Can AI Stop Business Failure?

Artificial intelligence – AI – is this year’s innovation. It’s the biggest thing in business – or, at least, big business.

McKinsey estimates that tech giants spent $20B to $30B on AI in 2016, with 90% committed to research and development and deployment; and 10% on AI acquisitions.

Easy enough for giants with massive budgets and cash to burn. But for our country’s small businesses, determining whether AI is an opportunity or a threat is, well, complex. As big businesses leverage AI to sell harder, better, faster, stronger – small businesses will have to keep up.

That’s no easy feat. Even without factoring in AI, the Small Business Administration (SBA) reports that though a promising two-thirds of small businesses will survive their first two years, only half of all businesses remain in existence after five years.

So is the glass half full or half empty? And how will AI impact those chances?

The good

In the consumer world, Intelligent Advisor solutions have already had dramatic effects in the management of financial assets. These roboadvisors, as they’re called, claim to make investing more affordable and accessible for those who can’t affort to pay a highly trained human advisor.

And it’s working. Investment News reports that today, the five top robo-platforms have a combined $100 billion in client assets – projected to reach about $385 billion by the end of 2021.”

These roboadvisors are able to provide automated, personalized recommendations for lay investors. The technology can help improve the financial wellbeing for those who might not be able to access or pay for professional human advice.

In effect, AI is driving inclusion for small-time investors. This is great news, and it’s long-past time the same kind of technology affect change for small businesses. Why? Because they sorely need it.

The bad

To truly compete, small businesses must act much larger than they are. This presents a catch-22. To understand how to scale at the pace of a bigger businesses, small companies need a dedicated CFO, able to analyze performance and provide insights to drive continued growth.

CFOs aren’t just number crunchers. They can answer things like:

  • What should I do to grow my business?
  • When, where and at what price should I access debt?
  • Am I paying too much for my current debt?
  • When, where and at what price can I raise equity?
  • Do I have the proper type and amount of insurance?
  • How does my business compare to its competitors?
  • Am I paying my partners and vendors at rates that compare to the industry?
  • How can I improve my credit profile?
  • What is my business valued at and who might be interested in buying?

Small business owners often don’t have the time or resources to fully analyze these questions on their own – and often lack the financial means to hire a CFO to help. Financial consultation costs money, but to access the money to pay for it, small businesses need… financial consultation. Without these insights, small business owners can make costly mistakes.

The opportunity

In the same way that intelligent automation and digital insights helped revolutionize the personal investor space, AI tools can have a game-changing effect on businesses. Robo-business advisor platforms, or “intelligent CFO” programs can help small businesses shatter the metaphorical growth ceiling.

Over the years, I’ve had the chance to hear from thousands of different small businesses about their ambitions and pain points, and some key themes emerge: business owners are under incredible pressures; they fear making costly mistakes and being taken advantage of in their business dealings.

Small business owners with an AI-informed intelligent CFO will have a leg up on the competition to make better and informed decisions.

An example: Small Business, LLC, is growing and needs capital to continue growing to support demand. An intelligent CFO, armed with the business’ latest financial report, would identify this issue based on cash flows and top line growth. It could recommend the lowest cost of capital and the best providers.

But the cost of the capital may still be too high for the business. So, this is when an intelligent CFO could really change the game.

The intelligent CFO would recognize potential barriers to growth, and provide actionable recommendations. These recommendations may involve addressing issues in the following areas:

  • Personal credit
  • Business credit
  • Personal cash flow
  • Business cash flow
  • Personal debt utilization
  • Business debt utilization
  • Business trends

Once Small Business, LLC, addresses these concerns, it could access significantly better priced capital.

America is a mecca for small businesses. The backbone of our economy, these businesses succeed because their founders are passionate about their work, their craft. Seldom are these craftsmen also well-versed in finance. An intelligent CFO makes the financial aspects of business growth more transparent, enabling our nation’s small business owners.

So yes, there’s a lot of hype around artificial intelligence, but it’s no longer a buzzword, some far-off concept only accessible for big tech. The articifical intelligence manifest via tools like intelligent CFO will pave the way for small business growth. Those that learn to access and take advantage of this intelligence will have a significant leg up on their competition which could significantly improve their growth.

Author bio:

Sean O’Malley is the president and co-founder of SmartBiz Loans. Sean has extensive start-up experience and was at Venrock venture capital, where he managed the firm’s tech incubator. Sean joined Venrock from Yahoo!, where he held product and international strategy roles focused on driving consumer growth in international markets.

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