Going into business is tough. It requires a large upfront investment, which often means going into debt or acquiring investors who expect returns. For small business owners, acquiring funding can often depend on personal credit, or knowing the right people.
However, the development of new software and new ways to transfer and lend money is making life a lot easier for small business owners. Especially those who need either funding or professional financial management to continue pursuing their dreams. Peer-to-peer payment systems have allowed people with big ideas to seek funding directly from consumers, and cloud services have made every day financials a lot more manageable.
One of the principal challenges for hopeful businesspeople involves convincing people to give you money. Whether it’s a bank, a government loan program, or private investors, the difficulty isn’t in coming up with a great idea: it’s in convincing other people the idea has profit potential. Loan officers want to know you’re capable of repaying, and investors want a continuing return even after they’ve made their money back.
The issue is that these types of entities have limited ways of determining what will and won’t be a success. They rely on market research, their own knowledge and experience, and their evaluations of your business planning. Many won’t look at a project that has a level of risk they dislike. Not to mention if the idea is too novel or has too high of a startup cost.
The problem is that audiences and markets are unpredictable. No one can, with absolute certainty, say an idea will be successful until they try. Therefore, most investors and loan officers calculate risk so carefully. Ideas that have the potential to be hugely popular might get passed over because they carry a little too much risk, or simply because conventional wisdom misreads the true market potential.
This is where digital technology that allows direct peer-to-peer transfer of money has a huge positive impact.
There are a few ways this technology has been applied. One major way is the development of echecks, which allow people to pay each other directly across state and international lines a great deal more easily than older methods such as wire transfers. In addition to expanding bank-to-bank services, several third parties have cropped up, such as PayPal. These allow people to send money on a separate platform and then connect their bank accounts to it. There are even custom subscription services, such as Patreon, that allow people to support independent entrepreneurs with monthly contributions. It’s never been easier to directly pay someone you support, even if the amount is only a dollar or two.
These direct payment services paved the way for people with big ideas but limited methods of securing funds: crowdfunding. Peer-to-peer payment makes it possible for services like Kickstarter and GoFundMe to exist. These services allow people to pitch their ideas and projects directly to their target market. If people like the idea, they fund it, which is often effectively a pre-order of your pitched product. This process has allowed the production of games, movies and physical products that ordinarily wouldn’t have had the opportunity.
Another major barrier to people working on becoming small business owners is the wide variety of complex skills businesses require. Running a business requires financial acuity, and accounting requires a whole lot of training to get right.
Accounting is one of those “must have” operating costs. A business can’t survive without it, but not every business owner has experience with it. Hiring external accountants or employees with that expertise can get pricey. If a business owner isn’t ready for that sort of employee, going to an accountant can become a big dent in a budget. At the same time, it’s not the kind of service anyone should get cheaply. When it comes to financial accuracy, you want to make sure there are no mistakes at all.
In recent years, the tech sector and financial services industry have worked together to develop advanced tools that make outsourcing and automating accounting a great deal easier and cheaper. Of course, nothing beats having a true professional examine finances. However, for smaller operations especially, these services can be an absolute godsend to business owners on a shoestring budget. The main reason being that accounting stays relatively simple for smaller businesses.
Business owners can take advantage of technology that will automate their taxes, perform financial analysis as well as allow them to store and process data using cloud-based software. Software-as-a-service accounting technology lets business owners take charge of their accounting even with very little experience and training.
In the end, small business owners are being empowered by financial technology. Both to deliver their ideas directly to market and to handle all the complexities of their business with easily available and affordable assistance.
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