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Crowdfunding is a way of raising funds from several people. It is a popular way for financing businesses including small businesses. While crowdfunding is suitable for many businesses, we take a look at whether it is right for your small business.

Crowdfunding is suitable for your small business if:

  • Your idea is cool and interesting – As per Vision Launch which analyzed 400,000 crowdfunding campaigns arts linked projects (music, film and others) had higher chances of success (20-40%). On the other hand, small business campaigns had the least chances of success (3.1%). Innovative technology ideas also has a high chance of success.
  • Your idea is simple to comprehend – The target audience is normally a non-specialist who will probably only like an idea as long as they can connect and comprehend the product. Ensure you elaborate the features and benefits of your service/product in a very simple and clear way.
  • Your business is B2B – Products/services designed to be directly given off for a price to the customer have a higher probability of being engaging and simpler to comprehend.
  • You have an established support network in terms of friends, family and customers – Obtaining the initial few contributions quickly is crucial to lead momentum to a campaign. Your most powerful supporters are family, friends and business acquaintances. The latter’s support strengthen a small business’s profile as well as develop other investor’s faith and confidence.
  • You and your small business already possess a significant social media presence – Don’t make the error of beginning with a small business crowdfunding effort with a new social media presence. The crowdfunding effort should the conclusion of a long term effort of linking with customers as well as supporters online. Hence develop a powerful online community long before considering a crowdfunding effort.

Crowdfunding is unsuitable for your small business if:

  • You don’t still possess a lucid business plan as well as pitch – Potential crowdfunders, just like other investors, desire to view a convincing business plan before investing. The small business pitch should include what you are selling, the target market, how revenue and profits will be generated and more.
  • You require big sums of money – Crowdfunding best suits soliciting small to modest sums of money. If your need are higher, consider other investment channels.
  • You can’t show tangible results quickly – A main motivation for investors is the business idea converting to reality. Small business should target providing beta versions of their offerings within a relatively short period of time. Delays will undermine goodwill as well as credibility. There should be something to show soon in return of the investments made.
  • You lack the resources to run the crowdfunding campaign – Initiating a campaign and communication constantly with several investors needs finance. If you are devoid of the requisite money and people then don’t go for this kind of effort.

Before going for a crowdfunding effort ask yourself whether it is feasible. If not turn to other methods of investment. Last but not least thank the contributors even if your project has disappointed. Most investors will appreciate the gesture. That move shows the relationship is beyond monetary gains.

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