your marketing team, minus the salary expense.

Like all investments, there are considerable risks and benefits that go along with crowdfunding. When done the wrong way, investors can waste considerable amounts of money, and business owners can lose customers and develop a negative image. When done right, however, it can result in visionary products being developed, and benefit everyone involved in the process. If you decide to invest in a crowdfunded project, be sure to proceed with caution. If you decide to use crowdfunding to obtain funds, make sure you keep your investors informed, and develop a plan beforehand. Despite the criticism, plenty of businesses and entrepreneurs have used crowdfunding successfully, and you can as well.

For further reading:

https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-crowdfunding

https://www.cnbc.com/2015/09/15/how-to-crowdfund-successfully-tips-from-experts.html

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Interviewing: Some Guidelines to Follow

Posted On September 8, 2017 By Austin Strawhacker In Business Articles /  1

Job interviews can be tough as an employer. In most instances, you don’t know the candidate beforehand, and have to learn enough about them in a 30-45 minute interview to determine if you’re willing to let them behind the counter of your business (or on the factory floor, in the office, etc.). There is no surefire way to interview that will reveal which candidate is the best. However, there are guidelines you can follow that will help you learn about the candidates, and give you enough of a sense of them to make a good decision. Let’s start by looking at ways to prepare for an interview.

The first part of preparation is getting to know your candidate. One way is by reviewing their resume. In addition to reviewing the information they provide, review their LinkedIn profile, and make use of the information presented their. Be wary of using outlets such as Facebook, as you may be running up against discrimination rules. You don’t want to go into an interview with any biases about the candidate, so make sure you have the right attitude before they arrive. After you have reviewed the candidate’s information and qualifications, come up with a list of questions to ask the candidate. I will go into further detail on this below. Lastly, select an appropriate environment for the interview. A good rule is to select somewhere quiet and professional. Coffee shops are common, and some libraries have small study rooms you can use. Of course, if you have your own office, that would probably work the best.

When the interview starts, observe the candidate as you listen to them. Be on the lookout for “closed-off” posture, such as crossed arms. Additionally, take note of whether or not the candidate dressed appropriately. During the interview, don’t be afraid to delve deeper into questions. Nikoletta Bika, for workable.com, advises: “Asking one question about a past experience may not tell you a lot about a candidate. You don’t just want to hear their story. You want to understand their way of thinking, how they reached a solution, what was the impact of their actions and how others perceived them.” It can be very helpful to ask questions that force the candidate to expand on their past experiences. Miss Bika also reminds us that the “interview isn’t only about [the interviewer] assessing the candidate. It’s also a chance to present the company in a way that will persuade the best candidate to accept their offer.” This is a reminder that a job interview isn’t meant to be a one-way affair. You need to be selling your business just like the candidate is selling themselves. Also, it’s a good idea to take notes, especially if you are interviewing multiple candidates.

There are a number of good questions you can ask the candidate. While I’m sure you have heard most of the common selections, here are a few less-used interview questions that can help you determine if a candidate is the right fit for your business:

  • Tell me about a time that you made a mistake at work. How did you handle it?
  • What do you expect from your employer?
  • “What are the three most important attributes or skills that you believe you would bring to our company if we hired you?” (com)
  • “What did you like most about (a job on their resume)? What did you like least about this job?” (com)

These questions help you get a sense for what motivates a candidate, as well as how they interact with their coworkers. Most interview questions are meant to reveal something about the interviewee’s cultural fit, expectations, motivations, and skills. There are plenty of resources available to help you develop a set of interview questions (see below).

Always finish the interview by asking the candidate what questions they have. These can tell you a lot about the candidate. If they don’t have questions, or if they have very basic questions, it could point to a lack of interest or preparation. The questions they ask may be just as important as the answers they give you in determining what type of employee they will be.

Interviewing candidates is one of the toughest parts of growing as a small business. There is only so much you can tell about a potential employee’s character, work ethic, and skill in a single job interview, so be sure to do your research beforehand. Always remember that you have more than just answers to judge a candidate on (body language, apparent preparation). Also, remember to come up with your script and stick to it, for all of your candidates. Everyone has their own way of interviewing, but these guidelines will help you identify which candidates are the best fit for your business, and which ones to let go.

 

Special thanks to: Amy Dutton, Michael Wampler

For further reading:

Interview Techniques from Experienced Interviewers – workable.com

Best Interview Questions for Employers to Ask Applicants – thebalance.com

Professional Recruiters Reveal 16 of the Best Interview Questions to Ask – insperity.com

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