December 08, 2012

The ifs and buts of Crowdfunding

Crowdfunding is a relatively new concept and according to polls conducted by a popular research website last year, the concept has facilitated the success of more than 27,000 different projects, the owners of which had otherwise not be able to accumulate enough funds for their small sized businesses. Even the brightest of ideas would end up settling in the grave with proper funding is not available and that is exactly their crowdfunding comes in. It has always been difficult for small sized business owners to accumulate funds that would serve as capital and the problem has become more severe after the economic turmoil that swept the country a couple of years back. In most of the cases, the financial institutions would advertise that it is very easy for small and medium-sized businesses to have loans but the reality is quite the contrary.

Crowdfunding is actually an alternate funding method that works well for pretty much any kind of business. In this case several investors share the investment responsibility so the funding comes from different sources and finally the business owner has the money required to run his business. But, why would investors get interested in your business? In the case of Crowdfunding, investors get interested in not only the merits of the project but also the rewards offered by the business owner to the investors. So, if you are struggling to start your small sized business, crowdfunding could be a good option for you. The following are the things that you need to keep in mind:

• You need to prepare a business brochure that outlines the entire business idea and highlights the USPs of the business. There are several different crowdfunding platforms available on the Internet and using one that looks suitable for your business you could reach out to potential investors and present them your business brochure. The brochure needs to look professional and should have enough ingredients to gravitate investors towards your business.

• It is also important for you to have a juicy reward plan in place because the investors would not only be interested in the merit of your business, but would also be asking “what's in it for me”? So, if you have a reward system in place that is going to make them more interested in your business over your competitors.

• It is very important that the business brochure you prepare also highlights the risks of investing in your business. Of course you don't want investments into your business to be a risky proposition, but you need to step into the shoes of an investor and be able to see the potential risks. If the brochure does not highlight the risks of investment, it's going to go against you because no matter how foolproof of business is, it has to have its own share of risks. So, it is wise to highlight the risks.

• Going by the current trends, a small sized business or startup firm should have the strategies in place to be able to bring in at least 20% return on investment every year in order to attract substantial investments. So, you need a foolproof plan that points to at least 20% ROI.

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