Do you have plans of starting your own business? How do you like the idea of collecting money from people to pay for your venture? Sounds pretty cool, doesn’t it?
Before starting a business from the ground up, your main concern would probably be funding. After all, just a great business idea isn’t enough. You need a lot of other ingredients to get this dish right.
Depending on your requirements, the urgency of the situation and the status of your savings, you could either take a Business Loan, borrow some money from your friends or family, or look at other alternatives.
One of the most popular alternatives these days is crowdfunding. If you aren’t exactly sure what it entails, don’t worry about it. We’ll take you through the basics to give you a better idea of what it means and how it works.
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What Is Crowdfunding?
In simple terms, crowdfunding is simply a way to get people to contribute money towards the funding of a venture. While there are many ways to do it, it is generally carried out online through various crowdfunding platforms.
For starters, you need to hunt for a crowdsourcing platform and pitch your business idea in the best way possible. You need to convince the maximum number of people that your project or venture is worth contributing towards.
The more people looking to contribute, the better. However, this doesn’t come without some strings attached. In return for their contribution, you should ideally give them something in return. This could be in the form of discounts, freebies or whatever has been mutually agreed upon.
Although it sounds simple enough, there’s more to it than meets the eye. While there are many examples of crowdfunding working wonders for people all over the world, it doesn’t work well for every Tom, Dick and Harry.
There are a couple of questions you need to ask yourself and a couple of things you need to think about before you give crowdfunding a try. Sometimes, some campaigns are just not meant to be crowdfunded, while others lack proper planning or fail to get the necessary support to get off the ground.
Therefore, to make things easier for the budding entrepreneur in you, we have come up with a couple of essential questions you need to ask yourself before you go down the crowdfunding route to fund your venture.
Here they are:
- Do you have a sound plan in place?
First things first! It is imperative that you have a strong business plan to start with. While coming up with a business plan for your venture, you not only need to evaluate the costs and revenue angles, you also need to create contingency plans.
You must have an emergency plan to fall back on since the market keeps fluctuating. If you want people to invest in your business idea, you need to show them that they aren’t just throwing their money away. In short, you need to show them a fool-proof plan in order for them to place their faith and confidence in your venture.
Making a business plan isn’t that difficult, as long as you have a clear idea of what you want to put out there in the market. Whether it’s a product or a service, check the feasibility. See if you have a properly laid out marketing plan and make sure you have identified your target audience well in advance.
If you’re offering a product, creating a prototype to help people better understand what you’re aiming for could be a big bonus. Knowing everything about your business plan is going to be extremely helpful for you in the long run.
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- Hundreds? Millions? Billions?
Now that you’ve come up with a sound business plan, the next thing you need to think about is your financial target. You can’t randomly launch a campaign and ask people for random amounts of money. You need to know what your exact targets are and you need to execute your plans accordingly.
There are two things you need to keep in mind when setting a target. Don’t ask for financial contributions that are too low, since you could end up with far less money than you require, and don’t ask for contributions that are too high. Being greedy definitely isn’t going to help you. Asking for too much reduces your chances of attracting more investors.
Raising the required amount isn’t enough. You also need to have a well laid-out plan detailing how you’re actually going to spend it. If you’re used to drawing up budgets for your personal expenses, then all you have to do is apply the exact same concept here as well.
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- Is what you’re offering good enough?
Like we mentioned before, people won’t just fund your business idea for free. You have to offer them something in return once your venture takes off. But, before you go about making big promises, check the feasibility of what you’re offering.
What you’re going to offer depends on a number of factors. Are you planning to reward them with special offers, discounts, freebies, subscriptions etc. or something similar? At the end of the day it all depends on you and what your target audience is looking for. You have the freedom to get creative and choose rewards that are exciting enough for them and easily manageable for you.
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- Have you identified your target audience?
Identifying your target audience is of primary importance. Your target audience are people who could potentially show interest in your business idea and subsequently fund it. You need to get inside their heads to get a feel of what they’re thinking and what they’re expecting.
You also need to know them better to figure out their needs and wants. Does contributing to your campaign make any sense to them? Does it benefit them in any way? How can you send your message across more clearly so that the chances of getting a positive response increase?
These are important questions that you need to dwell on. Without doing your research beforehand, your crowdfunding campaign could tank in no time at all.
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- Are you ready to burn the midnight oil?
Although it may sound fairly straightforward, getting people to fund your business idea isn’t that easy. Like everything else, you need to put your heart and soul in it to see it flourish. It requires a lot of hard work, networking and constant following-up on your part.
To make things a bit easier, you could consider looking for a business partner. Working with a business partner can simplify a lot of things for you. If you think you can go it alone, that’s cool too.
But, since crowdfunding is all about pitching your business idea to the right audience, especially on an online platform, two heads could be better than one. Selling your idea online might involve creating a lot of content like videos, SEO campaigns etc. You basically need to engage with the target audience. Step up your marketing game and make your business ideas dazzle. It could decide whether your crowdfunding campaign will turn into a roaring success or an epic fail.
- Are you all prepped up?
You can’t start a crowdfunding campaign and expect it to take off without first doing all the necessary preparations. Prepping can be time-consuming, which is why you need to start early so you have enough time on your hands to get the funds in place.
Find the right crowdsourcing platform, aim at the right target audience, get your business pitch in place and get the wheels rolling. Just ensure you have your basics in place before you get started. Your prepping could also include a website, a blog (to tell people more about your venture) and a good social media presence. Basically, anything that will give your venture the best possible chance of success.
- Do you know about the platform limitations?
Be careful when choosing your crowdsourcing platforms. They all function differently. With some platforms, for instance, you can’t get your earned funds dispensed unless you achieve your final target.
Also, these platforms aren’t usually free. You have to pay to make use of their services. And it doesn’t stop there. There are different types of crowdfunding as well. You need to research a bit and choose the one that best suits your needs.
These are just few of the limitations you could face. You just need to be wary of all the possible hurdles you could face, both financially and logistically, that could hamper your crowdfunding campaign.
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After asking yourself all these questions, you should be able to decide whether crowdsourcing is the right choice for you or not. If you came to a positive conclusion, give it a shot.
In case your answer was negative for any of these questions, you could reconsider your options once again. In any case, if crowdfunding isn’t for you, then taking out a business loan could certainly be a feasible option.
You can even take a Personal Loan to begin with.