Crowdfunding — it’s the way to go, baby. More than ever, businesses are relying on small contributions made by a large number of people in order to get their projects off the ground, and it’s certainly paying off!
There are myriad advantages to the crowdfunding life, but here are just a few: low risk launches of new and exciting products, the ability to tap into a rapidly expanding market, and the opportunity to create buzz around your company while simultaneously building lasting relationships with potential and repeat buyers. If that sounds like a mouthful, it’s because there are just too many benefits!
While you may be itching to plunge into crowdfunding waters, there are a few considerations you need to, well, consider first. Sit back, relax, and plan out your crowdfunding takeover with our quick guide.
1. Create a Formal Budget and Timeline
First, we must start with two of our favorite things — budgets and timelines. Exciting stuff, right? Well, love ‘em or hate ‘em, they’re here to stay, not to mention super essential for your path to success.
For the budget, you’ll need to (generally) account for the following:
- Testing prototypes
- Product design, manufacturing, and importation
- Website design and development
- Branding and marketing costs
- Legal fees (Trademarking, registration, etc.)
- Fulfillment (Kitting, warehousing, etc.)
You’ll also want to factor in the costs associated with your platform of choice — Kickstarter, for example, will collect 5% of funds raised plus payment processing fees. Additionally, it’s a good idea to set money aside for inventory that might get lost or damaged along the way.
Setting up a timeline can be trickier since every campaign is different. However, you might find it helpful to split your timeline into five parts:
It might be useful to look at what other successful crowdfunding campaigns have done in the past, especially if their product is similar to yours. Make sure to add plenty of cushioning though, which we’ll cover right about… now.
2. Add Buffers into Every Step of Your Plan
You’ve developed an excellent plan and even tied it with a bow. But, as life goes, nothing is written in stone. Your plan, excellent as it may be, can be impacted by a plethora of factors, many of which are outside of your control.
Here are some examples of what could go wrong…
- Manufacturing can get held up due to a disruption of the supply chain
- Products can get held up in customs
- Lengthy trademarking and patenting, which can take months to process
Remember: It’s always better to underpromise and overdeliver. Leave room for errors and be patient — your backers will thank you for it!
3. Design Rewards Tiers That Are Simple Yet Enticing
Not everyone is able to contribute to your campaign in the same way, which is why it’s important to ensure that all of your reward tiers (that is, what backers receive relative to how much they pledged) are uniquely valuable. If a backer isn’t quite ready to commit the full amount that your product is worth, you could recognize their contribution with a nice handwritten note or an enamel pin. The possibilities are endless, so get creative!
On that note, it’s also important to keep it as simple as possible. We know — conflicting advice, right? But trust us, there’s a real art to being succinct, and that’s what you’ll want to focus on when designing your reward system. The more tiers, the more complicated the fulfillment. While that might not sound like a big deal now, you’ll be saving “Future You” a whole lot of work.
Note: Once you’ve launched your crowdfunding campaign and people have pledged their contributions, you are no longer able to make changes to your reward tiers. Pick wisely!
4. Keep Campaign Backers Updated on Your Launch
Your initial campaign backers are the real MVPs — after all, they invested their hard-earned money into a product, your product, that they believe in. Continue to earn their respect and trust by keeping them in the loop. Communication is always key!
Share hardships, celebrate milestones, and give them sneak peeks of your crowdfunding adventure. By being open and transparent, you’ll build deeper, more meaningful relationships with your backers, which could translate into even more support down the line.
5. Gather Customer Feedback Early and Often
Staying in touch with your backers is not only fun, it’s also essential. By hearing what they have to say, you’ll be provided with ample opportunities to better your company and keep your newfound audience happy!
While positive feedback is always fantastic, and often a much-needed boost, negative feedback is nothing to gloss over. Think of a backer’s dissatisfaction as just another chance to wow them by taking what they have to say seriously. Of course, not every suggestion is feasible, but sometimes, even a minor change on your end can really help turn things around.
6. Find the Right Fulfillment Strategy
Whatever you do, don’t let fulfillment be an afterthought! You’ve gone through the trouble of crafting an awesome product and gathering a dedicated following, so why fall short when it’s time to deliver?
We’ve briefly mentioned in-house fulfillment, which could potentially be an option for smaller campaigns. However, in-house fulfillment can become quite risky once order volume starts to ramp up, which means outsourcing to a 3PL is probably your best bet. Our best tip is to look for a fulfillment partner that has prior experience with the ins and outs of crowdfunding campaigns. For more info, be sure to check out our resources on what to look for when choosing a fulfillment center as well as the best questions to ask!
Our pal Alex G. Bell once said that preparation is the key to success, and we couldn’t agree more! The crowdfunding journey can be lengthy and sometimes challenging, but it sure is rewarding. By playing your cards right, you’ll be exposing your company to a whole new world of possibilities.
If you’re shopping around for a fulfillment center who’s as jazzed about crowdfunding as you are, or even if you’re still in the planning stages and have a few questions, do not hesitate to reach out to us! We are always happy to help.