Feeling the capital crunch?
For those of you that are working as food artisans, café or restaurant owners, how many of you are lamenting a shortage of working capital for the next quarter?
How about struggles with working capital for next week?
Today, I thought I’d take a break and write a blog for my Good Capital Projects’ entrepreneurs.
After attending a recent farm funding conference, I’ve been considering food entrepreneurs. I know they have unique needs around working capital.
Working Capital Ideas in the Traditional Economy
So, what exactly is working capital?
Working capital is the difference between the money you’ve paid and the cash you owe.
Jonathan Blum, a writer on all things tech, did a great article on edgy ideas happening in traditional banking and traditional economy innovation.
A lot is going on, and he offers a terrific article well worth exploring.
However, true to traditional capitalism, incentives for innovation tend towards pure profit motives.
A Zebra-Scaled Approach
What happens when we introduce a zebra-scaled approach to these ideas?
To start, in most cases, we are connecting our business with people in our communities through authentic relationships. As a result, we lift our businesses and create resilience in our local economies.
But know, there is creative opportunity for social entrepreneurs to find the same benefits as the traditional entrepreneur. You can do this by turning to innovation in the alternative economy.
Here we’ll examine the same ideas as they’re available in the new economy space.
Credibles “Pay from the kitchen, not the cash register.”
So reads the Credibles tagline.
Developed by a Slow Money Northern California leader who also developed the alternative currency, Bernal Bucks, and counts onetime Union Bank executive on his resume, Arno Hesse has a business model designed for social entrepreneurship.
Put Future Sales to Work: the app related granddaddy in this space is Credibles.
It’s called Credibles and the app captures prepays on food.
Arno charges a 5% fee.
Maybe you’re curious as to how that fee breaks down? In his transparent business model, he includes an offset to credit card processing ~2% (Square quotes 2.75%), 2% to offset his overhead, and most times, 1% goes to a local economy charity (like Slow Money).
However, it takes more than an app to make an idea work. Like any commitment to your customers, a thoughtful campaign designed for launch and for developing a robust engagement from your customer base will deliver dividends.
If you’re interested in Credibles, you might consider Northern California where Credibles has gained serious traction. The average load on the Credibles app in 2012 was $400. Take a minute to multiply $400 by the number of customers you currently work with. Following me? You should get an immediate sense of the potential!
Eliminating Adversarial Relationships for Vendor Respect
- Get (and give!) Your Money Faster:
My first exposure to the ideas around a respectful vendor relationship came from John Mackey’s book, Conscious Capitalism.
In the book Macky described holistic operations It includes anecdotes where managers and business owners don’t manipulate vendors any more than they would their customers.
Mackey gives several examples, including:
- Whole Foods management committing to new contract negotiations after their decisions to bring integrity to the vendor procurement process.
- The management for the Container Store and their deliberate decision to work with manufacturers throughout the year instead of at the holiday rush to smooth out vendor employment and overtime pay.
- REO management buying and storing inventory from their struggling vendors during the recession.
In these examples, managers honor the vendor as a valued part of the business ecosystem.
If you think for a moment, you can see how these choices respect every person involved. From CEOs and salespeople at vendor companies to their employees down the line this respect comes together to create a more resilient value chain.
Real Life Examples from Folks We Know
Since reading Mackey’s ideas so many years ago, I’m excited to know entrepreneurs acting on this principal!
As you may remember. a great example comes from, in one of my recent coaching cases, my client, a grass-fed meat distributor supports a struggling rancher with favorable terms. This social entrepreneur knows what’s good for the rancher is good for his business too.
In your personal business case, however, as the owner of a struggling startup food business, you’re excused if you aren’t able to implement these ideas immediately. If instead, you find you need to negotiate better payment terms and float off your good credit to keep your business running. That said, aspiring to a respectful vendor relationship is exciting. And, you should get in the habit of considering what feels right to do today!
Banks Designing to Improve Personal Cash Flow
- Lose the payroll, the paper, and even the branch!
While credit unions and community banks are central to community economy, to be a good steward of your financial resources, you might consider fintech innovation for your personal banking needs. This is one way, yes, you can help your overall cash flow. You can check out options like CHIME and Motive Money where you get a savings coaching and add can even add a little to your personal savings account through Savers Credit.
However, in the alternative economy way, you might also consider barter, share economy solutions, and local currency for your small food business.
These alternative economy solutions are great ways to sidestep the bank and add diversity and resilience to the local economy.
But, remember, avoiding the bank doesn’t mean bypassing the tax man. While sharing equipment or retail space isn’t a taxable event, a barter exchange is – and the IRS takes note.
Getting to Know Your Customer: Better Service and Better Cashflow
- Smarter Point of Sale – Credibles fits here.
So does Equity Eats.
Credibles is a pre-paid gift app, and Equity Eats fronts the money for gift cards and then turns around and sells the gift cards to your community.
Whether it’s Credibles or Equity Eats, both apps help you to develop a database of customers that includes their specific ordering habits. Equity Eats even goes a step further for customer enhancement.
By giving your employees technology to engage with customers, you’re learning more about your customers and taking customer service to the next level!
Intentioned, Thoughtful Outreach Doesn’t Have to Feel Salesy
There’s a realness gained by reaching out to our communities.
When we reach out, we’re not only selling our products, but we’re also enhancing customer service and making authentic connections for a holistic experience.
Once we start to consider relationships, our human and social capital, as part of our available building blocks, we start seeing opportunity in places we had least imagined.
And, by introducing relationships to the transaction, we discover a lens to find exciting new opportunities scaled for our small businesses.
We know your friends, neighbors and community members interested in a more holistic experience through the alternative economy space are looking to support your business. They want to frequent your businesses, and, in some instances, they may want to invest or provide their talents and time. It’s an exciting time, your business is important to building community for new and better ways to meet the needs of people like you!
Tell Me What You Think!
Reading, did you find new ideas for you to move you forward with your business?
Did it stimulate you to think of other ways you might engage your community to become supporters of the good work you’re doing?
If you did, I’d love to hear!
Let me know in the comments below.