Are your restaurant’s most loyal customers goading you to finally fix the heater? Are your coffee shop’s patrons loving your java but begging for free WiFi? Or maybe your spa’s biggest fans are crying out for you to add a new product or service to your offering, but you just don’t have the cash to get it going? It may be time to consider crowdfunding for small business.
If you need capital to make improvements to your business, but haven’t qualified for a loan, the most likely investors may be the Average Joes who walk through your door each and every day. After all, if people are willing to spend their hard earned cash to help that guy make potato salad, how much more willing would they be to invest in making a business they love become even better?
Crowdfunding has been around for awhile, but until recently it hasn’t been viewed as a business financing solution. Many have seen crowdfunding as primarily meant for charities or creative types. But that image is changing fast as more and more small businesses successfully obtain financing through crowdfunding platforms.
Whether you’re a Mom and Pop coffee shop or a budding startup, there may be room at the table for you to grow or improve your business through the crowdfunding model.
Do Your Homework
Before you consider approaching customers or investors to crowdfund your small business, be prepared with the facts. Talk to vendors and get quotes so you can back up your idea with a tangible plan. Know exactly what you want to do, what the cost will be, what the improvement will mean for your customer, and the timeline to get it done.
Also decide what kind of investors you’re looking for and what you’re willing to offer in return (usually required when you’re asking for a lot of money). Are you offering equity in your business? Or are you focused on customers who primarily want the benefit of making the improvement happen? A clear vision of your goal will help others accurately spread the word about your crowdfunding campaign. This is definitely something your accountant could help you with!
Transparency is Key
If you share your heart with your customers—let them know what you want to do and what’s holding you back from getting there—you’ll be surprised how many will be eager to help. The key here is to be transparent and to give your customers a sense of ownership in your business goals.
For example, the next time your customer asks for the gazillionth time why your diner hasn’t added additional seating for the weekend brunch crowd, be upbeat but honest with them. Have a human conversation.
“I know! Wouldn’t it be great if we could build on an outside patio with extra seating? I’ve looked into it, but I just don’t have the extra cash on hand to cover the construction. So many customers ask me, I’ve even considered a crowdfunding campaign to get it started. Do you think that’s something folks would be interested in?”
A few honest conversations with your most loyal customers will gain you vocal supporters who will advocate on behalf of your campaign. By opening up the option without directly asking for money, you invite your customers to help you help them. And who knows? There may be a few mysterious benefactors in your midst who are willing to invest more than you think!
Suggestions for Implementation
You could go really old school at start a collection box for your store. To attract eyes, make a poster board explaining the project with a graph to show your progress. The visual image will encourage people to participate, especially once you start getting close!
Start an online collection on a site like KickStarter or GoFundMe. To get the world out, create flyers, business cards, or even stickers! Consider sending out a newsletter to all your subscribers and definitely schedule some social posts about it. Keep the momentum going by letting people know your progress, both in terms of funds raised and in terms of project planning. Ask for their input such as “what kinds of tables and chairs would you like to see on our new patio” or “what should we name our new, free wifii?”. Involving their input will increase engagement levels and the reach of your campaign. Don’t forget to advertise your crowdfunding project on your website’s homepage too!
Consider selling something, like t-shirts or cups, for a increased price to raise the extra capital. Personalized items tend to drive lots of demand, as do items that allow the customer to “leave their mark”- like engraving their name on the bricks that will make up the new wall or patio. Businesses tend to see greater levels of participation when their customers get recognized, even if it’s just a public “shout out” on Facebook (tag them!). If you’r too low on budget to afford the initial cost of t-shirts or other goodies(that’s why you’re reading this article anyway right?)..simply great a club! Contributions earn membership (create varying levels to increase total donation amounts), and membership earns them perks like discount or special after-hour service.
You could also designate a few nights (or days) per month to be “fundraising days”. You can either ask all customers to make a donation that day, or alert everyone that a portion of the day’s sales will go towards raising the funds. Advertise ahead of each designated advertising day to get the crowds to show up!
Remember to let everyone know their donations are tax deductible! There are endless opportunities for getting locals to participate in crowdfunding small business, and you can try and number of combinations to reach your goal. If your local community supports the Shop Local or Small Business Saturday campaigns, chances are they’ll also help you out!
What if You Don’t Have Customers Yet?
The first step of crowdfunding small business isn’t necessarily customers. If you’re a brand new startup, you may not yet have a loyal customer base eager to help fund your business. And that’s okay. If you have a great idea that solves a problem or fills a need, the internet has plenty of resources to make your idea a reality. Through an equity crowdfunding platform like MicroVentures or EquityNet, you can connect with so-called “angel investors” interested in banding together to fund your idea.
Keeping it Legal
On a national level, the laws behind equity crowdfunding for small business haven’t fully been sorted out. But about a dozen states now allow this new financing approach. If you’re considering a crowdfunding campaign or your business, first check with your attorney or your local Small Business Development Center to make sure your plan complies with federal, state, and local laws.
What do you think? Have you considered crowdfunding to grow or improve your business? Have you ever participated in a business crowdfunding campaign? Why or why not? We’d love to hear and help spread the word!