Crowdfunding is a very popular way to raise money for a new business. Crowdfunding essentially means asking multiple people to contribute to your business project. In return, investors may get a specific perk or may simply be asked to donate with no strings attached. There are even many online platforms where business leaders can set up crowdfunding campaigns to gather more money for their new ventures.
Is Crowdfunding Right for Your Business?
Crowdfunding may seem very attractive, but there are some things you'll want to consider before you take the plunge. Questions you may wish to ask include:
- Do I need brand ambassadors? If you need to raise awareness of your small business as well as get your business financed, crowdsourcing may be a good option, because smaller investors who have a stake in a small business are more likely to become champions of that company.
- Am I a strong marketer? With so many businesses competing for crowdfunding dollars, you need to have a very compelling vision and message to attract a large number of investors.
- Can I make the business attractive to investors? Your business needs to be a company groups of people are excited to invest in.
- Do you know the rules? The SEC has a number of regulations concerning crowdfunding, and you need to be able to meet all of these obligations. The rules to follow will depend on how much money you expect to raise through crowdfunding.
- How much control do you want? If you plan on raising more than $100,000, you may need your financial statements reviewed by an independent accountant. In some cases, you may need to be incorporated in order to take part in crowdfunding, and this may mean giving up some control over your small business.
Should You Crowdfund Your New Business?
If you need money to get your company started or if you need financing for a new project, crowdfunding can be one way to secure the financial resources you need. Crowdfunding raises awareness of your brand and your identity while also helping you raise funds.
You should only consider crowdfunding your new business if you've spoken with an attorney and a consultant who can guide you through the process of making sure you stay fully compliant with SEC and other relevant rules. You may need to incorporate before you start crowdfunding and you will certainly need to have a strong business plan, a strong marketing message and a really compelling vision that will make people reach for their wallets.
If you'd like support to help you through this and other financial maneuvers at your business, or if you would like to outsource bookkeeping, financial services or business consulting services, contact SLC Bookkeeping. Our services focus on growing businesses.