Turn Your Customers Into Your Shareholders

If you ask any entrepreneur what the most important part of their business is, there’s a good chance that they’ll choose their customers. The saying “the customer is always right” is a motto that has sustained millions of businesses and will continue to form the backbone of millions more. As the lifeblood of any business, customers can make or break an SME and it’s important to ensure that they’re inside when it comes to your business strategies.

The concept of crowdfunding is not just a way of raising funds and getting thousands of new investors; it can become an alternative form of marketing that’s highly dependent on customer loyalty. As existing fans and users, shareholders with a vested interest now act as ambassadors for your product or service which is an invaluable edge to have in today’s hyper-connected world of social media.

Customer loyalty is an amazing trait to have in your investors, as they will not only sustain your business but to take it to new heights as well by being leading advocates for you. On the flip side, they are also likely to be much more accepting of the challenges or tough periods that the company may go through as the loyalty cultivated means they will be more tolerant than a pure investor with only financial returns in mind.

In the same way, companies will no longer need to toe the line between shareholders and customers as both are one and the same. Shareholders with no connection to the business will only focus on maximising profits at any cost, which isn’t necessarily the optimal way to grow a business. With crowdfunding, entrepreneurs no longer need to balance between what’s best for customers and shareholders, allowing them to pour their efforts into creating a business that continues to deliver value to consumers. This is arguably much more sustainable and allows a business to not just survive, but even thrive over the long term.

Another strong point for customers is that they will be vocal with regard to honest feedback. This will be amplified if they are active shareholders as they will not only want your business to succeed but also stick around for the long term. Unlike pure investors that want monetary gains in the short term, customers are likely to advocate business changes that are in the best interests of the company. The feedback is likely to be carefully considered instead of geared towards increasing profits, and there’s the added benefit of it coming back fast!

For example, let’s say loyal customers have invested in a small-medium pizza business via ECF, with the company looking to expand. They will want to be assured that the taste remains the same across all outlets and will definitely be vocal should this not be the case! Entrepreneurs can expect fast, honest feedback which allows them to focus quickly to solve problems instead of being distracted by grander ideas. This will likely not be the case if you have traditional investors that are only concerned with the bottom line, and may not even have stepped foot into the store!

In today’s social media-driven world, people are connecting on a much more personal level to businesses and/or products they are interested in. The emergence of crowdfunding presents an amazing opportunity for companies to capitalize by turning their loyal and dedicated ambassadors into shareholders and vice versus. 

Because in today’s world they will be connected with you and your company and your team using all the social media properties that they can find you in so they can feel connected, they want to be cheerleaders for your company because they believe in what you are doing. The interesting thing that companies have severely overlooked with shareholders is that these individuals invested in their company and did not receive a product, and that these individuals will sell more of your products/services than any new customer you attract to your business.

Companies need to apply the same principles they have for operating the front lines of their business to the way they deal with their shareholders. Spending time cultivating, converting, empowering and managing shareholders will yield exponential returns. Which means you need to see both customers and shareholders as equally vital to the company’s success.

The concept of turning your customers into shareholders should appeal to all business owners, no matter what type of industry they’re in. For example, let’s say a noodle house wants to raise funds via ECF to open additional outlets. The lack of pressure placed on them by several large shareholders means they can continue to price their food reasonably, maintaining both quality and customer loyalty. Instead of being pressured to raise prices to maximise profit margins for shareholders, the noodle house can continue to focus on securing new customers while pleasing existing ones as the price remains competitive. Not only does this reflect well on the business as they don’t appear to be just interested in profits, it continues to strengthen customer loyalty which bodes well for the long-term aspirations of the business.

This concept even extends to more digital businesses such as challenger banks. Take the example of UK digital bank Monzo, which has attracted 2 million customers since its launch in 2015. Through ECF they hit their fundraising target of £20 million, with £18 million coming in just three hours from 36,000 retail investors who were also Monzo customers. Despite drawing some criticism for allowing customers to use overdrafts to buy shares, the ECF round now looks like a very smart investment with the challenger bank valued at over £2 billion today after securing an investment of £113 million from US startup accelerator Y Combinator. This is double the £1 billion it was worth during the 2018 funding round, and no doubt a huge gain on paper at least for the 36,000 customers/investors that put money into the ECF round!

As an entrepreneur, it’s important to put yourself into your customers’ shoes once in a while to reflect. Think of your favourite spots to hang out or shop, and how you felt when it closed down. There can be a multitude of factors as to why businesses, unfortunately, shut down, but in many cases, these situations were entirely preventable. No one likes seeing their favourite businesses close shop – the same goes for your customers / potential investors. These customers will be the same voices that aren’t just putting money into your enterprise, but will actively play their part to help it grow sustainably for long-term success!

Entrepreneurs can start to build an online or offline community of users, fans, customers and vendors who are excited about your company and turn them into shareholders who can be of true long-term value.