As a small business, it can be difficult to source funding to get yourself up and running or to finance a new campaign. One great solution a lot of new businesses are taking advantage of currently is crowd funding.
Crowd funding is a way for a business or charity to raise money to fund a venture or campaign. The money raised usually comes from many interested parties, in big or small amounts, and the whole process usually happens online.
Before setting up your crowd funding page to help finance your business, it would be a good idea to look at some previous successful campaigns and get to know the different sites. There are a variety of different crowd funding sites out there and they all specialise in different areas, some examples include: Kickstarter, Indiegogo, GoFundMe and AppBackr.
If you are looking at raising a significant amount of capital via your crowd funding campaign, it would be worth taking some advice from a commercial finance broker who specialises in this type of product. They will be able to advise you on the options available to your business and they should be able to help you set up your campaign page to give you the best chance of a successful campaign.
But how exactly could crowd funding benefit your business?
As more and more businesses turn to crowd funding to gain extra capital, it may be time for your business to look at this as a financial aid.
It provides access to capital
The most obvious benefit of crowd funding is that it gives you access to money your business needs. You can put this money directly into the products you are making or the new campaign you’re running.
The downside with crowd funding is that if you don’t hit your target, you won’t receive any money even the funds already pledged. This is because most crowd funding sites offer an ‘all or nothing’ approach with crowd funding for projects.
However, some crowd funding sites will allow you to take money from donators even if you don’t hit your target. This crowd funding option may see you being charged for withdrawing the money and donators should be made aware of this before they donate.
Money obtained should go towards the project stated. If your crowd funding offers a benefit to the donator, such as a signed CD for a fan donating money to a band to record their new album.
It can be a great marketing tool for your new business
A crowd funding campaign can be free PR for your business and it is a great way to market yourself online. You can get your name out there and start a buzz about your brand before you have even launched.
Many crowd funding campaigns have been picked up by the media, particularly new inventions and exciting projects. Plus, the online world is usually very keen to help these sorts of businesses succeed.
If you are going to use a crowd funding campaign for your business, make sure you market it as much as possible and make the most out of this free PR.
It showcases a proof of your concept
When you set up a crowd funding campaign, you will have to outline your business and what it does. So, when people start donating to your business, they know exactly what you have to offer.
Most people only part with money when they believe in/like something; the more donations your business or project receive, the more people that like what you do. It is a good indicator for yourself and future investors that there is a market out there for your concept.
It finds a market for your idea
Following on from the point above, crowd funding finds a market for your product or service before you even launch it. Having an audience ready and waiting is a rare thing for a small business, particularly one just starting up. Those initial customers also have the potential to turn into loyal customers of your brand.
It offers you the chance to perform some market research
When you put your business idea on the internet it gives people the chance to give you feedback. Not all feedback is going to be positive but that is usually of more benefit for you and your business.
Crowd funding gives you a great opportunity to find out what your potential market think, like and don’t like about your idea. To have this kind of insight at your fingertips is an invaluable asset for any business.
It may seem easier than applying to a bank or broker, but it’s not always simpler
Setting up a crowd funding page is a lot easier and quicker than going to the bank or a broker. Simply create an account on a crowd funding site, input relevant information about your business, specify the amount you want to raise and promote your campaign on social media.
However, it can be difficult to get the ball rolling and it usually takes a good amount of money already in the pot before the donations will start coming in. Investors are usually unlikely to place large amounts of money in a crowd funding pot if there is no or little money in there already.
Also be aware, crowd funding may be quicker to set up but not all campaigns are runaway successes. It could take you longer to obtain funds this way than it would do to be approved for a loan in some circumstances. It all depends on a number of factors which option is the right one for you.
You should take financial advice from a commercial broker to enlist their help to set up your crowd funding account. This is something you will want to do if you are trying to raise a big amount of capital or you want to attract big investors to your idea.
It gives you the opportunity to pre-sell your in-development stock
If you are using your crowd funding donations for the production of a product, you can use the web page to take orders of your new product. Whether you place the option to pre-order with donations or separate to it, it is a great opportunity to maximise potential sales.
It is a good option for non-traditional businesses
For businesses seen as non-traditional and unpredictable, it can be difficult to get backing from banks as they will likely see your business as too risky. App development businesses are particularly prone to this as they need a lot of start-up capital, which many traditional investors may not be attracted to.
This is where crowd funding could come in, and it has for many businesses. It is a way to raise funds from people who see a benefit in your idea and are not worried about any financial loss.
It’s free to set up
Crowd funding pages are free to set up so even if it is unsuccessful, your business will not have lost anything financially. As a result, there is nothing to lose and absolutely everything to gain.
So there we have it, your introduction of crowd funding and exactly how it could benefit your business. If you are looking for a new way to gain capital, crowd funding could be just the solution you have been looking for.