Small Business Assistance: Your Guide To Crowdfunding
Let’s start with the basics. What is crowdfunding? Crowdfunding is the practice of funding a project or venture by raising money from people who are interested and see potential in your product. You present your audience with an idea; if they like the idea, they will pledge money towards it to help it become a reality. The idea could be at an early stage – relatively new in its conception – but if your audience is able to see its potential they will not hesitate to invest. I use the term ‘invest’, as the project backer will usually wish to gain some benefit in the future. Usually, they would expect to receive the product itself once it has been manufactured. Of course, people can pledge money towards your cause without the desire to receive something in return (wonderful, wonderful people). Although, it’s best to have some kind of reward to entice your audience. You are, after all, selling your idea. These rewards can have various tiers dependent on the amount of money your backer would like to pledge. Each reward tier should be reflective of the money pledged; the more money pledged – the greater the reward. The money you are requesting for each tier should reflect manufacturing and production costs. If it is your first crowdfunding project, backers will understand that you may be requesting a little more than what the product is actually worth as you will need to buy packaging materials as well as postage materials. Plus the platform you crowdfund on will most likely add a fee for using their services. You also need to think carefully about where you’re shipping to. Offering worldwide shipping will automatically broaden your audience range, but you must definitely factor in costs. For some larger items, it may simply be impossible to ship to other countries. Breaking down the costs and explaining to your audience exactly what percentage of their pledge is going where will help your backers understand where their money is going and it will reinforce trust that you will deliver exactly what you promised.
Your campaign presentation should be clear, concise and most importantly – attractive! Providing your audience with clean imagery that makes your product look great will be the major selling point. Concept art at this point is to be expected – if you have a prototype, even better! This is where you want to really show off and make your product look amazing. Show the packaging and branding that you have designed – although it’s not essential, it is highly advised that you have all of this ready to show your audience. Run down the specifics and explain all the measurements so that your audience understands the size of your product and the materials used. It all helps towards envisioning the final product and will ultimately earn you more pledges!
Once you’ve finished the campaign, it’s on to the real hard work - promoting! Once your campaign is live and available for the public to view, you need to start spreading the word and making sure that as many people as possible see your product. Social Media is a great way of doing this. Use relevant hashtags such as #kickstarter #kickstartercampaign and #kickstarterproject to help find potential investors. Also hashtag relevant products too. For example, if your campaign is about producing enamel pins, you would use #pin #enamelpins #pingamestrong. A lot of research is necessary to discovering the best hashtags to use. Buzzwords like #pastel #love #cute and #kawaii are also very popular, but you would have to ensure that they are relevant to your campaign. Your social media content has to be strong and consistent. You may feel like you’re repeating yourself but you are responsible for generating your own hype. Connecting with other creators and artists, particularly within the same field as your campaign can be very beneficial. Everyone is in the same boat and a lot of the time, they are also struggling to get their message out there. You share the same target demographic, so offer shout-out for shout-out and share other campaigns on your own social media. You will appear supportive, approachable and friendly and it’ll add some diversity to your feed. Posting at least once a day will ensure you are not lost amongst all of the other crowdfunding projects desperately seeking an audience.
If you’ve managed to reach your campaign goal – congratulations! You made an awful lot of promises to some very excited supporters. Now is the time to fulfil them. A lot of crowdfunding sites such as Kickstarter have a system where they hold the funds for two weeks. The first is spent collecting the pledges from your backers and the second is finalizing (and, unfortunately, removing their fees from the final total. This is why we factor in the fees into the pledge goal at the start). During this time you should send out wither a survey or a Backerkit out to gather information from your backers. If you’re providing a physical product, you will at the very least require an address from the backer to send the product to. Other options may include sizes and other variants you offered as part of your campaign. You need these details to finalize your orders and quantities. Once you have that you’re on to the manufacturing process. Presumably you have researched your preferred manufacturing method as you would need to factor this into the pledge goal at the start. Once you receive the funds, now is the time to give them the greenlight! During this period, post updates as and when you receive them to keep your backers in the loop. They’ll be very excited to a part of your story, and without them this wouldn’t be happening. So remember to attentive. Once your orders are ready to go, it wouldn’t hurt to add in a little something extra as a thank you. This could be as simple as a hand written message, some sweets, freebies or extras added on to their order at no extra charge. This will make the backer feel valued and will gain a customer and supporter for life if they enjoy the product and brand you are presenting.
What now? That is really up to you. Opening an online store would typically be the next step naturally for most creators as you now have a product. You would need to promote your site if you were to open your own webstore so that customers would be aware of you, although there are other options. Etsy, Storenvy and eBay are all good platforms to sell products as the fees are relatively low. You would also benefit from their promotional services, as they would recommend your product to those who are interested in similar products.
We love the idea of using crowdfunding as a way to get your product out there into the world. However there are some draw backs. The fee that some crowdfunding hosting platforms take from your final total can be quite substantial. For example, Kickstarter will take 5% of your funding total, plus 3% + 20p per pledge. Pledges under £10 do have a discounted micro-pledge fee of 5% + 5p per pledge. This does not sound like much but if you have a lot of backers, it will really add up. However, some might argue that this is a reasonable fee for having your project on a platform that will be seen by many.
Crowdfunding can be a fantastic way to lay the foundations of your business and a way to meet a few other creators along the way (networking is essential to any business!). It is a method which can be done alongside your day job and is a good way to pick up the skills you’ll need in the long run towards owning a small business. It’s important you learn all about setting targets and deadlines, budgeting costs and delivering that which you have promised. Crowdfunding is a crash course in marketing and the amount of effort and passion you put into it directly reflects what you will get out of it.