Quick Question: What is or was the most difficult part of starting and growing your small business? We’d venture the guess that, more often than not, the answer to that question is “getting the money.” You don’t have to watch Shark Tank to realize just how difficult it can be to get investors for a great idea, especially considering the fact that it can take years for your business actually to become profitable.
Fortunately, raising money is becoming increasingly simple for small businesses in the digital age, thanks to the power of crowdfunding. You may know it as the tool that your Facebook friends use to raise money for a good cause, be it a social issue or a relative needing money for medical expenses. But in 2015, crowdfunding has also become a powerful tool for small businesses to leverage.
In fact, crowdfunding is scheduled to surpass venture capital raising for the first time next year! Here’s how you can take advantage of the concept for your own business.
Defining Crowdfunding
Forbes.com defines the concept as “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”
Instead of going to the bank to ask for a loan, you simply ask the people around you to contribute a little bit each. In return, they will often get a small reward, from a share in the company to a company T-shirt or similar benefits.
Examining Crowdfunding Tools
The list of potential crowdfunding tools is large and continues to grow. You have probably heard of GoFundMe and Kickstarter, but they are far from the only websites small businesses can use to seek investment.
Services like AngelList (not to confuse with the similarly named AngiesList), CircleUp, Crowdfunder, EquityNet, Fundable, RocketHub, SeedInvest and others are designed specifically for small businesses, with a network of potential investors just waiting to distribute their money into a concept they deem worthy.
BusinessNewsDaily offers a great discussion and evaluation of these and other crowdfunding services.
Establishing a Successful Crowdfunding Campaign
Now that you know about the concept itself and the tools available to execute a crowdfunding strategy, it’s time to put your knowledge to good use. While the details of establishing a successful crowdfunding campaign go beyond the introductory purposes of this blog post, here is a short overview of what any successful crowdfunding campaign needs:
- A core value proposition. What is the one thing at the core of your business that makes it worth pursuing, both for you and your investors? Answering that question to your audience of potential investors is crucial to securing funds.
- Supporting Media. As any marketer knows, a simple block of text will do little to convince your audience to take any step – let alone support your efforts with a monetary investment. That’s why your campaign should always have supporting media in place, from pictures and concept drawings all the way to videos that allow your audience to get to know you and your business.
- Natural “Next Steps.” Anyone who invests in you, whether it’s with $1,000 or $10, will be invested to keep in touch with your idea and business. That’s why it’s important for you to outline just what happens after you raise your funds and how your investors can stay in touch with you and your business. You may also want to consider establishing a contact database of your investors to help you reach out with new developments when needed. Doing so can help turn investors from stakeholders into loyalists of your business.
Crowdfunding is undoubtedly a trending topic among small business owners right now, so it pays to get to know the concept and how you can take advantage of it. And like everything else connected to small business management, it works more smoothly with an effective and efficient CRM that manages your investors as contacts and allows you to communicate with them whenever you need! To learn more about small business success, contact us.
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