Crowdfunding is believed to be one of the most up-to-date ways of funding either a business or a project. It entails convincing individuals to contribute with money so as to help you achieve your goal, while receiving something in return in the process. This practice is usually done online and it has proved its success in the past for a lot of companies and individual projects. Crowdfunding has helped fund and even launch countless new ventures and it has provided an outstanding platform for young entrepreneurs, who otherwise would have eventually failed, due to lack of money.
Still, crowdfunding isn’t like waving a magic wand, thus turning your dream into reality. Also, it’s not a tree with money leaves. Just like in the case of a pitch to venture capitalists or angel investors, you need to have a solid business plan in place before you sign up on the crowdfunding platform of your choosing. Without some serious planning you risk ending up just another one in a crowd of entrepreneurs who just can’t get their business off the ground due to lack of funding.
If you have an awesome business idea that could potentially turn up to be the next great thing and you’re anxious to see how much capital and attention it can generate in the online environment, just hold on a little and write your business plan. Here’s why you should write your business plan first:
1. Having a great business plan in place will help you in the long run with figuring out the smallest details. Chances are, your product won’t be perfect. Also, if you think about it for a moment, the business idea isn’t perfect. When the idea hit you, it felt like God has given you a gift wrapped in a business idea. I know the feeling, been there, done that. Still, you felt that way because you didn’t have the time to think it fully.
If you post your raw and imperfect business idea on a crowdfunding site, the potential investors may believe you are just wasting their time, presenting them with a flawed model. Take the time to write a solid business plan because the benefits are huge. By doing this you can work out all the kinks of your product and your main idea. Usually, business plans force future business owners to find a solution when facing challenges and help them create a far more effective model, which will definitely increase the chances of receiving the necessary funds. Think of your business plan as a roadmap of your business which keeps you focused on your track.
2. Creating a business plan will help you determine the amount of money you need. It’s pretty easy to guess how much money you need to get your business off the ground and running especially if you base those figures solely on assumptions. If you create a business plan, you could include the production costs it entails and also the tons of hidden costs. And not taking them into account will certainly damage the progress of your business. Come to think of it, it can also help you find reasonable offerings for each donation threshold that will allow your business to turn a profit.
3. Your expectations will be in check. Usually, entrepreneurs and future business owners get their hopes up high, instead of listening to the rational side of the brain. Also, you might get too excited and start developing on the idea before actually taking into account the real world limitations, challenges and applications.
This is one of the main reasons as to why business plans exist. They help you prepare to face these obstacles and surpass them. Also, it determines you to set realistic and measurable goals for when the company eventually launches. Also, it might even help you have a better understanding of the behavior of your target audience, the patterns of the market and the competitive landscape. One of the main sections of a business plan is the market research
4. Having a business plan in place will aid you in positioning your product on the market. In most cases, having an amazing product is not enough. As unfortunate as that may seem, you need to correctly position your product to your target market. You need to understand who you want to target and find a reason why they would need/want your product. Afterwards you can start branding and positioning the product in accordance with the collected data. After doing this, your job in selling your business idea to potential crowdfunders will become a lot easier.
5. The business plan acts as a game plan that will be presented to potential investors. While some crowdfunders are only looking to get something in exchange for their investment, others tend to invest in ideas that turns out to have a real and long-term potential.
And if you are looking to prove the potential to investors that your idea is worth the funding, you need some long-term business planning for your enterprise in order to clarify your idea and to be able to answer questions or address the investors’ concerns.