Funding Your Coffee Shop Business With Crowdfunding

Coffee Shop Crowdfunding Is a Popular Option To Raise Money For Your Coffee Shop Startup

Funding Your Coffee Shop

Coffee Shop Crowdfunding Is Becoming a Viable Option

The future is here.

Really, when you think about it, how many times have you ever thought to yourself:  “If I could just get a million people to give me just one dollar for my coffee business, how far could I go?”

It’s not that you want “free” money. What you do want is an opportunity to start your dream project. You want access to capital. And in return, you’d give back to your supporters in a reciprocal manner.

Ah, so many dreams. So little money.

Until now.

Projects and dreams get funded every day by successful crowdfunding efforts.

From movie productions, unique inventions, social causes – to, of course, many coffee shop businesses!

That’s right!

Many aspiring coffee shop owners turn to crowdfunding to bridge the gap in their coffee business budgets to make their dream a reality.

This funding method is already changing the way some coffee business are approaching their coffee shop startup – especially for those without a lot of money to start their coffee business.

Traditional methods of funding a coffee shop through a business loan will always be an option. But this new way of raising significant funds is a game changer! 

While you might think that traditional funding sources are on their way out the door because of crowdfunding's popularity, what we have actually found is that many coffee shop businesses don’t throw out traditional capital streams.

Rather, they include crowdfunding as part of their coffee shop funding mix.

Important questions about coffee shop crowdfunding:

• What is crowdfunding?
• How does it work?
• What can I do to improve my chances of success?

Let’s tackle each of these important questions. If you’re already familiar with crowdfunding, bear with us for a second.

Crowdfunding Your Coffee Shop Startup

What is crowdfunding?

Crowdfunding is utilizing a group of people (AKA: the public) willing to invest in your business or project, usually through a third-party website service, such as Kickstarter. Crowdfunding or crowdsourcing is not necessarily a new concept.

There are examples of utilizing “crowdfunding” for various aspirations for thousands of years. However, never before have people been able to leverage the internet, which has allowed so many people access to projects and funding, as we have seen over the last several years.

As many know it today, current crowdfunding efforts were the direct result of Title III of the 2012 Jobs Act, which permitted the general solicitation of funds for a stake in a project. The reason is that after the financial volatility of the banking system in the early 20^th century, many laws were passed, specifically prohibiting the solicitation of funds. In fact, you had to be licensed or registered to do so. This was to protect the public or average investor from being swindled of their cash.

Crowdfunding has answered the call for capital for small businesses that have been largely left out of the capital investment. 

Crowdfunding can be viewed as an alternative to traditional capital sources – which are traditionally done through banks, investors, or even using credit cards to start your business.

Usually, a crowdfunding campaign is done by utilizing one of the many hosting platforms out there, such as Kickstarter or IndieGoGo. While these platforms can “host” your campaign, it's really up to you to promote your campaign through various methods. For example, providing a video, information, and supplemental links to your work. You should have a coffee shop website – these are all to pique your readers' passion, and action is necessary.

To entice supporters, typically, you are encouraged to create a reward system for a particular amount of support. When the campaign is over, and if it's successful, you will need to hold up your end of the deal – and deliver your rewards.

How does crowdfunding work?

Crowdfunding is a simple concept (with a complicated legal background that is still meshed out in our legislative and bureaucratic systems).

However, as we know it today, crowdfunding works by posting your project and goals on a crowdfunding website, which people can decide whether to support or not.

You can entice crowd support with a well-produced video, well-planned goal(s), and tiers of rewards for their support. For example, if you want to open a coffee shop, your payback can or maybe a free coupon for a coffee and pastry, a t-shirt, rental of a room for parties, etc. 

What can I do to improve my chances of success?

There is never just “one thing” to do so that you can ensure success. However, we would say that having a crowdfunding plan is essential. Your plan should have clear benchmarks and goals. Of course, generating value for your customers (and supporters) and having a marketing plan will play a key part in your success.

But prior to that, you will want to take care of a few essential things:

Define Your Coffee Shop Concept

Knowing what kind of coffee shop you want to be in will be important before you start asking people for money. Have a distinct plan and articulate that in your messaging. If you are unsure of what type of coffee business concept will be best work for you, consider doing a bit more research.

Setup Your Coffee Business Structure

Before you accept any money, it may be best to establish your legal business structure. Research and determine what legal entity works best for you. For example, many coffee shop owners in the United States establish themselves as coffee shop LLCs. You will have to decide if such a structure works best for you and your tax obligations.

Understand Your Mission

Your coffee shop has a mission. While you may not know it yet, your mission will lead you to the path of success. Determine your coffee shop mission and center your crowdfunding efforts around that.

Develop Your Coffee Shop Branding 

Before you launch your crowdfunding campaign, your coffee shop branding should be made to order. Develop your brand, logo, slogan, and messaging and reinforce them with your crowdfunding campaign.

Tips for Crowdfunding for Your Coffee Shop Startup

There is no “right way” to use crowdfunding to start your coffee shop business; however, there are a few recommendations that you will want to consider before starting your campaign.

This mix of recommendations will need to be evaluated by your own personal efforts, where you currently stand in your business planning and development, and how much money you need.

Have a Coffee Shop Business Plan

A coffee shop business plan is essential if you are serious about having a coffee business (even a coffee/espresso stand). “Winging it” does not always lead to favorable results when you have your life savings (or other people’s time and money) in your hands. Having a business plan puts you in a strong position: it elevates your thinking and prospects for success. In your business plan, you can mesh through the process of your crowdfunding efforts.

Be Clear in Your Objectives

Your crowdfunding should have clear objectives – preferably with action plans and benchmarks. This helps you and portrays a level of thoughtfulness that the money you receive will not be squandered. Understand how much you need and allow yourself to have a little slack – remember that you will need to cover your promotional expenses, and you will need to give a certain percentage to the website service you will use to crowdfund.

Justify Your Goal

You are asking the world for a particular amount of money to reach your goal. Consider justifying why that number makes sense. Why have you chosen that amount? Is the amount on par with your objectives?

Have a Marketing Plan

Create a well-thought-out promotional plan for getting the word out about your funding campaign. Often, this will require you to create or establish a website, social media sites, use of video, etc.

Reaching out to local and national bloggers or influencers will be important. You will also want to have an email list to communicate with your potential supporters. A marketing and promotion plan for your crowdfunding should be thorough and cover multiple fronts. 

Communication is The Key To Your Coffee Business Success

Communicate The “Four P's” During Crowdfunding

Communicating is essential for your coffee shop crowdfunding success. Let’s focus on these four points:

Develop and Demonstrate Passion

Having a passion for your passion can be contagious. Your passion can often be seen. And it’s one of the things that people who are looking to invest consciously look for.

The People Behind The Crowdfunding

Who is behind the project? If you have a star barista or former local manager who understands the retail coffee business – share that information!

The Perks

Let’s face it; we all love to get something back when we invest in something. Sure, we love the idea of an idea of succeeding. But having a piece of the success or sharing in an experience can really be an added incentive for support. Creating tiers of support (and perks) can generate more support. Create simple tiers that people can understand and grasp.

Communicate Your Plan

You have to communicate your plan. Communicating through videos is not only strongly recommended; it’s essential. Having a clear plan and concise communication will lead to a great probability of success.

Other Important Crowdfunding Tips

Pay Attention to The Rules

There are plenty of popular crowdfunding platforms like Kickstarter or IndieGoGo. Every crowdsourcing service you use has a list of rules and best practices that you should follow. Before you sign up and post your project, consider reviewing the rules and processes for each website.

Typically, the rules are placed there to protect everyone involved and inspire ethics. We should also strive for honesty and transparency.

Protect Your Branding

Since you’ll be putting your stuff on the world for everyone to see – including your name and logo, it’s important to consider any options for protecting your name and branding efforts.

Keep Records

It’s important to keep records for your records, including a list of names, emails, and other information you will need to fulfill your goals. If you happen to raise a lot of money, you may get audited, so consider keeping your records organized and available.

Reaching Your Goal – Fulfilling Your Obligations

If you reach your goal, you will, of course, want to fulfill your obligations. Some of this requires you to mail out items – or hold items (or services) for people who visit you.

Why Some Crowdfunding Projects Fail

Many fundraising projects fail. From what I’ve seen from the crowdfunding efforts I’ve followed, there are five general reasons why they fail:

• Little or no planning
• No clear objectives
• Little credibility and authenticity
• No promotional effort
• Lacking emotional triggers for your target market

So, Can You Raise Money With Coffee Shop Crowdfunding?  

The short answer is yes! It a real and viable solution to help you reach your financial goals. However, you will have to plan for contingencies if your crowdfunding effort doesn’t pan out.

Still, with the right planning and promotional effort, we feel confident that crowdfunding will become an incredibly viable and effective tool for raising funds for a coffee shop business.

Mistakes Made When Crowdfunding for a Coffee Business

1. Not having a good idea:

Yes, there are even bad ideas about coffee shops. Make sure that your concept cuts through a certain level of scrutiny before posting your campaign.

Consider bouncing the idea off some of your friends or family. Having a detailed coffee shop business plan can help flesh out your concept. Often, these alone will help you realize that you’ve reached a minimum bar.

2. Not having a good plan:

Having a plan is a must. Not having a good plan – or even any plan – before launching your crowdfunding campaign can be a real disaster.

Not having a coffee shop business plan is one way to display that you are an amateur who may not succeed. Put yourself in your audience's shoes: Why would you give money to someone who doesn’t plan to use it appropriately?

3. Not having a good reward system:

Having at least three or four tiers of rewards should be well thought out. You want to balance out the ability to entice supporters with the necessary costs of fulfilling those rewards.

As a coffee shop, you have the option of providing a variety of small but meaningful rewards such as a free espresso drink, T-shirt, a cup, etc. can be enough to draw small to medium levels of support.

Make sure you do the math. For example, if you offer a $25 tier of support and a $13 T-shirt – how much money will it cost you? How many supporters at this level will you need to reach your fundraising goals?

4. Not identifying who your target market is:

It seems pretty obvious: you are targeting people who like coffee. But can you further discriminate against your target market?

For example, since you are a coffee shop, your market will be geared towards a specific area. Can you go further? If you are a coffee shop near a university, would students be your target market? If you are a café that wants to offer live music, would your target be musicians and music lovers alike? Make a list of the top three would-be supporters of your campaign. Look at your list. Is the small percentage of this list that will actually support your campaign going to be deep enough to reach your financial goals?

5. Not having a promotional plan ready:

If you build it, they won't come – unless you promote your campaign. Time and time again, people – brilliant people – try to rely on the crowdfunding community to simply find them, get excited, and pull out their credit cards. There is no way around it; you have to have a promotional plan ready to go – complete with a promotional budget – including a schedule of action before you click the release button.

6. Not having a video:

While not all successful campaigns have videos, many of them do. Improve your chances by creating a 2-3 minute video explaining your campaign, detailing why supporters should buy into it, and why you are passionate about your project. Do you need a video? When in Rome,… do as the Romans do. So, the answer is YES! People in the crowdfunding community expect it. Meet their baseline expectations with a creative video. Now, remember, some video creation will cost money. Your video budget should be determined before you begin your project.

7. Not having your self-hosted website:

Having a website for your coffee shop business is essential to presenting yourself as a professional business entity. Get your domain and hosting and establish your website. It needs to be professional. It’s also a great platform to share your extra-detailed updates, your various social networks, and even further videos.

8. Not accurately determining your budget:

Budgeting for your entire coffee business is one thing. But accurately budgeting for your campaign is another. After all, how much money will you ask for? How will you know what the right budget for your campaign is? Working out your budget and overall expenditures beforehand is essential. Then, taking that information, determining your source of funding streams, and then specifically figuring out where your crowdfunding campaign comes in will be next.

Remember that your crowdfunding platform will charge a certain percentage (about 5%) of your money raised. Additionally, your promotional efforts may add costs (video, website hosting, etc.). Finally, the costs of fulfilling your rewards are real and should be figured in a Pro-forma manner.

9. Not developing your support before your launch:

Your friends, family, and early supporters should be notified before you actually launch your campaign. I recommend hitting the ground running by getting your friends, family, and close circle of support to jump in on the very first day – by snagging up one of the tiers or at least sharing your story. It’s easier for strangers to jump on the bandwagon when they see you are close to reaching your goal. As it many other things in life, your success breeds success.

10. Not providing updates to your supporters:

Many campaigns launch and then remain silent. Provide updates that will continue to draw interest in your supporters and entice new visitors to your campaign with action. How many updates are necessary? It depends. You don’t want to inundate your supporters with spam, but you want to keep them posted on relevant news.

Crowdfunding Your Coffee Shop Business

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Based in Seattle, Washington, USA, Coffee Shop Startups is dedicated to providing you with the most relevant information on how to start a coffee shop business successfully. Over the last 11 years, we've helped thousands of aspiring coffee business owners worldwide. We harness the experience, wisdom, and knowledge of many successful coffee shop owners to help you increase your chances of success and profits. We support business owners who want to start a coffee business by providing them with valuable information on starting their coffee business successfully.