Crowdfunding is the practice of funding a business project or venture by raising money from a large number of people. It is the opposite of traditional financing methods where a project or business raises funds through a small, select group of individuals or institutions. Crowdfunding will help your small business raise large amounts of money so you have the budget for more resources to boost your revenue.
What are the Benefits of Crowdfunding?
Crowdfunding offers small businesses many benefits:
- Provides access to capital
- Minimizes risks
- Can serve as a marketing tool
- Offers proof that your business can grow
- Introduces you to potential customers
- Easier than other funding methods
Types of Crowdfunding
Reward-Based
This kind of funding involves offering those who support your crowdfunding campaign rewards or perks. Rewards can range from early access to products, exclusive merchandise, or personalized experiences. This method works best for small businesses or startups that are launching a new product or service and will need extra funding for production.
Equity-Based
In equity-based crowdfunding, backers will receive shares of your company when they invest in your business. It is very similar to traditional forms of investing but through crowdfunding platforms.
Debt-Based
This is a form of peer-to-peer lending where individuals or businesses will borrow funds from investors who expect to be repaid. This method works best for businesses that are in need of loans but don’t want to get involved with traditional banking.
Donation-Based
Donation-based crowdfunding involves supporters donating money to a small business because they believe in the cause/mission, and don’t expect a financial return. This model is typically used by nonprofits, social entrepreneurs, and startups.
How to Successfully Crowdfund Your Business
Apply SMART Measurable Goals
SMART goals are a widely-used goal-setting model that will help you focus on your ideas and use your time and resources wisely.
SMART stands for the following:
- Specific: well-defined, clear goals
- Measurable: how you’ll determine your progress
- Achievable: the end goal is something that you can accomplish
- Realistic: within reach and relevant to your nonprofit
- Timely: a clearly defined timeline
This makes it easier to put action plans in place and hold you accountable so you can reach your crowdfunding goals.
Create a Strong Marketing Plan
The most effective marketing strategies for crowdfunding campaigns include email outreach, social media advertising, guest blogging, and hosting events.
Social media specifically can attract new audiences to help out with your crowdfunding campaign. While there are many ways to use social media to your business’s advantage, simplicity is the way to go. Plan out three to five major topics that you can feature on social media that will tackle your goals. Keep in mind that potential supporters will be attracted to your story, so it’s valuable to add an emotional element filled with visuals and concise information.
Choose the Right Platform
You’ll find hundreds of crowdfunding options on the internet. However, not all crowdfunding platforms will work for your campaign. For instance, while GoFundMe is the right platform for a donation-based crowdfunding campaign, an online resource like Prosper works better for debt/peer-to-peer lending crowdfunding.
Crowdfunding, when done the right way, can help your business grow to new heights. At Enterprise Center we can help guide you resources to help finance your business and beyond.
