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Business Crowdfunding: How It Works

Business Crowdfunding: How It Works

Crowdfunding is a way to raise funds for a project or your business, whether it is BetChan Casino or wireless headphones, or even using special Internet platforms. Money can be borrowed or exchanged for a share of your future profits, or even received without conditions. In all cases, they are issued not by the bank or the state, but by other people or companies. Here’s what you need to know to understand how collective funding works and who can raise money through crowdfunding.

Times When Crowdfunding Is a Good Idea

  • When there is a promoted brand (personal or company)
  • When you test a new product, get pre-orders, and your audience responds to it, release a new line of products without investments and loans.
  • When there is no product and audience, but there is the 80th level of sociability, charisma, a punchy nature, and warm useful contacts in the media and business environment.
  • If there is a product with a very beautiful “Instagram” design and a touching story that can collect hundreds of likes and reposts through beautiful photos and videos, as well as active friends who are ready to like, repost, and share through word of mouth.

Pros and Cons of Crowdfunding as a Sales Channel

On one hand, crowd sites do not have to pay huge commissions on purchases. Most crowd platforms have their own commission but it usually does not exceed 10%. It is taken once from the total amount of fees (the system even calculates it in advance).

Crowd platforms do not dictate any strict conditions to users at all. There is more freedom, but also more responsibility of the author himself for the result.

Sending checks, working with refunds for unsuccessful fees and purchases canceled before the collection is completed, transferring taxes for individuals, and some analytics tools are the responsibility of all authors using the crowd site.

How to Run a Successful Crowdfunding Campaign

Look at Your Idea from the Outside

Assess your project soberly. Who is it for? Why is it interesting? Would you support it yourself? These questions will help you figure out if crowdfunding is really right for you. Maybe crowd investing is right for you, or maybe you need to go for a subsidy.

Estimate Your Resources

Consider if you can do it yourself or if you need a team. You have to not only bring your idea to life, but also come up with a promotion strategy, communicate with investors, and then send people goods (CDs, books, or the result of your production).

Consider All Expenses

Calculate as accurately as possible how much money is needed for the implementation and marketing promotion of the project. Include shipping charges, if applicable. Depending on the weight, quantity, and destination of the parcels, this amount can be very small or very large. And then add the crowdfunding platform fees, money transfer costs, and taxes to the total.

Come up with a Reward

To make people want to invest in your project, do not skimp on rewards. People love creativity, generosity, and partnerships with other interesting and thematically related companies – for example, when a legendary fountain pen comes with a calligraphy book.

Tell a Story

Why do you need money? You should not just dryly state your idea, but tell an interesting story. Then people will support you.

Communicate with Investors

When the fundraising begins, do not sit idly by. Connect with potential investors online and offline. Share the news and look for ways to keep yourself engaged in the campaign. Maintain interest in you and your project throughout the campaign.

And remember the statistics: if in the first week the project collected 25% of the required amount, then, most likely, it will be possible to collect it completely.

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by Brian Perry // Brian Perry is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.