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What mistakes businesses make when crowdfunding

by | Sep 9, 2017 | Business Financing |

Perhaps you own a new pizza parlor, nightclub, tech company or something else entirely. You have done your homework, for example, selecting the right business entity and negotiating contracts to your advantage. Like many businesses, though, you still need capital, and crowdfunding seems promising.

The good news: It can be a smart move. The bad news: Many businesses make mistakes when crowdfunding, and these errors cost time, money and other valuable resources. Here is a look at a few of these common blunders.

Subpar giveaways

Perhaps you want to set up a giveaway/reward to entice people to donate, and your idea is to give away a free T-shirt with the logo of your pizza restaurant on it. Would that be effective? Possibly; possibly not. Do your research to see what types of giveaways have worked well for restaurants that crowdfunded.

Some Kickstarter ideas that have done well are cookbooks, free dinners for two, portable dinners, recipes, mugs and kitchenware. Any of these would probably fare better than T-shirts, but again, the trick is in giving away a quality product that you have put special thought into.

Skipping a plan

It is easy to start a crowdfunding campaign with gusto. You are excited. You are motivated. You will give your all.

Unfortunately, after a few days or weeks, you might not feel this way anymore. However, your campaign still needs attention; you running out of steam could be its death knell. So, do not skip having a plan. Before the campaign starts, schedule promotional activities, goals and the like. In fact, you could take it a step further and do what you can beforehand to minimize your effort later (for example, writing the majority of the blog posts before the campaign starts).

Not following through

The thing that can perhaps hurt your business most is not following through. For example, suppose you decided on a cookbook for your giveaway. You promised 15 Italian recipes and glossy photos. Your backers expect you to provide this book as described; not doing so makes you look unprofessional and does not help build a good reputation for your business.