In this week’s post, I’m going to give you the top 9 benefits of using crowdfunding for your small business.
- Money, of course! The main purpose of crowdfunding is to finance a project for your business. You may even receive your money quicker than going through a bank or other sources. Kickstarter projects are typically 30 days and you can receive your money shortly thereafter. I don’t now about you, but I think it would take me 30 days to locate all of my bank and 401(k) statements needed for a bank loan.
- Pre-fund your Production and Sales. This is a great business model- Sell and get money from your customers before your product is even made! This guarantees that you have money to pay for the initial production costs and not stuck with 1,000 music CDs in the back of your trunk that no one wants.
- Gain Customers and Momentum. The more customers and funders you get, the more customers and awareness about you, your company, and your product or service. Crowdfunding allows you to gain customers that you have not personally met. Customers can be even located overseas. Crowdfunding has the potential for your company to gain a lot of customers in a short amount of time. Since a crowdfunding campaign is for a limited time, there’s also a psychological aspect for customers to participate in your campaign “before time runs out” and “be one of the first to have this new product”.
- Enhanced Customer Relationships. If people who are willing to buy your product and give you money based solely on an online description and without a product in front of them, they are definitely putting their faith in you and your business. These funders will be your loyal customers and supporters going forward. They are buying “the promise” that you will deliver a product to them.
- Marketing. Crowdfunding is also a great marketing project. Besides building online awareness, you can tell your friends, current customers, and future customers all about your crowdfunding project! Whether you’re talking to your neighbor, business association, or even the grocery store cashier, you have a unique “talking point” for your business. Instead of casually telling someone what your company sells, you can spin the talking points to highlight your success so far in the crowdfunding campaign, limited time to participate, lowest prices for the product, and the unique characteristics of the product.
- Online Social Reputation. Since you’ll be using social media accounts, email, and a crowdfunding platform, you’ll be doing a lot of online work to gain customers. Once again, you will be using the internet platform (the crowdfunding website) to gain customers. You WANT your campaign to go viral and shared with as many people as possible.
- Business Idea Legitimacy. Let’s face it, if customers do not want to buy your product or contribute to your campaign, they may not need the product or the business idea may not be the best. Let’s say that you want to produce triangle-shaped drinking straws. While a unique idea, there may not be simply enough people who want triangle-shaped drinking straws. So, no customers (may) mean the idea may not fulfill customer needs or wants.
- Brand Recognition. By marketing your product, business, and campaign, you are also building brand recognition. Whether someone decides to participate in your crowdfunding project or not, the person can potentially be a future customer. For example, I was not in the market to buy grown-up furniture until I bought a home. I was not in the market for baby products until I birthed twins. I was not in the market for a new car until I got my first post-college job. But when I joined these markets, I already knew of some products and brands that sold what I was looking for.
- Pricing. This is a good time to test pricing strategies for your products to determine what people will pay. Of course, you may consider offering your “products at a discount if customers order now through the crowdfunding campaign“. If you sell large quantities quickly, you can probably charge more to future customers after the campaign ends.
As you can read, there are plenty of other benefits of using crowdfunding for your small business. However, stay tuned for next week’s post on the disadvantages of crowdfunding. I am not a Debbie Downer, just like to keep my eyes wide open on the realities of stuff and life. If you are prepared for the ugly, then you may be more likely to push through it to get to the happy stuff, like a successful crowdfunding campaign and your dreams coming true… you know, the big stuff.
I can’t promise you the world or easy money, just a few bits of knowledge on how to potentially make it easier or increase your chances of success.