To start a business, you need more than a great idea. You also need money. Even if you have an extremely cost-effective business model in mind, you’ll almost certainly have some startup costs in mind for equipment, web hosting, a space in which to work and, of course, paying your team for their efforts. There was a time when this meant putting yourself at the mercy of banks and other business lenders. Since the financial collapse of 2007-2008, banks have become a whole lot more risk averse in their lending practices. They expect you to have an absolutely bullet-proof business plan, at least a year’s worth of accurate cash flow projections, and in many cases they’ll expect you to invest some of your own money, too.
While this encourages you to do the homework necessary to get your business up and running, there is a better way.
Why Crowdfunding works
Crowdfunding allows you to get your business off the ground without the need for conventional lending. You make the startup cash you need from donations by the people who’ll be using your business… the consumers. Your future loyal customers. Crowd funding works for a number of reasons. First of all, it’s proof-positive that there’s a quantifiable market interest in the kinds of products or services your business will offer.
Secondly, it allows you to start trading without debt and high interest rates placing a stranglehold on your cash flow, so you can start making a profit faster.
Here are some tips to help you get off to the best possible start…
Choose the right platform
There are many different crowdfunding platforms to choose from. Each has their own following, and their own terms, fees and caveats. It’s up to you to find the right balance. Choose a platform that will give you a broad enough audience to gain traction without miring you in hefty fees. Some charge a flat fee while others take a percentage of what you’ve raised. The best choice for you will depend on exactly how much you need and expect to raise.
Raise awareness via targeted ads
Unfortunately, it’s not a case of “if you build it, they will come”. You need to raise awareness of your nascent brand and encourage people to donate. Targeted ads on Facebook allow you to look for demographics in your target market and deliver targeted ad copy to encourage them to donate. At this point it’s imperative to…
Know how you’ll incentivize donations
There are many different ways in which you may choose to incentivize donations from your prospective customers. These include;
- Rewards- Free products, services and other honoraries such as these cool Brick Markers
- Equity- Donors get a share of your business proportionate to their investment
- Debt- Donors effectively lend you the money to be repaid by an agreed point (with interest)
Keep in touch with your donors
Finally, once your business is up and running, it’s important to keep in touch with your donors to ensure that they remain loyal customers. Make sure you regularly send emails, letting them know what’s going on with your business and thanking them for making it happen. You may also want to keep delivering micro-incentives over a longer timeline (such as exclusive discounts) to ensure your relationship with them remains strong.