South Africa is facing a coronavirus pandemic which is having severe social and economic consequences, and sooner than later the economic shock will start to hit hard.
Henceforth, keeping small businesses afloat, and to keep employees on, will be the biggest challenge, and so you’re probably looking at how to ensure that your businesses don’t go under because of a short-term cash flow challenge.
As someone who has worked in Equity Crowdfunding for over 5 years now, knowing the remarkable changes that Equity Crowdfunding can bring to your business, I wanted to share some thoughts at this stage to give some perspective and tips.
Self introspection in a pandemic
Your skills and experience are valuable and will remain so. If you are at home working and are new to it, then plan how you can be as effective as possible without burning out.
Whatever you do, try to get outside once a day if you can: walk, run, stretch or enjoy the outdoors. If you’re not switching off like this each day, you will not be the best you can be, and however frustrated or challenged we become, being kind to each other matters.
A capital raise from the crowd
It’s nothing new for humankind to be faced with an epidemic and some experts predict the coronavirus is unlikely to be our last. The most important thing for both entrepreneurs and investors to do is not panic.
Your digital presence to raise capital online will become your main and most important presence. This should not be mistaken for an appeal to save a business from closure but as a preparation to raise capital, by allocating a percentage of equity shares for investment by the crowd online.
You have less risk with equity financing because you will have no fixed monthly loan payments to make, especially with the current negative cash flow during this pandemic and into its aftermath. However, the risky side of it is that equity investors should not expect to receive an immediate return for their investment as they have a long-term view and face the possibility of losing their money if the business fails.
We would advise by starting off with asking friends and family to make an equity investment to finance your company and caution them to only invest what they can afford to lose.
Retaining your retail investors
Normally, investors would be skeptical during a pandemic such as coronavirus, but a savvy investor knows that after each crisis, the market not only rebounds but also rises to new heights. Meaning the hardest hit sectors may offer the most potential to bounce back.
Make that clear to the retail investor and those who may be your loyal customer or client. Overtime investors can win owning well-managed businesses that provide products and services that consumers need and love.
One thing is clear: there will likely be volatile markets over the next few weeks and probably months, and you have to remind your investors that you are a great business that has long-term prospects and are currently open to investments.
Tabassum Qadir is the CEO of Uprise.Africa which is the first and only regulated Equity Crowdfunding platform for South African businesses. The platform works with entrepreneurs to raise capital for their businesses in a democratic way and provides investors with an alternative investment option.
You may join her on an upcoming online webinar to learn more about Equity Crowdfunding by registering via the following link - http://bit.ly/38WHlN5
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