Navigating the Cash Crunch: Holding Your Equity Close While Your Business Reaches for More

Business Man at the crossroad of decision — The difficult decision between equity and debt financing | Image by Mohamed Hassan from Pixabay

When it comes to fueling the growth of a business, many find themselves in the proverbial pickle jar—twisting between two less-than-appealing options. On one hand, you can sell shares and bid adieu to a slice of your prized equity. On the other, bank borrowing lurks, with its enticing but risky promises, a bit like a fisherman’s siren song.

But wait, there’s more! Much like finding an extra fry at the bottom of the bag, there’s a third, tastier option: customer financing.

The Customer Financing Alternative: No Equity, No Debt, Just Growth

Customer financing: The innovative embrace of growth | Image by Ralph from Pixabay

Why part with your equity or sign up for a costly bank loan when you can convince customers to prepay for your products or services? It’s like getting a bear hug from your clients, except this embrace fuels your business growth without any loss of ownership or pesky interest. It’s a win-win, or should we say, win-wink?

The Success Story of Brad Lorge: Customer Financing as Growth Engine

Brad Lorge, a maestro in the tech world, founded Premonition back in 2015. Premonition’s journey wasn’t all smooth sailing (or coding). The revenue flowed like honey, but large enterprise customers were more sluggish than a snail riding a turtle.

Instead of the mainstream method of dilutive funding (read: giving away precious equity), Lorge played it smart. He asked customers to prepay, essentially turning them into the investors of Premonition. Talk about innovative financing!

Fast forward to March 2022, Premonition’s growth soared to a $3 million Annual Contract Value (ACV), culminating in a sweet $20.5 million acquisition. Best of all, Lorge and his partners were still holding 80% of the equity pie when they sold it. Now, that’s what we call having your cake and eating it too!

Customer Financing: Your Tool to Raise Funds Without Losing Equity

Your toolkit for raising funds without giving up equity

Interested in taking a leaf out of Lorge’s book? Start by exploring your customer’s wants and whims. Like a savvy chef, mix in some incentives, delivery guarantees, or project deposits. Stir well, and voilà, you have a recipe for growth without losing equity.

Productize Your Service: The Secret Sauce

Productizing: The art of packaging a service

You can take customer financing a step further by transforming your services into products. Think of it as putting your unique services in an attractive box with a big shiny bow. It simplifies sales and adds efficiency like a well-oiled machine, all while creating a predictable customer experience.

By packaging your offerings, you make it easier for customers to part with their cash upfront. It’s akin to prepaying for a box of cereal, except in this case, it’s your innovative product they’re eager to enjoy.

Conclusion: Fueling Growth Without the Bank or Equity Dilemma

Finding the right balance for your business growth

In the rocky road of business growth, why settle for the lesser of two evils? With customer financing or productizing services, you can grab the growth reins without sacrificing ownership or falling into a bank loan trap.

Whether you’re a newbie or a seasoned business guru, these strategies can help you find the cash your business thirsts for, while keeping your equity safe and sound. And remember, just like enjoying that surprise extra fry, discovering a new way to fuel growth can be both delightful and delicious.