3 Things You Should Know About Small Business: September 19
NEW YORK ( TheStreet) -- What's happening in small business today?
1. Why you may want to think twice about appearing on ABC's Shark Tank. MultiFunding founder Ami Kassar offers an interesting argument in the New York Times for why entrepreneurs should think twice before agreeing to be on ABC's popular TV show Shark Tank .
The popular show features entrepreneurs pitching their companies to a group of wealthy investors, including Mark Cuban, owner of the Dallas Mavericks.
Kassar tells the tale of Sean Tice and Kristy Hadeka, owners of Brooklyn Slate, which makes cheese boards out of slate. The partners had recently declined to appear on the reality show because what might not be known to viewers (and other salivating entrepreneurs) watching the show: before an entrepreneur can proceed forward with an investment, they must agree to give Finnmax, the show's producer, an option of either receiving a 2% royalty on operating profit or a 5% equity stake.Kassar makes a compelling case for why debt investments, especially for companies already bringing in revenue, might be more beneficial than equity investments. The most important reason is that by financing the business with debt as opposed to equity, the company has a tool to help it grow. "If a company's orders grow from $50,000 one month to $500,000 the next, the business owner has an instrument in place that's ready to handle the increase. By contrast, when owners give away a big percentage of their company for a $100,000 investment and then get hit with a big order, they have a brand-new cash flow problem," Kassar writes. 2. Is email bad for business? Email may be good for short follow-up questions, forwarding information and sending office humor, but it's not the best method of communication for explaining a point of view or scheduling meetings, says Inc.com. To grow, business owners need to stop typing and pick up the phone or, gasp, meet with customers face to face. This might be more time consuming, more expensive and all around more difficult, but in the end it will be worth it. "I can think of many times where a relationship was nearly destroyed over an email that was taken the wrong way, or where the tone came across as angry or arrogant -- none of which would have happened had they heard our cheery voices," the writer says. "So remember, business is done face to face and email is for follow up," the article says. 3. Kabbage backs online sellers. Got a great idea for a product that is selling online, but don't have the money to increase production? Consider Kabbage, a two-year-old company providing working capital or small loans to people who sell products online, whether that's through Etsy, eBay (EBAY) or other e-storefront tools. The company got a financial boost this week. It raised $30 million from Thomvest Ventures and other existing investors to expand its business, according to Wired . Kabbage lends anywhere from $500 to $40,000 to small business owners. Customers get six months to pay back the money with interest rates ranging from 2% to 7%, the article says. However, the most important requirement that the lender requires is that small business owners must prove that they are already making money at selling their widgets. The lender also looks at online reviews and seller history to determine how much money it will give small business owners. -- Written by Laurie Kulikowski in New York. Follow @LKulikowski To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com. >To submit a news tip, email: email@example.com.
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