4 Out of 5 Businesses Fail at Raising Capital: How to Beat the Odds…

That’s a stat from the SBA. Shocking, isn’t it? If you are a small business owner or commercial real estate developer, you have undoubtedly experienced the frustration and economic hardship that comes from scoring an epic funding failure. It was a great plan, right? Great team, right? Great market.

What You Forgot to Remember

All of business and all of life involves measured risk-taking. Our businesses are ruled by two (2) constants: Rational Choice Theory playing out at all levels and at all times; and, Large Number Theory.

Rational Choice

Rational Choice states that all of us act in our own best interests in all matters and at all times. Capital markets and market economies only work because their very design and operations are founded in deference to knowing how we will act in given situations and respond to given communications because of Rational Choice. In business, Rational Choice plays out everyday with consumers picking the winners and shedding the losers by virtue of the consumer’s purchasing decisions that, once again, are founded in Rational Choice.

The Numbers

Large Number Theory is what inevitably creates large markets. Large Number Theory tells us that if we flip the coin enough times, heads will equal tails in the number of flips. This is the power of communicating an idea on a broad basis. In business, advertising your value proposition is the very foundation of creating sales and defending market share. If your message does not go out to a sufficient number of potential customers, then your business fails.

Guess what? Financing works the same way…

Recent changes to the securities regulations allow savvy business owners and developers to now harness the power of mass communication to power their opportunities for obtaining capital forward based upon the same principles they intend to employ to generate sales in their future business.

Simply put, would you believe you have a better chance at obtaining capital going to one bank or one investor, versus communicating with hundreds or thousands of them at the same time? If you believe in the former, you are likely going to remain a member of the losers. If you believe in the latter, you now have only yourself to blame for not harnessing it to beat the odds.

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