Why Should Small Businesses Care About Bitcoin?
Any small business owner can tell you how difficult the job can be Inconsistent cash flow, difficulty attracting customers, and limited time all place constant pressure that pushes down othe people trying to keep the business afloat.
While specific changes can help alleviate the pressure temporarily, bitcoin is a solution that offers permanent breathing room, empowering small businesses with a tool that fights multiple battles for you.
Bitcoin’s benefits for small business
Bitcoin’s 16-year history is but a small glimpse into the profound effect it will have on business for the next 100 years. Innovators are constantly uncovering new advantages by using bitcoin, but here are the core benefits you can expect to enjoy after incorporating bitcoin into your small business:
Inflation resistance
Inflation hits small businesses much harder than larger competitors. With less capital available, on top of dwindling purchasing power from each dollar, small businesses have less flexibility than what larger businesses can afford.
The good news is that bitcoin was designed specifically for entities like small businesses. It gives small businesses the chance to build a longer runway of capital that closes the gap between them and their competitors.
Unlike cash reserves sitting in your business bank account, bitcoin is optimized for long-term wealth storage. When you have excess capital available, using it to steadily build a bitcoin position ensures that the dollars your small business earns go as far as possible. With inflation accelerating throughout the world, a fixed-supply, digital asset like bitcoin offers all of the premium and none of the risk inherent to counterparty-reliant stores of value like equities, real estate, or gold.
Enhanced payment processing
Bitcoin’s decentralized protocol offers seamless, efficient, and global payment processing for small businesses. Traditional payment systems require intermediaries like banks, credit card companies, or other payment gateways that introduce friction. Time delays, costly fees, and manual communication between all of them slow the process down, placing more time between you and your money. Bitcoin simplifies things by enabling direct, peer-to-peer transactions without the need for middlemen.
Bitcoin’s anonymous founder, Satoshi Nakamoto, once said, “The proof of work speaks for itself.”
Transaction settlement is native to the bitcoin protocol. When you conduct a transaction, there’s no need for a third-party intermediary to validate and transfer the funds between the buyer and seller. Thanks to bitcoin’s proof-of-work consensus mechanism, settlement is immediate and final. A transaction on the bitcoin network is not approved without the necessary proof being validated by miners who expend computational power to ensure the transaction's legitimacy. This makes each transaction irreversible, instant, final, and secure.
For international transactions, especially if you run an e-commerce business, bitcoin’s instant settlement can be a game changer. You no longer have to wait for days – or even longer – for banks and intermediaries to approve cross-border payments, currency conversions, and other complexities. Bitcoin is highly liquid, allowing for seamless conversion between currencies. The entire process happens in the background, so all you see is the payment landing in your account, without the wait or added costs.
Lower transaction fees
A $3 item may not be viable for credit/debit card purchases since the fees incurred by third parties (like Visa or Mastercard) to process that transaction eat too much into the profit. As a result, many small businesses have to set minimum thresholds for small purchases.
But as mentioned, thanks to bitcoin’s decentralization, you can skip the third parties entirely.
By leveraging bitcoin’s layer-2 payment rails like the Lightning network, your small business can process microtransactions – as little as $0.01 – at near-zero fees.
The few dollars and cents in savings on individual purchases may not feel like much, but added up over the long term – and especially if those savings are allocated to long-term bitcoin holdings – those small amounts previously lost to fees could turn into an impactful opportunity for investment back into your business.
Fraud protection
Since settlement is native to the protocol, and secured by computational power – real energy – that can’t be faked, tampering with a bitcoin transaction is impossible. This stands in stark contrast to legacy systems, which are vulnerable to falsifiable identities and other fraudulence that can lead to chargebacks or fraudulent transactions. Even cash can be counterfeit, and while not very common, still highlights the inherent risks that traditional payment options pose to small businesses.
Attracting new customers
Bitcoin’s growing popularity among tech-savvy consumers means that businesses accepting Bitcoin can attract a new demographic of customers who prefer to use digital currencies.
Given that bitcoin is a global, decentralized protocol, by accepting bitcoin as payment, businesses can differentiate themselves from competitors and appeal to a broader, more diverse customer base. Small businesses can expand their reach beyond local markets, tapping into a global customer base that prefers or even exclusively uses bitcoin. This not only opens new revenue streams but also presents exciting growth opportunities.
Attracting new employees
As bitcoin adoption grows, more potential employees see it as a viable industry to get involved with. Younger generations like Gen Z are more comfortable with technology, and are more open to bitcoin innovation within businesses.
Gen Z workers bring an entrepreneurial mindset to the workplace that can’t necessarily be taught to previous generations who have spent decades in the corporate world. Small businesses that adopt bitcoin have greater potential to attract top-tier employees and gain a competitive edge.
Transparency and accountability
Transparency in financial transactions builds trust, a crucial factor in customer retention and brand reputation. Bitcoin’s blockchain provides a transparent and immutable record of all transactions, which can enhance accountability and trust between businesses and their customers.
So if your business and customers prioritize transparency, you can use bitcoin’s blockchain to demonstrate commitment to ethical and accountable practices.
Censorship resistance
Thanks to bitcoin’s decentralized architecture, upheld by proof of work, no single entity or government has control over it, making it resistant to censorship and interference.
In regions where financial censorship or restrictions are common, bitcoin offers a reliable alternative. Businesses can continue operations without fear of government interference or unjustified account freezes.
Future-proofing
The here and the now are typically top of mind for you as a small business owner, but that doesn’t mean you don’t need to plan for your company’s long-term viability.
Bitcoin ensures that you’re not only securing the value of your capital, but also optimizing your business for the demands of consumers in the future. Bitcoin as a viable form of payment is only becoming more prevalent throughout the world. Whether you’re a bitcoin-operating business in the US, or a nation-state like El Salvador establishing bitcoin as a legal form of tender, the outlets for people to spend bitcoin in the real world are increasing year after year.
Blockbuster once made the mistake of assuming people would continue to want physical video rental, while Netflix was forward-thinking, focusing its energy on streaming; because it understood the trends within the industry.
Unlike individual industries, however, bitcoin is an innovation that affects all industries. Everywhere that money touches, bitcoin is redefining what norms consumers will come to expect for businesses to establish loyalty and trust with them.
Drawbacks to consider
Of course, adopting an emerging, first-of-its-kind asset like bitcoin doesn’t come without its own set of complications. Especially when being introduced to a system that runs on outdated principles, there is bound to be some friction in the adoption process.
Price volatility
Bitcoin is rapidly monetizing. As the world comes to understand its value, its day-to-day price can experience drastic swings to both the upside and downside. Ultimately, the cold hard data demonstrates that bitcoin is in a long-term uptrend, but relying on that trend in the short term can prove to be more risky.
Your small business should not hastily pour any and all capital into bitcoin expecting to make a quick profit. On the contrary, newcomers should approach bitcoin with patience, focus, and a long-term mindset oriented around sustainable growth.
Any expectations set short of that is a surefire way to let bitcoin’s short-term volatility prevent you from appreciating its true value to small businesses.
Potential for loss
As a first-of-its-kind asset, bitcoin comes with custodial considerations that the world hasn’t had to think about in the context of a custodial-controlled system. Banks handle most of the money in this world, but what gets dismissed is the repeated history of fraudulence and failures that the banking system creates for entrepreneurs.
Bitcoin is the first asset in the world that you can truly own and rest comfortably knowing that no one can steal, debase, or manipulate it. You can store bitcoin on a device known as a “hardware wallet” that’s protected by a 12 or 24-word “seed phrase.” The seed phrase is a randomized string of words that, when kept safe, guarantees protection from outside parties. But this security guarantee comes with one caveat: you must not lose the seed phrase yourself.
Accounting & taxation
Since bitcoin operates outside traditional financial systems, standard accounting practices must adapt to properly track transactions, holdings, and tax implications. Businesses need to account for bitcoin differently from traditional payments and balance sheet reporting, considering capital gains, cost basis, and fair value assessments.
Regulatory uncertainty and banking restrictions within certain regions can create hurdles for businesses integrating bitcoin. Some banks may scrutinize or limit transactions involving bitcoin, while evolving regulations require businesses to stay informed to ensure compliance. Despite these challenges, businesses that take the time to understand bitcoin’s unique properties and implement proper security, accounting, and compliance measures have all the more to gain.
Bitcoin offers breathing room
Despite the hiccups in getting your small business acquainted with bitcoin, it’s a worthwhile – even necessary – endeavor to protect your company long into the future.
With rising inflation and an uncertain economic climate, every dollar a small business makes counts. Bitcoin is the quintessential tool to ensure your profits last long into the future and remain safeguarded from unpredictable political action.
Keeping up with a rapidly changing marketplace can be nearly impossible with all the other day-to-day considerations your small business has to make. That’s why Sovreign was created: to streamline your operations and free up your time. If your business is ready for the Bitcoin Business Standard, set up a consultation today with our team of experts to get started.
