It can be a great way to grow your business, but consider all the angles first.

By the end of this year, crowdfunding will have raised more than $4.35 billion—and a good part of that will have gone to small businesses.

Here’s the rub though: even entrepreneurs with a brilliant idea and sound business plan might not have the skills to create an effective crowdfunding campaign. Too many people suffer from a field-of-dreams mentality. They think if they set up shop on Kickstarter or Indiegogo, the backers will automatically come.

In reality, though, certain business ideas can be a hard sell on a crowdfunding site. Or a company might lack the infrastructure and manpower to deliver on its promises.

Done right, crowdfunding can be a launchpad for growth. Done poorly, it can doom a venture to failure.

What Happens If You Succeed?

Crowdfunding is much more than simply raising funds for a project or business. It also can be a sales tool, public relations campaign, e-commerce initiative, market testing tool and much more, helping small businesses reach exponentially more customers than they would have captured otherwise.

But entrepreneurs need to consider all the ways that a successful campaign can affect the business.

For example, if an entrepreneur is running a business making handmade goods out of a home office, a crowdfunding campaign that results in thousands of interested backers and national media coverage could translate into a situation where the business owner spends as long as a year creating enough product to simply meet the pre-order demand.

Are You Offering the Right Rewards?

Businesses also must be able to offer different levels of product that will draw different levels of backers.

Let’s say you have invented an anti-wrinkle cream that will leave skin baby smooth, but it must be used within 36 hours. Because of the cream’s short shelf life, it’s unlikely that anyone will sign up for the
“10 bottles for $1,000” deal.

Instead, you could present a different deal to the $1,000-level backer. You as the owner could offer to come to the backer’s home and host a spa party for a handful of her friends. This type of approach allows you to capture high-dollar donations and provides a compelling reason for someone to consider supporting your project.

Don’t forget to offer smaller rewards—a sticker with your company’s logo, perhaps—so you can capture donations of $5 to $10.

Is Crowdfunding the Best Source of Capital for You?

By raising money through crowdfunding, entrepreneurs are able to raise funds without giving up equity in their companies—which doesn’t happen when an angel investor or venture capitalist is involved.  Crowdfunding can also be less risky than putting a home or other collateral on the line to secure a bank loan. While a failed campaign can result in a business never getting off the ground, there is often less risk involved in testing the waters via a crowdfunding venture.

But there’s something to be said for presenting your ideas to a tough, informed audience, whether that’s a banker or a room full of angel investors. In many cases, they will point out problems with your ideas and push you to make your company as strong as it can be.