What is crowdfunding and why is it a good resource to use to start your small business?
Crowdfunding is a great resource to get your small business up and running. Aside from raising money for your business, crowdfunding provides a great way of not only promoting your product and/or service, but also building a network that will benefit you and your business in the long run.
You can think of crowdfunding as a grant, in that you don’t have to pay back the money you raise. You do, however, need to keep your investors informed by being transparent about how and where the money you raise is being used.
Different Types of Crowdfunding
When it comes to thinking about how to crowdfund for your small business, it is important to know what type of crowdfunding would be the best fit. The most popular types of crowdfunding are equity crowdfunding and rewards-based crowdfunding.
With rewards-based crowdfunding, you have backers who contribute small amounts of money. In exchange for the money they contribute, the backers receive a ‘reward’, which is usually the product/service that you are providing. In addition to raising money, this form of crowdfunding also provides a great way to promote your product/service and create a future customer base.
With equity crowdfunding, investors typically invest a large amount of money into your business. However, instead of being given a reward in exchange for the money invested, these investors acquire a small share of your business. Whilst giving up ownership for a portion of your company can sometimes be seen as a disadvantage of this form of crowdfunding, oftentimes your investors can become your best advisors.
How to Be Successful with Crowdfunding?
Crowdfunding has long since become a great way to get your business started and a great way for entrepreneurs to get their small business the financial support it needs. However, you can’t just start a crowdfunding campaign without first being as well-prepared and informed as possible. In order to ensure your campaign runs as successfully as possible, here are a few things to keep in mind in your venture to start up your small business.
You need to research all you can about crowdfunding. Since there are different kinds of crowdfunding platforms that are better suited to specific industries or market niches, knowing the right platform for your campaign is imperative. Additionally, you not only need to know how to run a successful campaign but also the rules and regulations of your chosen platform.
2. Know Who Your Audience Is
While choosing the right platform can help with this, you still need to have a clear idea of who exactly your target audience is. This ties in with the previous point in that doing the research will help you better understand the audience you want to target with your product/service. Identifying their needs and wants will also help you grow your customer base in the long-run.
3. Spread the Word
Once you’ve started your campaign, how do you get it to reach far and wide? Share your campaign on social media such as Facebook, Twitter, Instagram. Reaching out to friends and family and generating awareness of your campaign on various other platforms such as blogs can also increase the chances of potential investors seeing your campaign.
4. Keep Your Promises
It’s no use making a campaign, raising funds for your business and then not keeping your promises to your backers or investors. This not only risks you losing your funds, but also threatens the trust you have built between with them. Keeping your promises builds your credibility, especially if in the future you need to do another crowdfunding campaign.