Crowdfunding is the practice of raising money to fund a project or business venture by raising small increments of money from a large pool of people. While this approach has funneled over $65 billion into the economy, research indicates less than a quarter of all crowdfunding projects are successful. As a result, many entrepreneurs seeking funding are now turning to experts for help. A crowdfunding consulting agency offers their expertise, assisting businesses as they launch, manage, and promote their crowdfunding campaign.
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Learn how to start your own Crowdfunding Consulting Business and whether it is the right fit for you.
Start a crowdfunding consulting business by following these 10 steps:
- Plan your Crowdfunding Consulting Business
- Form your Crowdfunding Consulting Business into a Legal Entity
- Register your Crowdfunding Consulting Business for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Crowdfunding Consulting Business
- Get the Necessary Permits & Licenses for your Crowdfunding Consulting Business
- Get Crowdfunding Consulting Business Insurance
- Define your Crowdfunding Consulting Business Brand
- Create your Crowdfunding Consulting Business Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your crowdfunding consulting business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a crowdfunding consulting business?
Startup costs for this type of business venture are minimal. Your clients will be spread out across the globe with most meetings conducted online. Therefore, those looking to minimize costs may choose to operate out of a home office. You will need a computer, high-speed internet, a telephone, and marketing materials. While startup costs may not exceed $10,000, what you bring to the table is invaluable - a proven track record and real-world experience.
What are the ongoing expenses for a crowdfunding consulting business?
Much like your startup expenses, overhead costs to run a crowdfunding agency can be kept at a minimum by managing your business out of a home office. Once the business experiences significant growth, however, it may be necessary to lease an office space and hire additional staff. At that point, ongoing expenses will expand to include payroll, increased insurance, an increased marketing budget, and overhead expenses.
Who is the target market?
A crowdfunding consulting business’s target market is any new project or business venture that is seeking funding to help launch their product/service and gain exposure. Some consultants decide to limit their services to certain industries while others prefer to consult wherever their expertise is needed.
How does a crowdfunding consulting business make money?
Some crowdfunding consulting agencies receive commission-based compensation while others are paid a flat or hourly rate. Once a contract is signed, your customer should pay a deposit, with the balance paid when the contract ends.
How much can you charge customers?
Since each crowdfunding campaign is different, there is no one-size-fits-all approach to setting your pricing. Many agencies require a due diligence fee of $1,000, an upfront payment of $3,500, and 20% to 35% commission on monies raised.
How much profit can a crowdfunding consulting business make?
If you lead a successful crowdfunding campaign towards their goal of $1 million dollars, with a commission fee of 20%, net profit for that campaign equals $200,000.
How can you make your business more profitable?
Due to the nature of this business, it’s important to not overextend yourself or commit to too many projects at once. However, many crowdfunding consulting businesses offer additional services, such as public relations, advertising, and marketing.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your crowdfunding consulting business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a crowdfunding consulting business
Successfully reaching your target audience is your first step towards proving you have what it takes to help them reach their financial goals. Marketing efforts should be precise with a combination of online and printed advertising. Additionally, many crowdfunding sites offer a directory of successful crowdfunding agencies and consultants.
When you launch each campaign page, be sure to place your logo at the end of your client’s page. Many entrepreneurs researching potential consultants review this information when compiling a list of potential consultants.
How to keep customers coming back
A successful campaign means your client ventures out on their own armed with the tools needed to reach new business goals. During your end-of-contract meeting, ask your client to write a review. Remember, word of mouth is one of the most cost-effective and powerful advertising tools.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start a Crowdfunding Consulting Business in your State
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Is this Business Right For You?
Have you realized significant success in your crowdfunding efforts? Are you passionate about helping new and aspiring entrepreneurs reach their business goals and dreams? If so, a crowdfunding consulting business may be the perfect fit for you.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a crowdfunding consulting business?
Your workday as a crowdfunding consultant will entail the research and implementation of crowdfunding strategies based on the unique needs of your clients. You will monitor the progress of each campaign, adjusting your strategy based on which methods are reaching your target audience and which methods are failing. Clients will expect to be regularly updated on your progress with clear data outlined in your reports.
When not working on client accounts, you and your team will need to utilize your knowledge and skills to identify potential new clients. Extensive research should be a part of your daily tasks, ensuring you are prepared for prospective new client meetings. Your organization’s successes should be outlined in a business portfolio that demonstrates your ability to crowdfund across a myriad of industries.
What are some skills and experiences that will help you build a successful crowdfunding consulting business?
While crowdfunding is a proven method of raising money for a new business venture, only a quarter of all efforts result in success. Therefore, those entering this field should have a proven track record, with numerical data, to back up their successes. This experience comes with a large network of influencers and correspondents who can assist in gaining exposure, leading you to a larger clientele.
At the conclusion of a successful crowdfunding campaign, your clients should have a clearly defined brand with the materials needed to realize continued growth. Therefore, it is important that you are able to listen to each client, understand their branding needs, and develop a strong, memorable brand for your clients.
What is the growth potential for a crowdfunding consulting business?
While still in its infancy, the global crowdfunding market is expected to experience 16% growth between 2020 and 2025. Experienced entrepreneurs getting in on the ground floor have the potential to achieve significant growth, even in their first year.
Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a crowdfunding consulting business?
It’s important to remember that potential clients have likely read the same reports you have read regarding crowdfunding. While they recognize the potential to reach their financial goals, success relies on the knowledge and experience of the individual or agency managing their efforts. A portfolio of your successes and a list of references will go a long way towards putting their minds at ease.
Consultants are encouraged to become a member of the CfPA which offers its members a platform to stay connected and network with others in the community.
How and when to build a team
The most successful crowdfunding consultants are PR experts, and they have the ability to write compelling content and understand the various social media platforms along with their advertising tools. Know your strengths and weaknesses and build your team around those qualities.