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Crowdfunding and the Small Business Model

Monday, June 03, 2013   By Mike Reddy

 

What the heck is Crowdfunding, you ask? It is such a new concept that even Microsoft's spellcheck does not recognise it!

The term may be fresh to the small business world, but the idea behind it is very simple. In fact, you may already be involved in Crowdfunding, and not even know it.

Crowdfunding evolved out of the concept of outsourcing- reaching outside of the business' four walls to accomplish tasks. It operates in a similar fashion.

Basically, it is a collective financial strategy, encouraging individuals to pool their resources in support of new business ideas that may not otherwise get off the ground.

The appeal of this method is that it matches creativity and business- creating partnerships that have both ingenuity and profit-making power. It both encourages and thrives in a community, bringing like-minded people together.

There are several Crowdfunding strategies in play these days. Donations, subscriptions and fundraising websites like IndieGoGo.com and Kickstarter.com are a few of the prevalent ones.

Some of the advantages over more conventional models are:

  • Starting small is no big issue - minimal start-up costs make this accessible to any entrepreneur.
  • Control and influence- creators and sponsors come together in projects they are both passionate about, building enthusiasm.
  • Interactivity builds more diverse teams, with a shared goal.

The idea that 'two heads are better than one' is taken to a new level with Crowdfunding. The more heads the better is the motto here.

Crowdfunding is also inherently more flexible than a conventional model. They are built to ebb and flow, rather than to adhere to limiting restrictions.

Other than starting a new venture, this method can also be called upon when launching a new product or service or expanding the business.

There are five general forms of Crowdfunding: donation, reward, equity, interest and mixed.

Any combination of these forms can help get a small business off the ground, or step in during hard times to keep things going.

Keep in mind that Crowdfunding has some drawbacks (such as fraud) so make sure to invest time and research diligently before considering it as a viable option.


By Mike Reddy, Business Coach


Mike Reddy is a Chartered Accountant, business coach and advisor helping businesses in Sydney, Melbourne, Brisbane and Gold Coast to easily increase their profits and cash flow. He is currently President of the North Sydney Chamber of Commerce, a Regional Councillor for Sydney North East and a member of the Institute of Chartered Accountants Sydney leadership team. As well as advising businesses, Mike presents business development seminars and webinars and is regularly contacted by the media to comment on small business matters. You can connect with him on Facebook, Twitter and Google+.