When it comes to turning an idea into a reality, funding is fundamental. As banks begin to tighten their belts and business owners struggle to gain finance in ‘traditional’ ways, business people are increasingly turning to the new sources and funding options.
Today, probably the trendiest of these new funding options is crowdfunding, which allows businesses to use a platform like Crowdfunder.co.uk, to effectively pitch to the world, bring people to pledge money to help fund projects or business ideas collectively.
In the UK, crowdfunding has grown significantly in the past few years but there are still many small businesses who feel that the process may not be for them, or they struggle to understand how they can get a project up. The upside of crowdfunding is the potential increase in brand awareness, something that is vital for small businesses and the marketing impact could be huge, especially given when you consider that a message can be spread far and wide.
But just as every business is different, so are the ways in which you can go about gaining funding for your project or businesses idea.
All or Nothing: You only receive your pledges if you hit your target. This is best suited for projects that need to reach a set target to be able to carry out their aims. The average pledge size on 'all or nothing' projects is £50.
Flexible Funding: Keep all your pledges, whether your projects hit target or not. This is best suited for causes or charitable projects. The average pledge size on 'keep what you raise' projects is £10.
Regarding these funding options, 'all or nothing' projects generally raise more money, but you do have to hit your target. 'Flexible Funding' means you’ll keep all the money pledged by your supporters but you’ll also have to fulfil all the rewards no matter how much or little is pledged.
Positive brand exposure
When you look at the available funding options, one of the biggest advantages of a crowdfunding solution is in marketing. By spreading the word about your businesses, the likelihood is you will find investors that didn’t know about your business before – and that can only be a positive thing! Those same investors will now be incredibly aware and very keen for you to succeed and will promote you to their following and open doors for you that you may otherwise have been unable to open.
In addition to this, crowdfunding, when compared to other funding options, tends to be a much quicker route to investment than traditional banking applications. In many cases, these can take some months to be accepted and if the answer is negative, such time scales can be highly problematic. Small businesses can’t just stop and wait for the letter to arrive. Crowdfunding tends to be much quicker, and you are likely to know whether you are going to get the money you need in a matter of days or weeks. As well as time, crowdfunding is, on the whole, less bureaucratic. Of course, you are still asking for people’s money and you need to prove you have a viable business proposition but this process is far less onerous than when applying to traditional lenders.
Mentioning funding options… Is crowdfunding for you?
As you try to figure out which of the available funding options is right for you, here are 5 key things to consider before crowdfunding:
- Build a team
- Be realistic
- Research successful projects
- Understand the detail and your offering
- Keep up the energy
And here are 5 key things to think about when running a crowdfunding campaign:
- Your pitch must be strong and connect with people on a level that is right for your offering and target audience
- Be realistic about your funding requests – you can always crowdfund again if you are successful!
- Think creatively and be as personal as possible with the rewards you offer
- Run an organized and structured campaign – details are vital!
- Build buzz and brand awareness
Toast Ale’s crowdfunding success
For many small businesses, thinking about the rewards on offer can sometimes prove the major stumbling block. For many, it can sometimes be difficult to see the wood for the trees and realize you have something of great value to offer. Think creatively: perhaps you could offer a ‘money can’t buy’ experience or perhaps offer the chance to be the first to try a new product and gain instant brands fans. These creative and personal touches will really pay off in the long run.
One such company who ran an incredibly successful crowdfunding project this year is Toast Ale Toast Ale is a mission-driven business, proving that the alternative to food waste is pint-sized and delicious. Toast Ale began to tackle food waste head-on, offering great craft beer from fresh surplus bread that would otherwise be wasted. Did you know 44% of the bread produced in the UK is never consumed?
In 2017, Toast Ale successfully raised £27,952 of its £20,000 target, gaining 449 supporters in just 28 days! Toast Ale is a small business, just like you.
So small business really can make crowdfunding work!
Yes! It just needs a bit of planning and research before you will be ready to take the plunge! Researching successful projects like Toast Ale will give you great insight and help you to understand your offering and of course, make sure it is right for your business.