Crowdfunding is coming. In fact, for many businesses crowdfunding is already here.
There are many equity and revenue share crowdfunding platforms that are already funding small businesses around the country, but what we have seen so far is just the tip of the iceberg. According to a recent Forbes.com article there are nearly 500,000 new businesses started in the United States each month. It is entirely possible that various forms of crowdfunding become the primary funding source for most young businesses. As you consider raising capital via crowdfunding, you must keep in mind that the crowd is going to want to see certain things before they consider investing. Here are 3 specific areas of focus related to your financial projections.
1. Enough Margin for Revenue Share
Many crowdfunding platforms offer a revenue share option. So for example, each time you sell a product you would take some percentage off the top to return to your investors. Here is the problem, if your financial projections show that your margins are too thin to be able to take 5% or 7% off the top of each sale and still have the cash to operate the business, your company probably is not a good fit for a revenue share or royalty type agreement. If you can demonstrate through your financial projections that you can grow the business, provide a royalty to investors, and reach profitability, then you are in business!