One of the newest ways to make money online is called crowdfunding. Crowdfunding involves getting a large number of people to financially fund your business idea via donation, allowing you to achieve whatever it is you want to achieve in your career (and in your life) without having to come up with all of the money by yourself.

How to Do It

How does crowdfunding work? Here are the basics:

• Step #1: Come up with an idea. What is it that you would do if you had the money to do it? Would you start your own business? Create your own non-profit? What would you do with your life if money was no object? Whatever the answer is to these questions is your idea. This is your vision of what you want out of life, or your mission behind your crowdfunding campaign, if you will.

It is also important to know what problem your idea solves. Who does it benefit? How does it benefit them? What issue or concern does it alleviate? How does it make the world a better place?

• Step #2: Create a plan. With your future vision in mind, how would you make it happen? In other words, what steps would you need to take in order to turn it into a reality? Create a plan that is as detailed as possible. Include short-term goals, as well as long-term goals so that you have a crystal clear image of what you want to accomplish. This step will also help you figure out how much money you need to raise through crowdfunding.

• Step #3: Develop your pitch. Your ability to get people excited about your idea may be the difference between living your dream and having a life in which you always want more. So, you need to develop a pitch that makes others want to be a part of your vision enough to open their wallet to you.

Think like they would and answer their questions before they can even be asked. If there are going to be hurdles to cross, discuss how you intend to overcome them. If you have competitors, explain how your idea is better for the environment, more efficient, or cheaper. The more transparent you are, the better.

Use your charming personality to win your possible investors over. Show them that you are passionate toward your idea and that failure isn’t an option.

• Step #4: Choose your crowdfunding platform. You’ve got your idea, your plan, and your pitch so now it is time to find a platform for funding. One possible option is Kickstarter, a website designed to help you get the money you need for your particular creative project. Indiegogo is an option too, as is Tilt and Patreon.

If your idea revolves around renewable energy, Abundance may be an option for a crowdfunding platform. U.K. based idea creators have a couple of options, some of which include BankToTheFuture.com, Microgenius, and Seedrs.

Check each one out and choose the one that you feel has the greatest possibility of success for your particular idea.

• Step #5: Start your funding. Now comes the important part: starting your funding. One way to entice potential investors is to offer them something in return for their money.

A common way to get investors to pledge more money is to offer varying levels of support. For example, for a $25 investment, you may agree to put their name on your website, which is additional advertising for them for a very minimal cost.

But for a $100 investment, you may offer them a free product or service before it is available to the general public, whereas a $200 donation can get their name engraved on it. Get them to pledge $500 though and you could give them additional products or services that they can give as gifts to friends.

Put yourself in your investor’s shoes and think about what you would want to get if you were to invest in a particular crowdfunding campaign.

• Step #6: Ask your friends and family for support. Sometimes it takes someone to place the first dollar in the cup, so to speak, before others will follow suit. Friends and family that support you can start the money gaining trend, encouraging the rest of the world to do the same.

• Step #7: Promote your idea. Get your idea out there as much as possible, drawing the public eye. Post it on social media and ask others to share it. Create a website committed solely to your idea and blog about it or link to it in your articles, getting yourself as much exposure as possible.

Pros

When you compare crowdfunding to traditional funding by investors, there are many pros to using the former. For instance, you don’t have to find one or two investors to come up with the full amount of money you need. And by asking more people for less money, you’re more likely to get it.

Additionally, if you’re having a hard time getting a loan from the bank, crowdfunding is a great way to work around it. This makes it a great solution for that fresh out of school young adult that doesn’t have a lot of working capital or a ready-to-retire senior who doesn’t want to risk their life savings on their venture.

Cons

One of the major cons of crowdfunding is that you’re fighting against the fact that most startups fail, so you’re going to have to work really hard to convince your investors that you’re not going to fall into the majority. This can be a difficult task as a smart investor is going to do what he or she can to protect their money.

Plus, this particular money-making option is very time consuming. As possible investors have many questions and concerns, you have to be available to answer them. This means being email accessible more often than not.

Earning Potential

Your success with crowdfunding depends on whether or not you can sell your idea to a lot of people. Sometimes it helps to be well-known first, as music legend Neil Young can attest when he met his crowdfunding goal of $2.4 million in mere hours (less than a day).

However, your ability to raise money on crowdfunding platforms can be tremendous not only for initial investments but also for future gains. For example, Oculus VR, a virtual reality gaming company started on Kickstarter and subsequently sold to Facebook for $2 billion. So, you may be able to create a great company that makes you a lot of cash in the end.