Looking to smooth out seasonal dips, manage cash flow or finance new equipment or a remodeling job? Before you go to a bank, you might want to consider your customers. If you have a loyal following, your customers just may offer to pay you up front, creating a credit or house tab that they can use towards future purchases.
The most common form of pre-selling is the CSA, short for Community-Supported Agriculture. Farming is a very seasonal business. Farmers need to spend money on seeds, supplies and workers early in the season, but they don’t generate revenue until months later when their crops are ready to be harvested. With a CSA, customers pay up front early in the season, when the farmer’s cash flow is low, in return for a weekly delivery of vegetables once harvest time rolls around. It’s a win-win: Customers get farm-fresh produce without having to go shopping, and farmers get cash when they most need it.
There are other ways businesses can raise money through pre-selling, including crowdfunding (more on that here).
And a startup called Credibles offers an easy-to-use app that food producers, restaurants and other businesses can use to create pre-selling offers. Customers open an online tab and are paid back in edible credits, or Credibles. By paying up front, they often receive a premium, for example, 10% more food.
While a crowdfunding campaigns typically have a one-to-two month fundraising period, Credibles campaigns can be ongoing. And like all forms of pre-selling, it generates loyalty, repeat business, and a deeper connection between customers and the business.
- Generate cash and working capital when you need it
- Encourage loyal, repeat customers
- Pay back with in-kind product
- Not sufficient for large scale capital needs