Although there have been many successes, there is a lot of misunderstanding out there about how crowdfunding may help small businesses. If you are considering crowdfunding, here are some ways to improve your chance of success.
See a CPA and an attorney
Crowdfunding is not free money. The crowd typically gets a “perk” for their contributions. This may be a public “thank you” on social media or some tangible item they are, in reality, purchasing, including pre-sales of a new product. So crowdfunding can result in both tax liability and legal liability.
The crowd may invest in your business, becoming part owners. This may not yet be legal in all states. Georgia is one exception, with specific rules. In some cases the crowd can lend money to you.
Don’t ask for too much money
Don’t expect to raise all needed funds through crowdfunding. Most successful campaigns ask for less than $10,000. Crowdfunding may raise part of the money you need, but the rest should come from other sources (you, banks, SBA, investors, etc.).
Build your network first
Don’t just hope strangers on the Internet will donate. Do you have a network of potential donors through social media like Twitter, Facebook, LinkedIn, etc.? If not, choose two or three types of social media you are confident you will use regularly and start building your online network.
Before announcing your campaign online, develop a core team of three to five people to help you (family, close friends, professionals). Then look to other people you know well who will be ready to make donations before you publicize your campaign through social media and press releases.
This way people who don’t know you will see that your campaign is already attracting contributions.
Choose a platform that is right for you and know their rules
Different crowdfunding platforms, like Kickstarter and Indiegogo, have different rules and attract different crowds. So for different platforms research the type of crowd attracted, time limits, standards and the amounts and types of fees. Look at successful campaigns to get ideas. Then choose the right platform for your campaign.
Share a compelling, engaging story
People participate in crowdfunding because they want to be part of something in which they believe. You must share a story through video, pictures and words that engages the crowd and motivates them to get involved. Develop interesting perks for different levels of funding. Be sure the crowd knows your goal and time limit.
Use press releases in addition to social media to publicize the campaign. Promote your campaign offline through face to face networking. At brick and mortar business locations, use posters and flyers that include QR codes leading to your online campaign.
Encourage others to share your story
Throughout the campaign, encourage others to share your story through a variety of media. This is easier if your story is personal, engaging and emotive. Offer cool, interesting perks that the crowd will want to share. Show appreciation to those who share.
Communicate updates and say thank you regularly
Continue promoting your story throughout the campaign. Maintain your presence on social media. Add new perks, add to your written story and thank everyone who contributes and who shares your story. Announce your success and appreciation when the goal is met. If you meet your goal before the time limit, consider asking for donations toward a “stretch goal” related to the campaign.
Crowdfunding is a creative funding option with a lot of potential, but you must enter into it with a well-designed plan and realistic expectations to be successful.
Connie Edwards is a Business Consultant with the Savannah office of The Georgia Small Business Development Center Network. She may be contacted at email@example.com.