Are you needing capital to fund your small business? That is a silly question right, everyone needs capital to fund their business if they want to keep their doors open. If money is not being made than its an expensive hobby. One thing, I hear new business owners talk about all the time is coming up with money to fund their ideas, passions, goals and dreams. Today, I want to share three steps to successfully crowdfunding your small business.
Money seems to be a huge topic for the new and existing business owner. Here are the things you need to know about crowdfunding your business successfully and the right way.
Knowing Your Needs
No consulting, website designer, scrub line, t-shirt line, jewelry or such companies needs more than $10,000 to fund their business starting out if they do it right. Break down exactly what you’re needing for your small business. It okay to estimate but when you say “I think my website run me $5,000.” Well, if you’re not building a custom website from scratch starting out you shouldn’t been spending more than a $1,000. Create a spreadsheet of all the needs from supplies, design, legal, hiring help and more. Do market research to see how much everything is running for. Then contact the people you are needing those things from. Each having a line on your spreadsheet. This will help you know your exact expenses and what you need to crowdfund for. I will say add 15% to the total for room.
Choosing Your Circle
When it comes to crowdfunding your business I personally believe if it under the the $10,000 mark you need to enlist three sets of people to help you with this. As stated before I am not a huge fan of crowdfunding websites. I am a fan of working with family, friends and loyal supporters. Too many times we are willing to run to Kickstarter but not go to the close people who can really help us go further when it comes to our dreams. The fact you know exact amount of money you need you can create another break down of what people can donate to help your dreams possible. Just like a crowdfunding website there is different levels to back. Say you need $10,000 for your business you will need to have an estimated of 25 people to help depending on your friends income. Here is an example
- 5 backers – $1,000
- 5 backers – $500
- 4 backers – $250
- 10 backers – $150
That would bring you to $10,000 with 24 friends, family and loyal supporters. Right now personally, I know I can ask 4 friends and family members total and get $10,000 without evening having to ask loyal supporters. This goes back to being surrounded by like minded people who believe in investing in dreams, futures and being financially savvy.
Breaking It Down
There is a couple ways that you can do this depending on the type of people you will be asking to support your business and the funds you need. Bring everyone into the same room and sharing exactly what you’re trying to accomplish. This will make it easier to answer everyones questions at once and get feedback. Make this meeting formal but informal for your funders. Bring a financial breakdown of all the information that they need. Sharing the market research you have down, what the funds will be allocated to and even creating a frequently asked question section them. People are more likely to give you funds when they are informed verse uninformed. You are empowering them with the facts and knowledge they need. One final thing if your friends, family and loyal supporters do fund your business please make sure you have legal paperwork in order. Letting them know this is not an investment with a return they would receive or giving them equity or stake in your company.
Crowdfunding your business successfully takes you researching, knowing your numbers, and bringing the right people around you to do it. Especially, if you’re seeking a lower amount of funds verse six figures. Tap into your circle and watch what happens.