At least 29% of businesses are failing simply because they run out of cash. This could come from poor planning, planning not being based on five to ten-year growth, or simply failing to collect receivables from customers.
Regardless of the reason, there are multiple ways to start funding a business and sustain that method with a winning fundraising strategy.
Whether you want to raise venture capital to fast-track an idea or you want to raise funds for your existing small to mid-sized business, a company’s fundraising strategy could make or break the success of its efforts. The unfortunate thing is that around 60% of the businesses that are successful in raising pre-seed funding, end up failing to continue to the next phase of the startup process.
Fundraising and sustaining what you make can be difficult to navigate if you aren’t sure where to start. Instead of starting blind, take a look at some of the top fundraising strategies and trends that are sure to help you secure the working capital you need.
Viable Fundraising and the Difference It Makes
Just as you can’t move forward with a business without a business plan or market research, the concept is the same for the fundraising strategy you use. Without a plan, you will fail at targeted marketing and are unlikely to secure the donations you need.
Overall, it’s unlikely that you will reach those you are trying to reach at all. Your efforts will be misdirected and this will eventually be a waste of resources. This also means that your efforts won’t be as effective as they could be.
Your goal shouldn’t just be an initial fundraiser. You should be aiming for a higher retention rate of donors which will make the sustainability of continued funding more simple. Fundraising development is necessary because this is how you will achieve a faster ROI and not a failed plan.
Some of the most viable options for funding a business are crowdfunding donation pages and email campaigns. Each of these options is scalable, and that’s the main differentiator. As your business grows and your needs change, these fundraising options offer enough flexibility to adjust as well.
Why Is It So Easy for a Fundraising Strategy to Fall Flat?
One of the top reasons that businesses fail at implementing fundraising strategies is that they aren’t reaching a large enough group of people. The top reason that companies fail to make it to the next startup phase after obtaining seed funding is that they are simply wasteful.
After receiving the funds from their fundraising efforts, they often have no strategy on how to allocate those funds. This means that a donor’s money isn’t being used for the right things and is likely going to run out before it goes to the areas that need it most.
The problem with this is that you aren’t likely to sustain long-lasting relationships with those donors. It’s also not likely they will become a retainer donor or a long-term supporter of your initiative. The initial step in gaining funding is choosing the strategy that is going to work for your business model and that will resonate well with donors.
Your efforts aren’t over after hopping on to the trend bandwagon, though. It will require outreach and strategies for sustainability after the fact, and these are things that many businesses are failing at.
1. Diversified Funding
If you want to increase your profits and build your portfolio across different asset classes, diversifying your funding is the best way to do this. Venture capitalists leverage funding opportunities, and this is an approach that small to mid-sized businesses should be taking.
While this is often a tactic for nonprofit organizations, for-profit companies can do the same. A non-profit might leverage the use of monthly pledges, gift-giving strategies, and auctions. For-profits can adopt the same fundraising strategy by opting for email marketing efforts, peer-to-peer options, and fund-a-need approaches.
Try What Works for Your Business Model
There are no “hands-off” options (as long as you comply with local laws and regulations) when it comes to fundraising. However, the method you use just needs to be tailored to your company and your ideal audience. The great thing is that you can gain donations outside of your ideal network if your messaging is done properly.
Small to mid-sized companies can achieve this through multiple for-profit funding solutions. Some of the most popular options for for-profit businesses are:
- Small Business Administration
- Venture Capitalists Efforts
Other ways that you can diversify your assets could be through using angel investors and using microloans. However, with any form of loan, you want to ensure that your business has the resources to comply with pay-back times. For non-profit organizations, regardless of size, you could make use of other tactics, such as:
- Use the silent auction tactic
- Make use of raffles and sponsorships
- Give ticket sales or discounts a try
Regardless of the type of business you have, you should also be prioritizing donor stewardship and tracking performance KPIs to guide each move with the strategies you use.
2. Using Platforms Tailored to the Company, Campaign, and Client
One of the most common causes of failure when it comes to raising capital is doing the bare minimum. Maximizing your fundraising campaign through the use of customization is one of the top funding tips that business owners can make use of, because you are making your campaign more customer-centric.
Think about the exposure methods you plan to use for your campaign. If you are planning to have an online presence, potential donors want to see customization in your efforts, and those efforts should showcase why you need funding and why you deserve ‘their’ funds.
Think about how 25% of new businesses aren’t getting funding at all. This is mainly due to the fact that their efforts are too generalized, which won’t catch a donor’s attention. With better customization, you are more likely to see quicker ROI and a better engagement rate.
The Chance to Scale
Fundraising platforms are going to allow you to reach a larger audience. This is also going to open the door for you in terms of succeeding at targeted marketing. When it comes to marketing your services, whether through general marketing efforts or raising capital, 14% of businesses are failing because their marketing is poor.
Making use of online fundraising management platforms will give you the ability to scale through more streamlined marketing and better customer outreach. Some of the best ways to tailor these platforms to your campaigns are to:
- Brand your donation forms and marketing materials
- Utilize multi-step forms to enhance UI/UX efforts
- Ensure you are offering a variety of payment methods
- Help customers with their donation decisions and suggest amounts to donate
With these fundraising tips, you will also want to make sure that you brand each step in your message and make it specific to the people you want to reach. The point is to give them a reason to make a donation that isn’t only related to you specifically needing their capital.
3. Leveraging Data for Decision-Making
Data is useful when it comes to securing funding because you are gaining direction in how your strategies are working. Leveraging data analysis can also give you insight into why your donors are giving to you, how often, and their preferred method(s) of giving.
Using financial models throughout your strategy will help businesses keep track of their ratio of net income and total campaign costs. This can help to keep budgetary restraints and will also provide continued monitoring. The main things that companies need to realize are that data compilation, analysis, and visualization are trending.
The reason for this is that potential donors want to see numbers. This is essential because they want to see where their money is going. These visuals can be transformed and meshed into your social media and email campaigns as well.
This tactic is effective because the numbers speak for themselves. To measure the effectiveness of your fundraisers, figure out the most important KPIs you want to keep track of. Outline your engagement metrics and start measuring the cost per dollar that was raised.
Understanding Data Principles
Your fundraising strategy will likely fail if you aren’t using your backend data as you should. This means that your fundraising and marketing team needs to understand how to use it to pinpoint certain audiences.
Some of the best places to start are to assess the success or failure of any recent campaigns that you’ve done. If you have, you can measure historical donor data. Doing this will increase effectiveness and play a primary role in your donor retention.
You also need to monitor your number of new donors and your lapsed donors. It will also help keep an eye on ‘at-risk’ donors. These insights will allow you to determine the best ways to retain your donor, and gain new partnerships and better methods of securing more capital through up-selling methods.
This is one of the traps that many businesses fall into: not monitoring their donors from the back end. So, this is where you should be starting with your data models.
After obtaining a better view of donor health, you can continue to optimize the flow of your data. This often has to do with customizing data funnels and leveraging those funnels to feed your campaigns and outreach methods.
Additionally, you will need to start segmenting your targets. This will often involve categorizing your supporters, your used efforts, and what you haven’t done already.
This is essential because it’s a way of “cleaning” your data and having a place for each category. Segmenting your compiled information is also another method of staying on budget and determining where you can allocate additional resources. Data usage is an underrated trend, but some of the most successful campaigns were heavily reliant on their back-end data.
4. Going Technical Versus Manual
When you take on the task of raising capital for your company, you have to also adopt more technical means of doing so. Automating fundraising efforts is continuously trending as it is with everything else. Using automation when funding a business is just another way of delegating tasks.
Instead of passing off tasks to people on your team, you will be delegating those things to a fundraising platform or other similar software solution. The concept is also the same when you work with professional strategists who are well-versed in using technology like this.
Opting in for a more technical approach to your fundraising strategy helps you keep track of certain metrics. It also helps businesses to stay on track with their goals rather than doing everything the manual way.
5. Tapping Into the Evolution of Valuation Methods
A valuation method determines the worth of your company, its assets, or its stock. Valuation in general is essential because it gives a full picture to buyers of how far their contributions will go. It also helps to show what certain things should be selling for.
Valuation methods allow you to see past just at the current time. These methods give a view of the potential of your business in the future.
Ways that you can do this prior to fundraising are to look at comparable companies and to look at your assets. You can take an asset-based approach and opt in for a historical earnings valuation or a relative valuation.
Overall, the valuation of your company should play a part in how you structure your fundraising strategy. For early to mid-stage companies, the venture capital method and the discounted cash flow method are the most popular options.
Leveraging Your Fundraising Efforts Based on Proven Trends
The best fundraising strategy will be based on customization for your company and your target audience. There are a lot of gray areas when it comes to securing and sustaining funds for a business.
Strategy success isn’t promised for every business that tries them. It will depend on your outreach efforts, where you place your campaigns, how well you communicate your needs, and the potential success of what you would use the funding for. Instead of giving in to potential failure, work with the Fidelman & Co. team to better approach funding your company.