How to Get Your Business Ready to Crowdfund
Updated: Apr 22, 2022
We often talk to business owners who come to us with the idea that they’d like to crowdfund their loan, but they’re not quite ready for it. Maybe the project they have in mind is still several months down the road, they're not sure about the social aspect, or they’re trying to cross a few ‘ts’ and dot a few ‘is’ before they embark on the crowdfunding journey.
If this sounds like you, here are six steps you can take to prepare your business to be well-positioned to launch a crowdfunding campaign with Honeycomb.
Have a specific growth project in mind
If you have some vague idea that you want your business to grow, you might not quite be at the point where crowdfunding is right for you. The best crowdfunding campaigns require a specific goal at the end - a new building, piece of equipment, marketing campaign, product line, or something along those lines.
Having a tangible project to center your crowdfunding campaign around is the first step in getting your business ready to crowdfund. Then, you can start to center your narrative around how important this project is to your business’s growth.
Get your social media crowdfunding-ready
Crowdfunding is probably the most social of alternative business funding models out there - it depends on you spreading the word about your campaign to your followers, and hopefully having them spread the word for you as well. This is both why loan crowdfunding leads to 60% growth increase post-campaign, and why having a strong social media following at the start helps your campaign’s success.
Our campaign coaches build a customized social media and broader marketing plan with you before you launch your campaign. To get ready to execute that campaign plan--which they'll help you understand every step of the way--you'll want to get yourself social media and network ready!
Did you know we recommend businesses grow their social following to 250+ followers before starting a campaign? Or recommend you have a sturdy word-of-mouth community before starting?
This doesn't mean you need huge numbers. Some of our most successful campaigns have come from small but passionate supporters!
The benchmarks we usually see on a business’s social media that indicate they’re in an ideal position for crowdfunding are if they have at least 250 followers on any given channel, and are receiving engagements on their posts. This isn’t an exact science, but the basic idea is that if your customers are actually engaging with your business on social media, the more likely that they’ll be interested in investing in it.
This is why investing energy in giving your customers a way to connect with you digitally, is so important to focus on!
If you aren't already posting to social media 2-3 times a week, or haven't found other ways (such as email) to make marketing a priority, now is the time.
If you have a marketing team for your business, make sure it’s clearly communicated to the social media manager that this is something that takes priority.
Get your books in order
Because Honeycomb is a regulation crowdfunding platform dealing in small business loans, we do require the businesses that work with us to undergo a credit analysis - this is just to make sure that you’re in a good position to take on debt, and that there is less likelihood of any defaulting on the loan repayment.
We take a look at you as a whole entrepreneur. Some of our campaigns were turned down by a bank or couldn't get the funding they needed through a bank. We look at the whole person, your business plan, your vision, and invest in that.
While you’re in prep mode for your Honeycomb campaign, here are the documents you'll want to have ready:
Business Financial Statements - such as Balance Sheets, Cash Flow Statements, Profit & Loss Sheets,
Tax returns from the past three years (or whatever you have if you’re younger than 3 years)
Bank statements from the past three months
We also will want to gather a sense of where you’re at financially on a personal level - this can even help the process, not hurt! The personal financial statements you'll want to get ready are:
List of personal assets (Do you have a car? Valuable jewelry? Property?)
List of personal liabilities (Do you have student loans, etc.?)
Sources of additional income (Do you have another job? Any investments?)
Authorization for a Personal Credit Check (this is just a signature that allows us to perform a credit check on you)
Gather a list of contacts to reach out to directly
Another step you can take to make sure you’re ready to come out swinging with your Honeycomb campaign is to gather a list of contacts who you think might be interested in investing in your campaign. This can be as simple as just creating an excel spreadsheet and adding to it as people come to you.
When you have this list of contacts, you can start a newsletter, which begins a direct line of communication from you to these contacts about the investment opportunity. This is so much more powerful than your social media, however awesome your posts might be, because it’s directly in someone’s inbox.
Think of it this way, you’re more likely to accept a party invitation that comes into your mailbox than you would one posted on the street, right? Because you know the host specifically wants you to come to the party. This is an excellent way of inviting your network personally to come and invest in your business.
Brief your inner circle about the opportunity to come
This is sort of like the previous point, but a little bit deeper. While you might build out your contacts list to be hundreds of people, some of your first and possibly largest investments are most likely going to come from your inner circle.
Your inner circle includes your family, friends, mentors, close business colleagues, and anyone else you have a personal relationship with. They are the people who believe in you the most and want to see you succeed. Your Honeycomb campaign is the perfect chance to say “thank you” to them, by giving them the chance to invest in your growth.
Instead of dealing with borrowing money from a family member, they have the opportunity to invest through our platform if they want.
Before your campaign even launches, you can approach your inner circle with the news that you’re soon going to have this opportunity to crowdfund a loan, funded by them. You can get them in “on the ground floor” so to speak, so they’ll be ready to invest right when the campaign launches.
This will interest people outside of the circle in the campaign by lending credibility to it. You know how when you see a busker on the street, and there’s always already a couple of bucks in the guitar case? It’s a similar idea here - you’re showing that people are already believing in your business, and your campaign has the potential to meet its goal and be a sound investment.
Learn about crowdfunding with Honeycomb
When you’re getting ready to run a loan crowdfunding campaign, it’s important to be clear and precise about the opportunity you’re offering your customers, friends, and family.
Many people, when they hear the word “crowdfunding,” they immediately shut it out. There are so many misconceptions out there about crowdfunding, such as that it’s always just digital panhandling and that only inexperienced businesses use it.
Honeycomb campaigns are different from reward crowdfunding like Kickstarter in that it’s not a handout that you’re asking from your crew - it’s an investment. People can invest in your business in the form of a loan, which they’ll get back, plus interest.
When you run a crowdfunding campaign with Honeycomb, we coach you on what exactly a loan crowdfunding campaign is and how to communicate it, but the extent to which you communicate it to your circle is up to you.
Look at you! You're ready!
And with these tips, you’re sure to be well-positioned to embark on your crowdfunding journey. Fill out the form below to learn more about running a Honeycomb small business loan crowdfunding campaign.