Choosing your goal can be one of the trickiest parts, because
you can't know how popular your project will be until you've already got going. At that point, you can change your rewards around, but not your goal.
In this post, we'll discuss how to choose your Funding Goal by
taking as much variation and risk out of your choice as possible.
Worksheet
This worksheet was adapted from the book
The Kickstarter Handbook by Don Steinberg. We've changed it a fair bit to
create a range of estimates wherein you'll find your ideal Funding Goal.
(To DOWNLOAD a copy of this spreadsheet Click Here)
(To VIEW it on Google Docs Click Here)
We'll walk you through it here. We used the example of making an iPhone app. Nice n' simple.
1) Fixed Costs
These are the
costs that won't change. They're fixed amounts and NOT percentages of your final total.
- Our
main cost here is to develop the app, which will cost us $5000 to pay
the software developer.
- We're setting up a website and paying a
professional to do it, that's $750.
- We have also built in a bit of a
cushion of $500 for the things we can't foresee.
2) Reward Costs
This
is where it gets a bit complicated, because
you can't know how many of
each Reward your Backers will go for. And unless they all cost the same
amount, it's very difficult to create a proper estimate of costs vs.
revenue.
So, our answer for this is making two different estimates.
YOUR JOB is to fill in the orange areas...
Pledge Amount is how much money Backers give you for that Reward.
Estimated # is how many of each reward you THINK you'll sell.
Low Estimate is how many of that particular reward you THINK YOU CAN sell at a minimum.
High
Estimate is how many of that particular reward you WOULD SELL if you
did really well (
not viral well, be realistic, most projects don't go
viral)
Cost per Reward is how much money it costs you to create, do or otherwise make that reward happen (
but not Shipping!)
Shipping per Reward
is how much money it costs to get the physical reward into the hands of the Backer.
PAY ATTENTION HERE. For our shipping costs we ASSUME EVERYONE IS INTERNATIONAL. The reason being that if
you can't
know how many people from abroad will order and how many from your home
country. Thus, if you
plan for the highest possible cost then you will
always be left with a surplus (unless 100% of your Backers are
international...unlikely).
The Areas in Grey are pre-coded equations
Pledge Revenue = Estimated # x Pledge Amount
This is how much you take in from this Reward Level
Rewards Cost = (Cost per Reward + Shipping Cost) x Estimated #
This is how much money you pay from this Reward Level
Total Reward Revenue is how much money you have made from THIS reward level + all levels BEFORE
Total Reward Cost is how much money it will cost you for THIS reward level + all levels BEFORE it
REMEMBER: These numbers are not what YOU get, because the Crowd Funding Platform (e.g. Kickstarter) still needs to take its fees.
Now we have 4 IMPORTANT numbers -->
1) Total Reward Revenue High Estimate - $17,700
2) Total Reward Revenue Low Estimate - $5,050
3) Total Reward Cost High Estimate - $1,250
4) Total Reward Cost Low Estimate - $625
BUT!!!
Before we take the Cost away from the Revenue, The Crowd Funding Platform has to take its fees.
3) Percentage Costs
These are the fees you pay as a percentage of what you just raised. We have these set to the high estimates.
Platform Fee
- Usually 5% of what you raise which goes to Kickstarter or Indiegogo
or others for allowing you to put your project on their site
Payments Fee - Usually 3-5% (we used 5%), which goes to Paypal or Amazon payments for processing the money from your Backers.
Consultants or PR Manager
- If you hire a consultant, often times they take a percentage of
what you've raised.
If you're doing your project on your own, you can
delete this section.
Total Fixed Costs (from above) - Now we're adding in the fixed costs which are not a percentage of your funds raised.
Total Reward Cost - This is taken from the Rewards Section. Now, after the fees are taken out, we can subtract this.
Surplus After Costs - These two numbers tell you how much you will have left over after all your costs are inputted.
As
you can see, the Low Estimate Surplus is -$1957.50 and the High Estimate Surplus is
$8795. This means that
if you hit your Low Estimate numbers exactly then you would still be
almost $2000 short of what you need to make your project happen.
I
f you hit your High Estimate numbers exactly then you will have $8795 to play with after the whole project is paid for. Fun, huh?
....AND NOW YOUR MAGIC NUMBER
This
means, you need to take your Low Estimate Final Total Reward Revenue of $5050 and the
amount you're short $1957.50 (making it a positive number) and add them together, which is $7007.50
This is your magic number --> $7007.50
This means your Funding Goal
MUST BE AT LEAST $7007.50!!!
If it were me, I'd add on at least $500, maybe an extra $1000 just to be sure.
-------------------------
Estimate High Costs and Low Revenues...
...So You Can Finish Up Happy :-)
The reason this is such an
effective formula is because even the Low Estimates are actually also High Estimates.
- Remember, we put in a $500 Others charge just in case
- We assume all shipping is International, much of it won't be
- We planned for 5% Paypal fees. If you're only paying 3%, that will make a difference
Building
higher costs into your estimates will ensure that you have a surplus,
not a deficit, at the end of your project.
It's always better to assume
you'll be paying more than you're planning for because, let's face it,
nothing ever goes entirely to plan. Something will come up that you'll
have to shell out for, and WHEN that happens, you'll be happy you
planned for it.
In the unlikely case that nothing
happens to cost you extra money, GREAT!, now you've got a bigger surplus at the
end to help carry your project to its next stage.
--------------------------
Stretch Goals
A new trend is creating multiple Funding Goals called Stretch Goals, where you show what EXTRA STUFF you will do if your Funding Goals are surpassed.
Take a look at this project called
GODUS, a video game project that surpassed its goal of ₤450,000 and made more goals to encourage people to keep the funding coming.
This is a great technique to
keep Backers involved and giving you money after you've reached your Funding Goal. This also
helps people trust that you're not going to just take the surplus money and bank it...well...maybe not all of it ;-)
Split Campaigns
I can't find any examples of this at the moment, but I've seen a few before. It's where someone needs, say, $20,000 and
instead of trying to do one big campaign, they split it up into two $10,000 projects.
This
can be useful if you don't think you'll get enough support to raise all your money at once, but it goes a bit against the philosophy that your Funding Goal should be enough to help you fulfill your project.
Another argument against is that
these projects are considerably more time consuming then ever. A good campaign will take up months of your time and days of conceptualization. Breaking that into two isn't always a great idea.
That being said,
if you have a product and need money for a prototype, it's not a bad idea first to do a campaign for that before you start setting goals for mass manufacturing.
Having an Income for Yourself
If your campaign is a big one - like epic video games - it's not a bad idea to
factor in an income for yourself and your team.
In all likelihood, the main cost is labor. But in other projects - creating a manufactured project or artistic production
- people often forget to pay themselves or at least have enough money to subsist on while they're implementing their idea.
There's
no shame in this, but it does have to make sense. If your project costs $10,000 and will take one month of your life after the Crowd Funding Campaign, don't add $5,000 just for your bank account. That's not cool.
But if the project will take 6-12 months at 45 hours a week to implement after you're finished the campaign, it's not a bad idea to have some of your Funding Goal reserved for your living costs.
If you don't, you'll have to get a job or live off of savings (if you have any) and your project will suffer.
I personally, would rather see $0.20 out of every funding $1 go towards helping this project get implemented in a timely manner, rather than run into the Project Leader at the local McDonald's flipping burgers while I still haven't received my stuff. Wouldn't you?
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Your funding goal is perhaps
the most important part of your campaign to plan well because it's the only thing you can't change once you've launched the campaign.
Plan for hiccups and be realistic and you should do just fine.
--Timo
