Finding the funds to get your small business dream up and running is one of the biggest challenges that most entrepreneurs will face. It’s the first major hurdle, and it’s a doozy.
The concept of crowdfunding is a relatively new one. With such easy, shareable ways to spread the word when you need some financial help via social media, it’s often one of the most cost-effective methods of obtaining the money that you need to get your business started. And it’s all done online.
Things like Kickstarter, GoFundMe, Indiegogo, Crowdrise, Crowdfunder, RocketHub, Crowdcube, appbackr, AngelList, Invested.In, StartSomeGood, FundRazr, MoolaHoop, Peerbackers, Razoo, Fundly, or Quirky. Whatever crowdfunding website you choose to go through, it’s a simple way to ask others for money to finance your small business or idea.
But just like any rising new form of technology, there’s an etiquette to crowdfunding that you’ll need to learn if you want to be successful at it. There are faux pas that, if committed, could irreparably ruin your chances of receiving any donations. And there are ways to work the “crowd” in crowdfunding to your advantage, and rake in the cash you need to get your small business off the paper and into reality.
Here are a few of the major Do’s and Don’ts of utilizing crowdfunding for your small business:
DO: Keep Your Campaign Short
A 30-45 day campaign length is approximately the ideal time length for optimal results, according to crowdfunding experts. Much longer, and you’ll wear out your more loyal crowdfunding followers, like your friends and family. New donors will also lose interest if the campaign drags on too long.
DON’T: Assume That If You Post It Money Will Come
That’s not how this works. Just shouting your business idea into the void isn’t going to make it happen. Things don’t go viral on the internet by simply being uploaded to YouTube. You have to work it.
Share the link to your crowdfunding page every day, everywhere you can. Email it to your “fan base,” investors, family and friends, colleagues, peers in shared-interest groups online… post it everywhere, and share it once a day. (Another reason why your campaign shouldn’t last much longer than a month… it’ll drive people crazy.)
DO: Plan in Advance
This isn’t something you can do as you go. The key to successful crowdfunding is a lot of time, effort, and planning. Just like your small business, right?
If you campaign is 35 days long, you should start planning 35 days before you post the campaign and make it live online. Schedule out short snippets of information that will be sent out to inform people about your business plan (and tell them why they should invest) every day of the campaign. Plan this all in advance so that you can simply manage the crowdfunding page and post to-the-day updates after it goes live.
DON’T: Believe that Your Business Idea is All That’s Needed
If you think that your business plan is brilliant enough to generate donations by itself, think again. It’s not enough to have a great idea. You’ll need to get a few extremely important points across to your potential donors:
- Tell them about your dream in detail.
- Tell them your achievable goals.
- Show them how you intend to reach those goals, step by step.
- Explain how your business will affect others; including themselves.
- Plainly state why you need their help instead of other means of funding.
- But most importantly…. TELL A STORY ABOUT YOUR BUSINESS TO ENGAGE THEIR EMOTIONS.
DO: Offer Rewards
The warm fuzzy feeling that they’ll get by giving you money isn’t enough. What’s in it for them?
Offer incentives to donors in levels that correlate to the amount of money they give. Make sure that the incentives or rewards are personal, heartfelt, and something that the person will actually enjoy. A keychain with your new business’ logo on it is fine for your co-worker who donated $10. But for a backer who gave $2,000 you should involve them somehow.
For high-dollar donors, include their name somewhere… in a personalized video, in a custom wood carving from your workshop they just financed, or in a song from your new music school they just donated to. Or involve donors in the process somehow. Donors get to choose the color of the aprons at the bakery they just bankrolled, or they can vote on which of these logos they like best to represent your new business.
DON’T: Keep People in the Dark
Send them some updates! If they already gave money, they want to know that they made a difference. These people have proved that they want you to succeed. So show them your progress as it happens!
They’ll feel included, and like their money is being put to good use. Frequent updates also get new donors excited to see the process of the dream being realized in action, so share the photo of your new building space, and send out public thank you’s as goals get met.
DO: Have a REAL Plan
If you post a crowdfunder page with only half of a vague idea, no one will donate. Would you invest in a small business plan that doesn’t seem to have a real plan? No.
If your small business idea isn’t going to work, people won’t want to be a part of it. If it’s clearly attainable with some money and time, then you’re golden.
Communicate your concrete plan. Show them what you’ve done to achieve your goal thus far, and explain exactly where their money will go and how it’ll further your business.
If you don’t have some of the first steps toward starting your business already completed, don’t post a crowdfunder page at all. Come back when you’ve made some progress, and have a clear plan of action.
DON’T: Overlook Stretch Goals
If you quickly and easily meet your first, baseline goal, it’s ok to keep going (to a point). Plan out your stretch goals in advance. If you meet your first goal and want to proceed to your next stretch goal, you should have extra content ready to post about it, and extra incentives ready to go.
Be sure to thoroughly explain what the stretch goal will be used for. People will want to know that you’re not just getting greedy; you have a specific plan in mind for that money. Tell them about it!
DO: Keep it Personal
Remember, you’re telling a story to your audience, first and foremost. Tell them about yourself and how you came to this business plan. Answer their important questions. Tell them…
- “Here’s who I am, and here’s what I can do.”
- “Here’s what I want to do.”
- “Here’s what I plan to do next to achieve that.”
- “Here’s how you can help.”
- “Here’s why you should help.”
- “Here’s what’s in it for you, the community, and the world.”
- “Here’s who I am and this is what I want to do; you can help.”
Happy crowdfunding, entrepreneurs!