Below is a list of some things to consider before deciding to create a Rewards Campaign. Crowdfunding can involve a lot of work, so it’s important to make sure you’re prepared and know what to expect.
Have you gotten enough feedback directly from potential customers/backers to know there’s strong demand for what you’re about to do?
Do you have a detailed idea of how much you need?
Be sure to consider the following expenses -
- Reward fulfillment
- Legal expenses
- Platform/processing fees
- 30% cushion for unexpected expenses
- Be honest about your needs and set a realistic target
- Shoot for a target you think you can hit early in the campaign so you have the last few weeks of the campaign to push beyond it – it’s better to surpass a reasonable target than fall short of an overly ambitious one
Do you have a strong team?
- Teams help spread the work out, increase the size of the networks you can reach, and bring more knowledge to a project. Team projects raise more money than individuals in crowdfunding.
Does the project have a Web and Social media presence?
- FB, Twitter, LinkedIn, Instagram, Youtube – Make accounts on networks that reach the people you specifically need to target
- If you haven’t already, start building a community around your social media accounts to support your project
How big is the direct email list?
- Determine how big your personal network and that of your team members is because this network will give you the strongest support
How will your capital target connect to your network size?
- How many people are you connected to from social media and your personal networks including email etc.?
- How much is your product/service and how many of these people are willing to buy it right now?
- Survey a random sampling of these people and see how many in a group of 20-50 will commit right now to your proposal and how much – this can help estimate a conversion ratio and how many people you need to connect with to get your desired funding.
- For example - If 20% of those surveyed will commit $100 each to your pitch and your campaign will need $20,000– a network of 2,000 people could potentially convert to $20,000 in support
Have you determined the appropriate legal/tax structure for your goals?
- If you’re doing a rewards campaign and aren’t considering selling equity or other securities offerings for your company in the future, you don’t absolutely need to establish a company, but you should. Set up an LLC for your crowdfunding campaign and a business bank account.
- Crowdfunding campaign revenue is taxable income and you should consult a CPA. You can set up an LLC easy with legalzoom and other services
- Talk to a tax accountant about your plan, rewards, and campaign schedule – depending on your state of residence, there can be unique tax consequences that can apply to certain crowdfunding campaigns if you are not proactive