Is Crowd Funding the Begining of the End For Business as We Know It? or How I Could Have Beat the Furby to Market.

Sometimes I miss the more simple times when business models worked on the principle of coming up with a product or service, marketing said product or service, selling it and making a profit which then could be reinvested into the company to build it up and increase net revenues and in turn increase profit.

A lot of people will say that they don’t get into business because of the initial start up cost. Traditionally this meant saving money up or getting a loan from a bank, a friend, a family member or connection that had money to invest. These people required business plans and proformas, research on the market and how the product or service would be of value to this market. Personally I saved a bit of money and got a loan against future allowances to buy my first batches of paint, self adhesive googly eyes and synthetic fiber to be used as hair; I undertook all rock collection myself, without any monetary compensation for my time. I understand that not everyone has the luxury of having parents with the financial means and who are willing to take a risk on such a business. I was lucky to have parents that could do that.

This model seemed to work pretty well.  If the product is of value to the market, the business succeeds and grows. If the market doesn’t find sufficient value in the product, the business fails. If growth is intentionally stifled by a business the market finds a way to create more supply to fill demand. If a product becomes obsolete a business adapts or disappears. Personally I stuck with the pet rock market too long and once I realized the market was shifting to softer more cuddly concepts, I was too invested in inventory and I couldn’t afford the mini bean bags that could have catapulted me to fame and fortune.

Maybe, if I had been more quick to adapt, taken a more proactive position, my investors would have backed me, but honestly, I didn’t even have the faith in myself at that point. My profits had gone towards a lavish lifestyle of Dip-Sticks, Big Chew and Charleston Chews. My business failed and I can admit that. As with starting a business, adapting takes a risk that I wasn’t prepared to take. I was over committed to my original concept and, even once I was ready to move on, the next market was already reaching saturation. I couldn’t produce the new product at a sufficient profit to pay off my investors. They knew and so did I. It was time to walk away and that’s just what I did.

Now days, the economy has changed. It’s easier to pimp a product then it has ever been before. Global production and shipping, sales tools that can reach almost every household in America, and the ability to throw together a marketing campaign for almost nothing, makes everybody who has a product or service to sell a potential player. With the internet, I could have dumped those pet rocks on to the market, taken my income and bought cheap bean bags from China, retooled my marketing campaign and been back in business within a week (you’ll never steal my dreams from me).

The other thing that’s changed is funding. We now have crowd funding, where people give a business money in exchange for something so that the business can start producing a product or retool some part of their business. The idea of pre-buying or buying related shwag for a product that isn’t even in production may be understandable. It’s cool to get something before anyone else, or better yet something they can never get. What’s more difficult for me to understand is getting money in this manner for retooling a business that is already a going concern.

Capital investments need to be made sometimes to increase business or maximize profitability. In my concept of a business model, this money should be coming from profits or be taken as a loan to be repaid from future profits. This used to be part of business 101. Not every product can be liquidated to create a capital fund. I get that. Maybe traditional funding sources aren’t an option. If the current business can’t earn enough to save for retooling or qualify for a loan, then what is the point of sinking more capital into it?

I watched an Indiegogo campaign video today that I felt was very well done. I was tempted to give money to it, though I don’t have any money so that wasn’t an option. I also thought about how I might be able to steer some marketing funds towards this particular business, outside the current Indiegogo campaign. Realistically their focus doesn’t coincide with the products I work with so it probably wouldn’t benefit anyone as well as other options.

Maybe these campaigns aren’t about the business as much as they are about the people giving to them. Sometimes people just want to do something noble, something that is selfless. It feels good to get behind a little start-up and be a part of something new. I get that. If they can get some shwag or a service that they may not otherwise have been willing to buy, maybe it’s a little easier to justify the expenditure.

So, if you’ve got ten or twenty-five dollars to spare and want to buy yourself a little feel good feeling inside, go ahead, get on Indiegogo or kickstarter and find a campaign that you like Find something that you can feel passionate about, maybe not passionate enough to do something with yourself but at least passionate enough to be able to feel the warm glow off somebody else’s passion. The best business’ are often started out of somebody’s passions. Go find a passion you share and be a little part of it. And if there’s nothing there today, check back next week, because there’s always more coming.

If you want to start a business, or do some retooling, maybe you should put more time in to the financial business side of your project opposed to the video and shwag making side. It may not be as sexy but a little bit of planning can go along way to make your venture profitable.

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About J Tom Field

Jack of all trades...
This entry was posted in Articles, Business and Culture and tagged , . Bookmark the permalink.

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