Is crowdfunding right for your business

For most businesses, the starting off and planning part is not very difficult with the basic prerequisites being a great idea and a rock solid plan on which the business is to be based. What is not easy however is raising finances to put the venture into motion. There will be many options available to you – dipping into your own savings, taking loans from friends and relatives or establishing a credit limit with a financial institution and lender. These are all time tested traditional methods of financing a business. But before you decide on one, consider the latest alternative – crowdfunding – and evaluate whether it is right for your business.

What then is crowdfunding? The process begins with bringing investors on board who are interested to support the business idea and are confident about success of the scheme. Thus they are assured of high returns on their investment in future. However, investors in a crowdfunding scheme are generally interested in a specific niche market and will support entrepreneurs who are in that niche only. If the process is managed properly, it can be very rewarding for both the lender and the borrower. The various forms of crowd funding include real estate crowdfunding, equity crowdfunding, crowd lending and so on. You can browse the various sites on the Internet for various crowdfunding sites that have financed a large number of businesses successfully. Partnering with the right firm will surely take your enterprise to the next level.

Before you take the crowdfunding route for your business, determine whether it is right for you. The following points will help you come to a decision in this regard.

  • Can you create a sample product – Having an idea is fine and getting a loan from a lender is possible with a business plan but in crowdfunding you have to have create a sample and tangible product for your investor. Backers or potential investors would want to examine closely what you have to offer. It may even be an asset as will be required in real estate crowdfunding. In the case of a professional service provider, ownership of infrastructure will have to be proved. For example a car mechanic in Melbourne with an authorised and accredited garage and service centre can opt for crowdfunding for expansion of business.
  • Can you pinpoint a target audience – Not all businesses have a target audience. Going back to the same example of a certified garage, one that will issue a roadworthy certificate in Maribyrnong will cater to a cross section of vehicle owners regardless of age or gender. But if you are looking for crowdfunding for your business, you should have a specific target audience in mind and know who your customers will be and how to market your products and services to them. By analysing this data, you will realise how to develop your product and from there make preparations for a crowdfunding campaign.
  • Do you have a business strategy in place – Once you have determined what your target audience should be, you need to have a business and marketing plan in place. You have to structure a thorough approach, something on the lines of a business plan that will clearly spell out the future roadmap of your business. Once this plan has been created, it will offer crowdfunding investors all the answers they are looking for in your business before investing. It also proves that you are serious about your venture and have a professional approach. It has to be remembered that crowd funding investors are not like the conventional lenders but more like your customers who would want to be closely involved in your business.

If you have ticked off these boxes, your business is an ideal platform for crowdfunding.

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