Do You Really Need Funding and Are You ready for it?

Tim Berry

5 min. read

Updated May 25, 2023

Let’s not beat around the bush: businesses need money to succeed, and that money does not appear out of thin air.

Some businesses are blessed with angel investors. Others utilize the most traditional routes by seeking loans or seeking the support of an investment group. However, every business and every situation is unique.

Not all businesses have the privilege of surviving and thriving off of the investment of a few individuals. Not all businesses are lucky enough to have their needs coincide with loan eligibility. Thankfully, there are other fundraising opportunities available, with more popping up every day. As each situation and need will be unique, it is important to have a basic grasp of what to do, what not to do, and what’s available.

1. Start with a clear idea

This seems so simple, yet it is amazing how many fundraisers and businesses fail because they have no clear plan or goal. Although you may be eager to jump right to fundraising, make sure you address the most basic building blocks first. Some issues you’ll need to address include:

  • Who are you as a business?
  • What is your purpose?
  • What are your goals? (These must be specific or “SMART,” which stands for “specific, measurable, attainable, realistic, and timely.” Instead of “raise more money,” frame your goal as, “raise $10,000 by December 1.”)
  • What are your values?
  • What is your company worth?
  • What kind of growth can you realistically expect in the next year?
  • What are your needs?

If you can’t answer these questions, you’re not ready to start fundraising. A clear sense of identity and purpose are required to get investors interested. A clear understanding of your current status, needs, and future plans are required to get investors to give.

2. Explore the options available to you

Fundraising isn’t one-size-fits-all, so familiarize yourself with all the options. Classic options like targeted mailings and product-based fundraisers are still strong options today. What’s more, they’re fairly simple. Targeted mailings involve sending out fliers, letters, postcards, or other physical introductions to your company and requests for investment. Product-based fundraising operates just like the candle or candy bar sales you remember from school: You partner with another company to sell a product, and receive part of the profit towards your fundraising.

Businesses that seek to serve in and become a staple of a small- or close-knit community may benefit more from personal options, like offering a service or hosting an event. Classic options like car washes are a great way to display your company’s work ethic while getting a chance to speak with large numbers of potential investors and customers. Other companies choose to host social events, like concerts, movies in the park, or other community-building endeavors. Cover charges help with costs for the event itself as well as fundraising.

Using the internet to crowdfund has become wildly popular over the last few years. Big names like Kickstarter and Indiegogo get all the attention, but there are hundreds of sites and services dedicated to crowdfunding. Fundable is focused specifically on fundraising for businesses, while SportzFund seeks to pair the popularity of fantasy sports with fundraising needs. SportzFund is a personal favorite of mine because I’m a huge sports fan, and it’s easy to get other sports fans excited donating when they get a free fantasy sports game for every $10 they donate.

3. Avoid pitfalls

Learn from those who came—and blundered—before: Don’t repeat common fundraising mistakes. First and foremost, know the law. Crowdfunding sites are especially appealing because most are equipped with all the information you need; if your questions can’t be answered through their FAQ pages or a dedicated legal page, there are employees standing by to answer your questions.

Local fundraising requires a little more legwork. Learn the restrictions and rules for product sales, mailings, and other options before you start. For example, some fundraising sites only allow you to keep the money raised if your goal is met, where others let you get some of it. It’s extremely important to read the fine print, especially if you’re not sure that you’ll meet your goal.

For those utilizing product sales, make sure you’re selling something people actually want. It’s equally important to make sure that your market isn’t already saturated with that product. If the local schools are selling candles or candy bars, then don’t sell those items. Pick the fit that’s right for you. Sure, Kickstarter is popular, but perhaps coming up with incentives and rewards is a drain on your limited resources. Don’t go with what’s popular just because it’s popular.

4. Perfect your pitch

This is where the first tip comes in especially handy. Once you know your company’s goals, strengths, and needs, it is easier to craft a pitch that fits and works. However, while concrete figures and company goals are very necessary, it takes a lot more to make a perfect pitch. A pitch needs to be engaging yet succinct. Make sure your tone matches your business’s personality and make sure that it will appeal to your target audience.

Don’t just ask for a sum of money—explain what you plan to do with that money. Not only is this an excellent use of transparency, but also the fact remains that stories generate more interest in figures. People want to know what their money will accomplish. Use real people instead of stock photos. Make a simple video explaining your mission and why you’re raising funds.

5. Use social media

Don’t neglect social media; your fundraiser doesn’t have to be social media based (or even based online) for it to be a powerful tool.

Social media meets two primary functions: It helps disseminate information and it helps create relationships. Regardless of fundraiser type, many individuals will seek more information about your business. A well-maintained website and active social media accounts are key to informing and engaging prospective investors and clients. As a bonus, such sites help reassure donors of your legitimacy.

When fundraising, be present online. Be active, be informative, and be engaging. Use social accounts to draw attention to and push traffic towards your fundraiser. Give updates during the fundraiser, but don’t forget to give updates afterwards as well. Use pictures, infographics, and video to show the investors’ money hard at work.

Above all, be honest. Be honest with yourself about your current reality and your needs, be upfront with investors, and be above board in your fundraising endeavors. A clear focus and well-articulated needs are the first steps towards fundraising success.

Content Author: Tim Berry

Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.