Small Business And ESG

Small businesses that ignore ESG as a passing phase do so at their own peril. In the next few decades there will be a massive transfer of wealth to the millennial generation. This is purported to be the largest in history, surpassing even the inheritance of the Boomer generation.

The influence of the former is already roiling the investment market, because their criteria for placement of funds is vastly different from that of their parents. Boomers have disassociated virtuous activity, such as donations to charities or voluntary community work, from investment of their money. The millennials, on the other hand, tend to connect the two closely. They are bypassing the old polluting and sin industries like coal and oil and embracing cleaner renewables. This not only influences their own actions but also that of their parents, who ask them for advice.

This amounts to one of those tectonic shifts in the market place that small business needs to pay much more attention to. The value of the products and services that are produced are already much more subjected to ESG criteria environmental, social, and governance impact. Both short and long-term business planning must take into account the changing values of this new cohort of investors and entrepreneurs.

The ESG and SRI connection  socially responsible investment is implicitly connected to ESG. The new generation shows every sign of elevating this to a priority for their investment decisions, and purchasing intentions. This applies not only to large investment vehicles such as private equity funds, which sell shares to the public on the stock market, but also to small business funding and start-ups. Many banks are now requesting a sustainability assessment from both large and small businesses.

Small businesses can boost SRI – The company website and newsletter is a good starting point to show that your business follows a socially responsible path. This can be manifested through a commitment to a more eco- friendly supply chain for products and services produced by your company. If you import some of your parts, it is important to know that your foreign suppliers treat their workers well and respect the environment. It is not enough just to pay lip service to this, because in this internet connected world, information is just a click away. Activists investigate corporate claims and call out laggards.

Millennials are more demanding- They are twice as likely than the average consumer to check the impact of packaging on the environment, and to verify the social credibility of companies from which they purchase goods. Switching to biodegradable packaging, and acknowledging ecological and social concerns is not expensive, and must become part of the small business mindset.

The ESG trend is here to stay – When very large money management funds start paying attention to a new trend, and changing their investment philosophy, no company small or large can close their eyes to the impact that it will have on their business. The reality of climate change has its deniers, but the millennials are not fooled and have jumped on the bandwagon of sustainable development.

The virtuous business leader is in favour -Social responsibility is connected to business ethics. The consumers in advanced countries demand a different approach to the way business is done. The exploitation of the environment at any cost is no longer tolerated. Climate change dynamics, supported by a more activist generation, will force business owners to shift to a more ethical approach. The sooner this is realized by business leaders in different industries the better will be their chances of survival in the long-term.

Social media will play an important role The millenials are masters of social media, and will use their networks to promote the ESG concept. This has the potential to attain a critical mass that will sway people all over the world. The effects are already visible in the way that the Chinese government has committed itself to non-polluting sources of power. The vast inherited wealth of the new generation will support SRI with hard cash.

Obtain Business Financing Through OPM

 

 

 

Not knowing how to obtain financing for your business can be a huge hindrance to growth. You may see, what in your mind, is a great opportunity to create wealth for yourself and others. It could be some real estate deal in your own or some foreign country; or you have one of those “eureka” moments for a product or service that provides exciting possibilities. Unfortunately you have absolutely no money to carry this through to reality. This is where knowing how to organize an OPM can get you the initial funding needed to launch your project.

OPM stands for Other People’s Money. If you truly feel passionate about your project and have done your homework on competitive offerings, market acceptance, preliminary survey of consumers and potential customers it becomes a matter of persuading those with money to get involved. At this stage of development the established avenues of funding such as banks and other financial institutions cannot be targeted because they are not risk takers and need existential proof of success in the short and long term. Many budding entrepreneurs are prevented from going further, as the money obstacle seems insurmountable to them.

This is the time to build what is referred to as an investment deck – or a platform from which you can solicit funds from private individuals or non-establishment investors. A deck consists of a detailed business plan, which clearly states the goals and objectives of the business, defines the market in terms of product/service, price, place and promotion, analyzes the competitive landscape, defines the uniqueness, benefits, and features of the new business, describes the strengths, weaknesses, opportunities and threats, and places this all in a financial context.

The latter requires help from an accountant so that realistic projections of revenues, costs and profits can be made that will withstand careful scrutiny. A three year projection that includes a profit and loss statement and balance sheet is a prerequisite. This is not only necessary for the potential investors but also provide a guideline for the founders.

Once the investment deck is in place it now becomes a matter of targeting investor groups who may be persuaded to join you in developing and bringing your ideas to market. This involves a carefully honed presentation strategy, which effectively uses the information in the investment deck to solicit funding. Passion, commitment, enthusiasm supported by cold statistics are needed to win people over to your cause.

Fortunately banks are not the sole source of initial funding for a business – Many of the world renown companies started as basement or garage operations that were launched through the help of ordinary individuals or organizations that provide platforms to raise funds. There are many sources of this type of assistance, each will require a slightly different approach:

Friends and relatives – These people know you and hopefully trust you. You will want to minimize the risks to any one person by soliciting money from many individuals in this group. The proposal may involve shares or loans, depending on the individual’s preference. Keep in mind that when accepting funding from this group you are risking treasured relationships that may be jeopardized if the business fails.

To minimize this, make sure that they are investing discretionary money that they can afford to lose if things go sour. No business is foolproof, and the best laid plans can be upset by shifts in the marketplace that are not foreseen at the outset. Being up front on possible risks reduces the consequences of negative outcomes.

The Indie approach – This uses the very successful online crowd funding platforms of which Indiegogo is one of the most prominent players. They have helped raise over a billion dollars in funding for start-ups in various business categories around the world. To launch a crowd funding campaign requires some preparation and initial funds but they are very reasonable, and can be organized on a shoestring budget.

One of the requirements is to create a video, which extols your product or services in a persuasive manner. The duration in which the solicitation takes place is limited and requires the full cooperation of the soliciting entity. The advantage of this form of funding is that you can reach a broad audience around the world, while at the same time making a special appeal to those people that personally know you. This applies not only to relatives and friends but also to the virtual friends on social media. Having a strong presence on such business platforms as Linkedin provides access to those that may themselves have been involved in the business launch process, and will thus be more receptive to the campaign.

Angel investors – are individuals who have set a personal mission for themselves to aid and incubate new business ideas and concepts. They have a more sophisticated approach in choosing where and how they place their money on risky ventures, but they are definitely open to new ideas. Usually, there is more interest in high tech proposals than other ventures, but this does not exclude the possibility of a sound business plan in established commercial or industrial sectors. Angel investors are usually involved in local business associations such as the chamber of commerce, and this is a good place to tap into this funding resource. A classified ad in a local newspaper can often ferret out this type of investor as they are always seeking new business opportunities.

Immigrant investors – Many countries offer a fast track to citizenship to foreigners who are capable of investing in new businesses. There is a minimum investment required, which is usually in the $500,000 + range. A good business plan, or/and a past record of success in business, or as an executive in a company related to the products and services in the proposal, is helpful. In most cases it is necessary to show that the new venture will provide additional jobs in the community where the investment is made. The commerce and industry development department in most countries would be a good place to look for these type of investors. Direct advertisement in South Asian classified ads is another avenue that can be followed.

Investment clubs – In most locations there will be some sort of formal or informal investment club, where people seek peer advice and group market analysis to make investments in stocks and bonds. Members of these clubs are usually less risk averse and therefore are more likely to welcome a presentation by a local entrepreneur with a good idea and plan. To locate these opportunity seekers ask around the neighborhood, or better still join the local chapter of the chamber of commerce where you will have a better opportunity of meeting them. Many are themselves involved in some business and understand the difficulties in acquiring seed or growth capital.

No money doesn’t have to be a show stopper if you have a great idea and a solid investment deck.