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4 Reasons to Seriously Consider Crowdfunding Your Next Business Idea
  • 31 July 2017
  • Eric Michaels

4 Reasons to Seriously Consider Crowdfunding Your Next Business Idea

Whether you are branching out into a new service, creating a new product line, or starting a new project, it can often be difficult to obtain the funding you need to succeed. While you can certainly search for the right investors through more traditional means—such as angel investors, venture capital firms, and even your network contacts—you may still come up short. Fortunately, new technology has increased the number of financing options available to you. Now, you can leverage a variety of different crowdfunding resources to back your projects. Here are four reasons why you should seriously consider crowdfunding your next business idea.

1. Lower risk

When you turn to public funding, you limit your overall financial risk. By starting a campaign on an established crowdfunding platform, such as Kickstarter or Indiegogo, you can lower your customer acquisition costs and establish a confirmed number of product orders.

By taking advantage of popular crowdsourcing networks, which have millions of repeat backers, you can also save on ad costs and potentially boost your number of pre-sales. When you leverage the power of these existing forums, you can expand your overall reach.

2. The ability to find new customers and engage with them

Creating a loyal customer base requires more than just funding. In order to truly be successful, you must develop an outreach and product development strategy that is centered around your key market. Sites like Kickstarter allow you to expand your market reach by providing you with opportunities to interact with your target demographic from the start.

Furthermore, these online platforms establish a sense of community. Consumers who make social media a part of their everyday lives love having the opportunity to engage with brands online. Through the crowdfunding system, customers can be part of a company's creation story—establishing an inherent level of connection that often increases brand loyalty, and allows you to create an established client base for future projects.

3. A smarter production process

When you are launching a new product, it can be difficult to navigate the supply and demand landscape. If you are unable to realistically predict how many orders may come in, you will likely encounter problems down the line—especially if you suddenly need to order large quantities of a particular product from one of your suppliers. Unfortunately, if you are just starting out, it can be difficult to predict early sales potential.

This is another situation in which you can benefit from crowdsourcing. Potential manufacturing partners will appreciate the fact that you are able to provide a precise number of orders that you must fulfill. In many ways, this allows you to take some of the typical financial liability out of the picture: You will know exactly what you need and will be able to confirm that you have enough financial backing to pay in full. Furthermore, you will have the ability to scan different offerings and negotiate based on your expected shipment dates.

4. Valuable insights

Conducting the necessary market testing can be a complicated, expensive process for new small businesses. Your team may find it challenging to set price points, understand your core demographic, and figure out the ideal way to deliver the finished product. When you utilize a crowdfunding service, you can get most of this information at entry-level costs.

During the process, you will also be able to get inspiration straight from the source. Potential customers will ask you questions that could ignite new ideas and help you determine your next steps. Oftentimes, strangers will be invested in making your launch a success, and they will devote a chunk of their time and energy to getting the word out. By building a good rapport with influencers in your space, you can add immense value to your product—and your company as a whole.

Alternative funding solutions might be the key to getting your next business idea off the ground. Consider leveraging a crowdfunding platform today.

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