A recent survey by Hiscox insurance revealed how social media is being utilized by small business owners. While the new technology is being used in many facets of small business life, it has not taken off as a source of funding.
The survey reported that female small business owners lead in using social media tools for marketing, to communicate with customers and public relations. They also slightly edged men in using social media for connecting with prospects, internal use, and market research. Men, however, are far more likely to use social media for hiring.
Social media funding not an option
While the findings indicate an emerging embrace of social media technologies, small business owners staunchly rejected crowdfunding as a source of financing. Kickstarter and Indiegogo, founded in 2009 and 2007, respectively, are popular donation services. Artists or entrepreneurs of any kind can create a web page for their project, set a funding goal, and, with the help of social media, find donors.
The Hiscox survey indicated, however, that these services have hardly been utilized by small businesses. Ninety-two percent of male and 94 percent of female small business owners responded that they had not considered using these services as a source of funding.
One reason may be the low rate of success. As reported by Forbes, 56 percent of Kickstarter projects and 80 percent of Indiegogo campaigns fail to reach their goals. Further, the average payoff amounts are $5,000 and $3,700 respectively. Successful campaigns often require significant promotion and small business owners may simply not find the effort worth the payout.
The nature of the small business may also keep them from using crowdfunding services. Fox business suggests that businesses in traditional industries may not see crowdfunding as a viable option. Their projects may lack the creative flair desired by crowdfunding websites and supporters. Attracting attention to their campaign may be difficult and depending on such donations can be a risky strategy.
Low optimism in 2013
In addition to the low use of crowdfunding, 95 percent of respondents aged 30-39 expressed difficulty getting a small business loan. This was a 33 percent increase from 2011. The survey also revealed pessimism about the year ahead with only 50 percent optimistic, compared to 55 percent in 2012. Only 11 percent of small business owners revealed plans to employ more people, which is down from 13 percent in 2012.
Small businesses experiencing trouble obtaining a loan through social media or crowdfunding should consider a merchant cash advance or working capital loan from an alternative lender. National Funding, an alternative lender, offers a variety of financing services to help small businesses nationwide.