Creating and launching a successful crowdfunding campaign to raise capital for your business involves more than just setting it up and waiting for the money to roll in. Here are three key strategies for any crowdfunding campaign.
1. Know Your Target Market
When launching a crowdfunding campaign it is crucial to know your audience. Who are your customers? If you’re raising money to expand an established business, then you have an advantage, as you already know some of your potential contributors. For startups with a new idea or product, being creative is critical. Research your potential audience by reading blogs and new sites. Know what the key and current issues are in your space. See what kind of content garners the most shares and comments—this is what your audience really cares about and where you should position your brand.
2. Know How Much You Need
Before raising money, you need to know exactly how much money you will need to develop your product or service, hire staff, and pay for all the related costs. Include the crowd-funding platform’s commission (which can be 5 to 15 percent of the amount raised.) Expenses should be categorized as fixed or variable. Variable expenses can always go higher, so estimate high.
Also understand the tax implications involved: money raised through crowdfunding is not tax-free and if you raise money one year, for example, but plan to spend some of the proceeds on production the next, you could run into a tax problem.
3. Track Activity and Adjust As Needed
All of the major crowdfunding platforms either have their own native traffic analysis tools, or let you connect to a third-party solution. Once the campaign is live, review and analyze traffic data to better focus your efforts. Depending on which sources of traffic most of your supporters are coming from, whether blogs or Twitter, focus should be put into these and similar channels knowing they have higher likelihood of generating more contributions.
Crowdfunding offers a new avenue for entrepreneurs to fund their business. That said, the ongoing rules regarding securities and raising money still apply.
For more information on crowdfunding and raising money for your business please see my new book “Finance Your Own Business.” You can also access a list of 29+ financial resources for businesses here: https://www.corporatedirect.com/business-credit/#small-biz-resources
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About the Authors
Garrett Sutton, Esq., author of Start Your own Corporation, Run Your Own Corporation, Loopholes of Real Estate, The ABC’s of Getting Out of Debt, Writing Winning Business Plans and Buying and Selling a Business in the Rich Dad Advisors series, is an attorney with over twenty-five years experience in assisting individuals and businesses to determine their appropriate corporate structure, limit their liability, protect their assets and advance their financial, personal and credit success goals.
Gerri Detweiler is the author of four books, including the Ultimate Credit Handbook (named one of the top five personal finance books of the year when it was released), and a media favorite quoted in publications like USA Today, The Wall Street Journal and featured on The Today Show and CNN. A credit educator since 1987, she’s served on credit reporting agency Experian’s Consumer Advisory Council twice.