Crowdfunding has become a very popular way of raising capital. On platforms like Kickstarter, you can create a project around making an album, just like the group De La Soul is doing, or even fund an alternative to socks! Once you have managed to raise the money, you need to answer the next question—how to best spend it.
In this article we will focus on how to best use Kickstarter funds to make smart online investments. We will assume that the money you have raised is of limited supply, and that you want to show your investors that they did the right thing by believing in you.
Plan 6–12 months ahead
It can be quite easy to just focus on the first thing you need to get started. For instance, you might think that all you need is a better website. But after that, your main challenge can be to create sustainable growth through a number of different strategies. These can cost you money, time and effort.
Your investment plan should have three stages: the initial investment stage, the support stage and the adjustment stage. You initial investment might be to improve your website to better address the needs of your audience or to improve your conversion rate. Your support action could be to invest in increasing traffic, and finally, you can choose to make adjustments by changing your strategy based on the data you have collected.
Instead of figuring out everything you need to grow your business, you should figure out what is the least you need. Not only will this help you save resources, it will also challenge you to make the most out of the resources you have at your disposal. It will force you to focus on your core idea. It can also help you recognize the areas where you should spend more. For instance, you might need to focus on improving the conversion of your landing page or improving your sales funnel.
When you simplify, try to think of the number “one”. What is the one area where you must focus your resources over the next twelve months? What can you do without and what can come later? By focusing on one goal, a number of other goals can become easier to achieve. For instance, if you have created a great CD, it can be a lot easier to promote it.
Keep a buffer
It is a bit of a cliche to state that you should expect the unexpected, but it is still a good idea to keep extra funds available for new ideas you might have along the way. It can be something as simple as extra plugins for your site or a new traffic source.
How much money to set aside is debatable; however, try to set aside 25–30 percent of your budget before you begin spending. The exact amount is less important than actually setting aside an amount (and not touching it). You might also consider allocating the money in your buffer over a number of budgetary periods so you always have a buffer. For example, if your total buffer is $6000, you might make $500 your monthly buffer.
In order to best spend your Kickstarter funds, try to think at least 6–12 months ahead, and simplify by focusing on what you need the most. You should also create a buffer before you allocate your budget. To best invest your funds, break the process down into three stages: initial investment, supporting investment and adjusting investments.