Short on cash for your low cost startup idea? Not sure if there’s enough demand for your product to make it worthwhile? Pre-orders could be the answer. Here is a closer look at the advantages of setting up a pre-order system to test interest and to collect funds to help you go forward.

Why a Pre-Order?

Pre-orders are offering a product to a customer that won’t be delivered until some point in the future. In most cases, the customer is required to pay at least a portion of the purchase price when they pre-order.

If you have an idea for the nifty kitchen gadget, but you’re not sure cooks are interested enough to buy it, you can set up a pre-order campaign to get a feel for the market.

If you need startup funding for your movie, use one of the many pre-order funnels to collect money in pre-orders from your niche audience.

Who Uses Pre-Orders?

Pre-orders work for projects that aim to produce a small number of widgets, for creatives with a book, movie or song they want to produce, and for helping a manufacturing business that has a specific product get startup funding.

Here is a look at each in more detail.

Small businesses with limited production. Does your Aunt Betty make an amazing spice concoction for holiday mulled wine? Have friends and relatives have been telling her for years that she should sell it? Pre-orders are made for her.

Aunt Betty can set up a website to take pre-orders and then spread the word through the family grapevine. The advantage is she won’t produce more than people will buy.

And if by chance she’s hit with more pre-orders than she expected, she is still in the driver’s seat. She will know well ahead of time how many spice mixes to make so she can get the best deal on bulk orders of pricey cinnamon stick and other ingredients.

Creatives. Writers can crowdfund their next book and test if there is interest in their new plotline. Singers, songwriters and musicians can fund their next offering by getting their following to order it ahead of time. Moviemakers can get fans of their genre to provide startup funds before production starts.

This is especially effective if the artist is active on a blog and social media. If he does live performances, he can make a pitch from the stage for pre-orders. Fans love to be the first to get access to a new release. They are often willing to pay ahead of time for the privilege.

Manufacturing business opportunities. If you produce a product that you make, balancing supply and demand is a constant challenge. Pre-orders can eliminate the problem. This gives you big benefits:

• Reduce your risk when deciding how many supplies you need to buy
• Reduce waste
• Provide startup costs to get the business set up
• Provide funding for making the product
• Hire the number of people needed based on orders received
• Control costs for products that are costly to produce

How Do You Set Up a Pre-Order System?

Here is an overview at how you can collect funds in advance, using your own website or established platforms.

The granddaddy of pre-order systems is Kickstarter, a crowdfunding platform started in 2009. Entrepreneurs have been able to find the money to get new ideas off the ground when they’ve been turned down by traditional sources of money. The website stays in business by taking 5% of the funds that a project raises.

Panda Sunglasses aimed to raise $3,000 and ended up with almost $20,000 in startup funding by using this platform. Pebble sought $100,000 and ended up with over $10 million!

The two other most popular crowdfunding sites are GoFundMe and Indiegogo. With all three, it is essential to follow the roadmap established by successful campaigns. Though almost 90,000 projects have met their goals on Kickstarter, close to 150,000 did not. The process takes time and effort if you want to reach a wide and targeted audience.

You can also set up a pre-order system on your own website using a plugins like that from WooCommerce or even Paypal buttons. This option is workable for people with an active, passionate following for their blog.

Pre-orders can be a lifesaver if you need startup funds or want to test your idea in the reality of the marketplace before making too many. It has produced results that got many low investment business opportunities from idea to actual product.