Why Blockchain Matters to Small Businesses

There are many disadvantages small and medium-sized ventures face in the current business atmosphere. Despite their status as the backbone of any major economy and integral to GDP growth and other national metrics, smaller firms face high barriers to entry and low insulation from conditions that would barely scratch their larger peers. The current regulatory environment is purpose-built for companies that are several magnitudes larger, and makes it hard to find financing, scale operations, process payments and recruit other ancillary services that are both necessary and yet monopolize the time and resources of small businesses.

Piggybacking on blockchain
Small businesses often work solely on scaling, as they should, but this focus neglects and strains the basic processes of invoicing, inventory and payroll that were established at the outset. The bootstrapped peripheral business flows that support a business's product or service also need to evolve, or risk creating bottlenecks. While this used to mean purchasing a CRM or CMS platform, hiring new employees or contracting with another service provider, blockchain has an alternative solution.

Smart contracts are a more economical option that can help small businesses inexpensively streamline the flows that keep them in business. They use blockchain to create, check and enforce contracts between users, who would be a young firm's merchants, clients and customers. Whether it be invoicing, paying employees or bills, settling interest fees, creating insurance policies, handling fulfillment of inventory, closing new deals or any other transactional activity, smart contracts can have a positive financial impact on small business.

Smart contracts can also help small businesses that require consistent cash flow ensure that they are paid on time. For smaller companies that do not have the endless coffers their enterprise-level contemporaries do, a late payment can be the difference between success and failure. In fact, 40 percent of small businesses reported cash flow issues within the past year. Because there is no doubt about when funds will be released, companies can deliver services and know that funds will always be available when they should be. Apart from significantly reducing the investment that founders must make in these support activities, the cost savings can be passed onto customers to make prices more competitive.

Ledger entries make these agreements irrefutable and universally enforceable, negating the time small-business founders and their employees must waste with filing, verification, arbitration and legal support. They're also autonomous. Setting up smart contract functionality between a business and its many partners, participants and stakeholders is a smart and sustainable move. Many business processes that once required personnel, middlemen, expensive software licenses, subscriptions, and precious time, can easily replace these at little cost. All this and more allows companies that rely on blockchain to remain lean and competitive.

It also decimates the costs of customer service and arbitration, which often relies on presumptive logic that frustrates customers. This is a prohibitive cost for smaller businesses that can now be avoided. Thanks to immutable references on the blockchain ledger itself, the only errors that occur are human (the ones that can't be refunded).

Young companies interested in setting themselves and their partners up with smart contracts can make use of some of the earliest services in this arena. To avoid the initial development costs of building on Ethereum, there are already blockchain companies like Confideal and dApp Builder that make it easy to create and launch a complete smart contract portal with just a few clicks.

At the end of the day, blockchain is a fresh technology, and one that existing infrastructure is still struggling to support. As it gains more stability, new ways of doing business will emerge for savvy small and medium-sized businesses to incorporate into their own value propositions. For this to happen, the biggest obstacle is getting businesses to build on blockchain and drive customers toward these solutions. It is a participatory technology more than anything else, and it cannot bring any of its benefits to those who do not choose to use it. Blockchain represents a rising tide, but the boats that reach the swell first will be first to succeed.