Are You Ready for the JOBS Act to Jumpstart Your Small Business?
Thank you to Spark Business from Capital One for sponsoring this feature highlighting small business.
Is your small business hitting a limit and needs a cash infusion to jump-start it back into profitability? Up to now, you had to approach angel investors, sell off part of your company in stock, take on a partner, or make cuts. With the implementation of the JOBS Act next year, small businesses will have one more already popular and proven weapon in their financial arsenal - crowdfunding.
With the passage of the JOBS, or Jumpstarting Our Business Startups, Act in April of 2012, the popular method of raising capital from hundreds (or even thousands) of individual investors in return for a token item of value was expanded much further. The SEC has been tasked to figure out a method to waive long-standing limits on equity-based transactions not covered under its umbrella, presumably in the first quarter of 2013. After the new rules are in place, small businesses will be able to solicit up to $1 million annually from individual investors using the same methods as popular online crowdfunding source Kickstarter.
Crowdfunded projects have grown over 500% in the last few years, almost doubling in 2012 to $2.8 billion. Individuals with as little as $50 to invest can, together, make the difference between many a small company’s survival or closing its doors forever.
While the SEC finalizes the details of investment-backed crowdfunding, what can you do to make sure your small business is ready to take advantage of the JOBS Act? Prepare your business to be scrutinized like never before.
Take some time to figure out what your business stands for. If you had to give the social networking equivalent of “the elevator pitch” and catch a complete stranger’s attention in less than thirty seconds to interest them in where your small business is going, what would you say? Does your company truly live up to that description? If not, start figuring out how to get there, because if you are not in love with what your business does now, very few individual investors will be, later.
Do you have your financials in order, so they can be boiled down to simple mathematics? Can you lay it out on a single 8 x 11” sheet of paper? Remember, relatively unsophisticated investors might not be able to spot the difference between a dud or a diamond in the rough, and your ability to walk them through how you make, spend and re-invest your income in a way they’ll understand could move you to the front of the line.Continued on the next page