- Crowdfunding can be a helpful fundraising tool for struggling small businesses.
- Make sure the story behind your fundraising initiative and monetary goal is clear to your audience so they understand your cause and how their money will be used.
- Communication is vital to a fundraising campaign. Start by emailing loyal customers who may be willing to contribute, and regularly update your audience on your fundraising progress.
- This article is for small business owners who want to use a crowdfunding platform to raise funds for their business and are looking for tips on how to run a successful campaign.
Crowdfunding is an alternative funding method that businesses can use to raise money – and one that your small business may be considering as you look for ways to deal with the financial impact of the COVID-19 pandemic.
Although crowdfunding can be an effective way to raise money for some businesses – you've likely seen stories of wildly successful campaigns that raise hundreds of thousands of dollars above their goals – it's important to recognize that the success stories are outliers. According to TheCrowdDataCenter, from January 2014 to November 2020, just 23% of crowdfunding projects met their fundraising goals.
There are, however, some steps you can take to improve your campaign's chances of success. Here's what several experts had to say on how to elevate your use of crowdfunding tools to get the most out of this fundraising initiative. [Read related article: Equity Crowdfunding: A Primer]
10 ways to tap into the power of crowdsourcing
1. Set a clear goal.
Setting a specific goal for the amount of funding you need to raise is one way to get backers on board. Make sure your fund goal is realistic, however.
"People will be more willing to get behind your project if they can see the finish line," Siva Mahesh, CEO of Dreamshala, told Business News Daily.
2. Seek help from experts.
"The biggest tip and most important element for a successful crowdfunding campaign is to not do it alone," said Brian Hooks, owner of Left of BANG Entertainment. "Find a company or individual that specializes in crowdfunding campaigns. They will ensure you check off all the boxes needed to build a strong campaign."
It's also important to pick a reputable crowdfunding platform that is dedicated to helping you get the funds you need.
3. Tell your business's story.
People want to know who they're giving their money to and why they should care. An authentic and memorable anecdote along with your fundraising campaign can go a long way. Unprecedented hardship has hit many small businesses, and it's important to be honest and express your needs.
Mahesh said you should explain who your business is and why it's important for you to have these funds. "When creating a campaign, it's essential to be as detailed as possible. People want to help, but they might be hesitant if your story is unclear. Be genuine and transparent."
[Considering other financing options? The Best Loans for Small Businesses]
4. Create a promotion video for your campaign.
Videos perform much better in terms of audience interaction than infographics or images. A good video, complete with sounds and narration, will help pull donors in and be an effective marketing tool for your campaign.
However, before you put your video out there, Yaniv Masjedi, CMO at Nextiva, a business phone company, suggests getting feedback from your peers. "Make sure that before the video goes out to market, it has virtually no lapses or boring parts."
5. Use your email list to promote your campaign.
Email your customers about your campaign, and include everything they need to know to participate. Shooting an email out to your contact list with the link to your campaign is a direct and effective way to get loyal customers to participate in your fundraiser.
6. Leverage your network.
When you're crowdfunding, you should use every inch of your network, said Kimberly Smith, marketing manager of Clarify Capital.
"Ask your client base, family, friends and community to share your campaign amongst their own networks," she said. "Using your network to access the networks of others will help build momentum and awareness."
Even if people who come in contact with your campaign don't donate, they can share it with their friends, which could be just as valuable. This brings visibility to your campaign from people may not be familiar with your business, which can boost participation.
7. Use social media, especially LinkedIn, to reach out to other business owners.
Instagram, Facebook and Twitter are typically considered the big three social media platforms to market your business. However, if you're running an equity crowdfunding campaign, it's important to promote your fundraiser on LinkedIn too, because it's a great space to pitch to a pool of business owners like you. The audience on LinkedIn is likely to be more familiar with your struggles as an entrepreneur and understand the amount you're asking for to cover business expenses, which can lead to an increase in support.
Sharing your campaign on social channels in general is crucial to build visibility and awareness, said Smith.
"Small business owners using this tactic should make participation as easy as possible for prospective donors," she said. "One of the best ways to do this is to link the crowdfunding campaign to social posts." Then, your audience just has to swipe up or click to be directed to your campaign page, where they can donate.
8. Familiarize your audience with the crowdfunding site you're using.
A confusing platform with a challenging interface is the best way to lose a would-be donor. In your communications about your fundraiser with potential backers, you don't have to give a detailed breakdown of how to use GoFundMe or Kickstarter, but you should include details about the platform you're using within your campaign promotion. Talk about its security and how backers should use it. This bit of information will help donors feel comfortable about investing their money into your business through the platform. [Want help choosing the right small business loan for you? Check out our buying guide.]
9. Offer tiered incentives.
Give your donors and backers rewards based on the size of their donations, and make sure they're worthwhile. An attractive incentive will encourage more people to back your campaign. Smith suggested raffling off products or offering discounted memberships to your service.
10. Keep your audience up to date.
You want to keep participants and potential backers engaged in your fundraising journey, so it's important to update them regularly on your progress. Sharing your growth on a monthly or even biweekly basis, depending on the length of your campaign, will help keep your fundraiser at the forefront of your audience members' minds, said Will Ward, CEO of Translation Equipment HQ.
Key takeaway: If you're looking to use a crowdfunding site for your business, share your story and fundraising goal with your audience. Use email, your network, and social media to reach potential backers, and offer incentives based on donation amounts. Update backers on your progress regularly, making them feel like part of your fundraising journey.