Tips for crowdfunding to grow your business
Although this may come as a surprise, crowdfunding is a great way to finance business growth. Many companies crowdfund to raise funds to develop new products and ideas. UK’s largest crowdfunding website Crowdfunder, has raised £42,485,223 to date for its users. People raise money for all sorts of things. For businesses, community groups, charities, political movements, sports clubs, and more.
Post your business idea as a campaign so people can donate money towards your goal. You need a good project description to encourage people to part with their hard-earned cash. Financial targets range from a few hundred dollars to test new products to thousands to fund business properties. You will set a target amount with a time deadline to achieve it on most websites.
Encourage people to support you. Offer a reward based incentive system based on how much people donate. This can be merchandise, discounts and even acknowledgement as a donor. For example, a donation of $10 can earn a donor’s name on your website. Or, for $20, offer a 5% discount voucher for a donor’s next purchase.
Here are some tips to think about when considering crowdfunding to raise funds.
Prepare a business and marketing plan
Treat raising funds through crowdfunding the same way you would other potential investors. Prepare a thorough business and marketing plan for your online project. Write a clear, engaging investors’ pitch to engage people. Be clear about your goals. Be transparent about your business and offer incentives for peoples support. Show passion for what you believe in and add testimonials from those who already back you.
Consider using a video to pitch to your audience. Invest some funds in a professional production. You can get your points across better in a video than on paper. You can also use this video as a marketing tool to promote your crowdfunding campaign on other websites.
It is important to get those first few donations quickly to show others that people support you. Getting these is key to getting noticed by others. This should not be difficult if you send out a promotional email to your current customers and supporters. Even friends and family may donate to get you started. Once you have those first donations it will help you reach out to people you do not know.
Crowdfunding advantages and disadvantages
As with any financial options, crowdfunding has advantages and disadvantages:
- advantages include:
- access to an already established customer base
- turning customers into investors’
- opportunities to interact with your customers
- feedback from customers during product development and testing phase
- instead of selling shares to investors offer reward incentives (a discount on their next purchase, for example)
- a great marketing tool for free
- lower risks – if you do not reach your funding goal you do not need to commit.
- disadvantages include:
- the need to build a promotion campaign for your idea or product to get peoples interest
- you cannot guarantee to reach your funding goal by the deadline
- competing with other businesses for crowdfunding
- the time required spent with investors providing updates which takes you away from the end goal
- providing incentive and rewards to those who support your campaign.
Promote your campaign. This takes effort. You cannot just start a page, write a description and expect the funds to magically roll in. You need to put the groundwork in. Let people see your commitment. This encourages belief in you and your ideas. Crowdfunding not only raises much needed cash, it allows businesses to market themselves in a way they never could before.