The first decision you have to make before launching your Kickstarter campaign is regarding your funding goal. There are a few things to keep in mind before you set your goal are some of the expenses that are inevitably part of the story.
Kickstarter’s fees, for using their platform and for using their money collecting system, will end up being about 10% of your overall funds used. So if you raise 1,000 dollars, Kickstarter will take 100 dollars and pay you the remaining 900 dollars.
You’ll also have some pledges that don’t go through because of incorrect payment information submitted by your backers. This is never a huge amount, usually ending up around 2-3 percent of your backers. Their pledges will show up in your overall amount of money raised, but you won’t see that money. I strongly recommend that you message these people when you see that their money wasn’t collected to remind them to fix their credit card information so that they can receive the product that they pledged for.
Shipping expenses are also something to be aware of before you set your goal. If you raise 1,000 dollars, a significant portion of that will go towards shipping. That leaves you with less money for manufacturing, etc. Make sure you know exactly how much it will cost to ship your product to potential backers from around the world, and use that information when you are determining how much to charge for shipping. Don’t charge too much, though, because backers from those obscure locations know how much it will cost you to ship to their countries, and they don’t like being overcharged for shipping. Do your homework and research all your shipping options.
Now, regarding the goal itself, I’ll use a project I recently worked with as an example.
He had contacted several different manufacturers to see how much it would cost to produce their product. The best offer they could find was a guy that would charge 20,000 dollars to produce 3,000 units. This meant that the minimum amount the manufacture would work for was 20,000 dollars. So, after quite a bit of thought, this creator set his goal at 20,000 dollars.
The campaign had raised about 17,000 dollars with a few days to go, so the creator put in 4,000 dollars of his own money to achieve the funding goal, and the campaign successfully ended at around that number.
So he’s now raised 21,000 dollars according to the final number on his Kickstarter page. Here are the expenses occurred throughout the process:
- 2,100 dollars to Kickstarter
- 2,000+ dollars for both sides of the shipping (from the manufacturer to him, then to the clients)
- A few hundred dollars of cancelled pledges
- A few thousand dollars for marketing and advertising
- 4,000 dollars of his own money (Granted, he did get 90% of this back after KS takes their percentage)
- 20,000 dollars to the manufacturer
When all is said and done, this project creator didn’t have even a single dime of profit resulting from his Kickstarter campaign. In fact, on the campaign alone, he lost money out of his pocket.
But… it’s not the end of the world. Because he only moved about 700 total units. So now he has over 2,000 products left that have already been paid for. Now he can move to Indiegogo InDemand, Amazon, or his own web store and sell those remaining units for nearly 100% profit.
As you can see, there is much to take into consideration when determining what your Kickstarter campaign’s funding goal will be. If this client wanted to make a profit on this campaign alone, he would have had to set his goal closer to 30,000 to cover every single possible expense and then hopefully have some left over. But the higher goal decreases the odds of ending successfully.
Instead he chose to set his goal at the lowest amount that whole venture would be “worth it” to him, which was 20,000. This leaves him with a successfully funded project, a customer base, and lots of units left to continue selling outside of Kickstarter.
My suggestion to future project creators is always exactly that:
Set your goal to lowest amount that you can run the campaign, pay your expenses, and FULFILL your promise to deliver a quality product to your backers. The lower, the better. But don’t let it break your bank.