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What you need to know for 01/20/2018

Showing their trust with their dollars

Showing their trust with their dollars

Creative way for Saratoga business to raise cash for expansion

What every small business owner wants is customers’ loyalty and trust. And Richard Frank, owner of Four Seasons Natural Foods in downtown Saratoga Springs, obviously has them.

Frank recently asked his customers to help fund his move to a new, bigger store nearby, in return for a discount on groceries when it opens. And they responded, contributing $23,000 in the first 10 days. Frank is also using more traditional financing methods, including loans and cash, but this one is innovative and the capital will surely come in handy.

There’s a little of the gift card model here, where the card is purchased upfront and the recipient uses it to purchase goods or services later.

There’s a little of the crowdfunding Kickstarter model, where creators ask for pledges through the Internet to fund films, music, stage shows, comics, video games and other projects. In return, they get tangible awards or experiences.

There’s a little of the CSA (community-supported agriculture) model, where customers front a farmer money before the growing season so he can plant, and then share in the harvest.

None is without some risk.

With the gift card, the store could close before the card is used, or used up.

With Kickstarter, the project could fail or never even get started.

With CSAs, the farmer could get sick, or go out of business, or the crop could fail.

Likewise with Frank, but the risk seems minimal. He has roots in the community. People in Saratoga Springs have known him since he took over the store in 1991, and feel comfortable with him. They don’t have to give him money, but choose to. They want to help.

For their help they’ll be getting something tangible — i.e. a nice new store and a nice discount of 5 percent to 20 percent on groceries, depending on how much they give. And they shouldn’t have to wait long. The new store is expected to open June 1.

That still doesn’t mean it should be all caveat emptor. Contributors to this or other alternative financing methods deserve some kind of assurance — through escrow accounts, IOUs or whatever — that their money is being used as intended, and they have a chance of getting at least some of it back if it is not.

Trust, but indemnify.

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