Tag: Crowd Funding
Kickfurther is a crowd funding platform. It is a platform that enables individuals to purchase inventory for small businesses. The best way to explain Kickfurther crowd funding platform is with a real life example.
As I walk you through a simple example, I have Kickfurther’s terminology in bold interlaced through the post instead of providing a dry glossary at the tail end. This will help you grasp their terminology easily.
Let us take a ride, shall we?
Let’s say that Amy (brand) is in the business of selling hats. She is really good at it and through her hard work she has established her brand.
Given that Amy’s hats are very popular, suddenly Walmart approaches Amy and says that they would like to purchase 10,000 hats. Walmart places a purchase order with Amy.
Now Amy is a small timer. She only has enough money to purchase 100 hats at a time.
She needs someone to assist her with inventory purchase or to give her outside capital so that she can go purchase inventory to fulfill the Walmart order for 10,000 hats.
Amy can take the conventional route and approach a bank to borrow money or look at an alternative route, like Kickfurther, a crowd funding platform.
Amy chose not to go the conventional route and decides to give Kickfurther a try. She approaches Kickfurther and presents her case.
Kickfurther does their due diligence that includes but not limited to reviewing / verifying the purchase order from Walmart, and reviewing / verifying Amy’s supplier information.
If everything checks out fine, Amy signs over the entire payment from Walmart for the purchase order to Kickfurther. The Consignment opportunity (Co-Op) is announced on the Kickfurther platform.
Amy purchases hats from her supplier at $10 per piece. She is raising $10,000 through her Co-Op so that she has enough money to purchase 1,000 hats to fulfill the purchase order from Walmart.
Amy’s Co-Op is announced. Amy is offering a 10% profit margin. This means you could expect a profit of $1.10 for every dollar you contribute.
This is where you and I come in.
Kickfurther has more than 10,000 members (buyers). You and I would be considered buyers.
Not all of them are probably interested in Amy’s hats.
Perhaps 500 people are interested in Amy’s hats. Each of these 500 folks purchase inventory.
You can purchase inventory only in “product packs”. In this case, “2 hats” would be one “product pack”. In this example, the package price is $20.
The minimum contribution required to participate in any Co-Op is $20.
Some buyers purchase one product pack (2 hats, $20), some 5 product packs (10 hats, $100), and this goes on until it all adds up to $10,000.
As soon as an inventory of 1,000 hats has been purchased, the Co-Op is fully funded. It is no longer open for any other buyer to get in.
Once the Co-Op is fully funded, Kickfurther would purchase inventory from the supplier pointed to by Amy.
If Amy has already made a partial payment to her supplier, then Kickfurther may issue the funds to Amy to pay her supplier.
Inventory Shipped and Received
Amy’s Co-Op was funded, inventory order was placed. The supplier produces 1,000 hats and ships it out. Walmart receives the hats. Walmart is happy to receive the hats on time.
The purchase order from Walmart has been fulfilled.
As soon as payment is received from Walmart, Kickfurther distributes the funds and profits to the Kickfurther buyers who participated in Amy’s Co-Op.
When a Co-Op reaches this stage, it is considered to be completed.
Duration is the amount of time Amy (brand) estimates that she will require to produce and receive inventory, sell, and provide a full payout to complete the Co-Op.
If Amy says that she can complete the Co-Op in six months, and she executes to that timeline, you would get a 10% profit in six months.
That is pretty impressive.
Kickfurther Co-Op Risks
There is no business without risks. If the purchase order craps out for some reason, then Kickfurther would work towards liquidating the purchased inventory and return liquidated profits to the buyers.
In an absolute worst case scenario, you could lose all your money you put into a particular Co-Op.
Kickfurther Risk Mitigation
The key to risk mitigation here is to diversify your contributions across several Co-Ops.
Secondly, do your homework. Be cautious and contribute to brands that have demonstrated success in the past.
If you purchased 5 product packs (aka 10 hats), your total contribution is $100. Amy successfully completed her Co-Op. Money has been distributed. You receive $110 back.
If you choose to pull the $110 out of your account, Kickfurther charges 1.5% service fees.
You would pay $1.65 (1.5% of $110) in fees to Kickfurther. Your net profit would be $8.35 or 8.35% after all fees and expenses.
That is an impressive profit in a six month period.
As the Co-Op goes through its life cycle from Offer Closed, Order Placed, Inventory Shipped, Inventory Delivered, Complete, Kickfurther will keep you posted on progress and status by sending out updates.
In 2017, Kickfurther is moving to a model where it would only fund Co-ops that are 100% backed by purchase orders. This is an excellent move in the right direction.
Kickfurther does not issue a 1099. They provide a detailed spreadsheet of your transactions.
I tried asking Kickfurther whether the returns should be considered short term capital gains or interest income.
They declined to comment and suggested that I should talk to my accountant.
Contribute with Credit Cards
If you have credit card debt, this is not an option for you. If you live within your means, use your credit card responsibly, and pay off your monthly balances in full, then consider funding your contributions at Kickfurther using your credit card.
I plan to use my credit card for funding my Kickfurther contributions. The simple reason being I get 2% cash back on all my purchases. Why would I want to lose free money?
If you are looking for a new income stream, Kickfurther is a viable option worth considering. I read a blurb about Kickfurther in Joe’s Retire By 40 blog where he was talking about his income streams for 2017.
I decided to probe further and this post came about. When I did my research, it certainly looked like an alternative income stream worth considering. I am always looking for ways to boost my online income and Kickfurther offers that opportunity.
I have signed up with Kickfurther and will keep you posted on my profits periodically. If you use my referral link to sign up, you will receive $5 from Kickfurther to fund your first inventory purchase.
What are you doing to increase your income streams in 2017? Would you consider Kickfurther?