Crowdfunding is a common way for new businesses to get the financial boost they need to grow in this day and age. Additionally, it’s the most current method of funding a concept. Through crowdfunding websites, anyone can contribute to any project. Naturally, your investments will also generate some revenue from your firm shares. However, let’s look at this article if you’re determined to figure out how much money you make each month via crowdfunding.
What is Crowdfunding?
Before learning how to estimate your monthly income through crowdfunding, it is crucial to understand what it is. Let’s use an example to define the phrase.
Imagine you have a visionary notion you want to bring to life and share with the world. However, the lack of funding to advance your project has left you helpless. It is due to the slight possibility that a bank or angel investor will decide to fund your business.
However, you can quickly secure cash for your project through crowdfunding. Crowdfunding involves a large number of people contributing money in exchange for tangible rewards and in the hopes that your project will be successful.
The idea of crowdsourcing is, of course, nothing new. The most well-known examples of websites that have provided a mechanism to raise money online for a business or idea include Kickstarter, Indiegogo, and Crowdfunder.
The Benefits of Crowdfunding
As we’ve already discussed, it’s challenging to raise money for a business these days. In addition, borrowing money for your business from banks or affluent individuals in this day and age is not a wise move because you have to pay interest. But if you choose to crowdfund, you can quickly have the money you need to launch your firm immediately.
The fact that investors may quickly invest in a potential firm makes it a popular idea. Startups can contact potential clients who might act as investors and brand promoters in addition to becoming customers.
How Do I Determine My Monthly Income From Crowdfunding?
People who are curious about crowdfunding or have made investments there without realizing it sometimes try to figure out how to compute monthly rewards. And why not? They want to enjoy the rewards of their investment in the company.
First, we must identify the areas in which we have made financial investments. In other words, it means that you need to monitor how the business where you’ve invested is doing. The amount of money you have invested in the enterprise after that must also be monitored.
You can determine your monthly crowdfunding income as a monetary amount or as a percentage change. The methodology is the same for all purposes, whether you generate a profit or a loss during the month. Understanding how much money you’ve made or lost can make your investing strategy smarter. Additionally, you can decide if the business is worthwhile from an investment standpoint.
The following formula can be used to determine the percentage return on equity shares you receive from a project or concept in which you have invested through crowdfunding:
(Current Value of the Share – Invested Amount) / (Invested Amount) x 100 = Percentage Change
The fact that the invested amount will always be in the denominator is one of the formula’s most significant features.
Calculating Monthly Profit from Crowdfunding
Following our discussion of estimating the potential profit or loss from investing in businesses that accept crowdsourcing, let’s look at a fictitious scenario to further clarify the idea.
Consider that you contributed $2,000 to a startup company on a crowdfunding website. You may receive stock shares in return depending on how much you invest in a company.
The issue that becomes apparent in this situation is how the business uses profits to gain an advantage over the competition. If your shares were worth $20 previously and you sold them for $23, you will have earned $2,300 from that transaction. In other words, you earned $3 in profit for each share in the startup.
However, how can you calculate if the amount is significant and you need to do so?
Percentage Gain= ($23-20)/$20= 15% gain
Calculating Monthly Loss from Crowdfunding
Let’s look at an example of how to compute monthly loss from crowdfunding now that we’ve seen how to calculate the profit. Let’s consider your $20 ownership stake in the company you invested in. However, a situation arose where you must sell your share for $18.
From here, it is simple to notice the $2 loss as the value decreased from $20 to $18. As a result, we can determine the percentage loss from here:
($20 – $18) / $20=10% loss
Realized Gains of Income vs. Unrealized Gains of Income
You can win or lose by realizing or not realizing, with or without your realization. Unrealized gain or loss happens when you invest, even if you are unsure whether it will be profitable or unsuccessful.
On the other hand, the actual profit or loss from your investment will only become apparent if you decide to withdraw your funds from the project. It is referred to as realized gains or losses from crowdsourcing.
Knowing your monthly revenue through crowdfunding is essential for day-to-day existence, as we already know. However, you must have the knowledge to do so to calculate that. We hope this post will help you quickly determine your monthly crowdfunding income!