Crowdfunding your side hustle: Use the power of crowdfunding to fund your new small business
If you’re looking to start a side hustle, chances are you’ll need capital. Sure, there are a few you can start without much funding, like using your car for deliveries. (Although even then, you’ll need to start with a car.) But whether it’s selling your creations on Etsy or opening up a Shopify store, you need seed money. You’ll want to develop (or source) your product, pay for advertising, and get your website going… all that takes money.
But, at the same time, qualifying for funding for a small business can prove challenging. If your side hustle needs start-up cash but you don’t want to go through the process of applying for a loan, you may want to consider crowdfunding.
The chances are excellent that you’ve already seen a pitch for a crowdfunded product. Your cousin posting about the self-published book they’re raising funds for, or someone posting a friend’s GoFundMe are both examples of crowdfunding. $17.2 billion dollars are raised in North America through crowdfunding every year, according to Thrive My Way. How do you get your share of that?
Pick a platform
There are a variety of platforms for crowdfunding. Each has its own flavor and focus. Whether you go for behemoth Kickstarter, or a more niche platform like Publishizer will depend, in part, on what type of business you’re looking to start. Creative businesses often do well getting funding on a platform like Patreon, while GoFundMe can be a good choice if you have a broad network of support who will eagerly contribute to getting your business started.
| If your side hustle needs start-up cash but you don’t want to go through the process of applying for a loan, you may want to consider crowdfunding
Create a budget
Take some time to figure out how much money you need to get your business started. If you know anyone who’s created a similar small business, check in to learn about possible expenses you may be overlooking. How much do you need in inventory? Marketing? Be realistic, but keep it as low as reasonable. On some platforms, like Kickstarter, failing to meet too lofty a goal means you don’t get any of the pledged funds. It’s better to set a modest goal and exceed it than to create one that’s too high and fail to meet it.
Learn from other crowdfunding projects
Once you have a sense of how much you think you’ll need, it’s time for research. Go on your platform of choice and see what’s trending in your category. How do they explain their business idea? Do they use photos? Video? What words do they use? Contribute to a few of them so you can see what types of emails they send to supporters. People love to back projects that have momentum, so be sure to see what’s working in other projects similar to yours.
Next, create a list of everyone in your network who may be a potential backer. Because the first days of a crowdfunding project can determine its success, doing all this work in the lead-up to the launch of your crowdfunding campaign may help ensure its success.
Don’t forget taxes
One common (and potentially costly) mistake that first-time crowdfunders make is failing to plan for the taxes that will be owed on the pledges paid out to your campaign. If you raise more than $600, you’ll likely owe income taxes on the amount. Be sure to include this into your budgeting process so you won’t be caught short when tax time comes.
Once your business is up and running, there will be other tax deadlines to keep track of. That’s why ComplYant helps small businesses stay on top of their filing and payment deadlines, all on one easy-to-use app.