We often hear from potential sponsors (Creators): If you want to do a crowdfunding project yourself, how should you set up a budget and what fees are included?
As a Creator, your goal is to raise funds to successfully bring your great idea to the world and turn the project into reality.
Budgeting your Kickstarter project is one of the most important things you need to do before launching your project. Good budget management will help Creator allocate and control the various costs of the project and grasp the costs that are easily overlooked to ensure that you can afford all costs.
Step 1: Outline the content list for each phase of the project
First, in a table, try to visualize these costs by listing a list of the preparations you need to do at each stage based on the three stages of the project: preparation before the project goes online, operation after the project goes online, and delivery after the project ends. There’s no rush to give a cost estimate for everything, this is just a list of everything you need to get your project from “0 to 1.” The more comprehensive the list, the more accurate your final budget will be of course.
In all preparations before the project goes online, including Landing Page, KS page, product development, pre-heating advertising expenses, etc., your expense list may include:
- Copywriting: Do you need to hire a local copywriter to write your marketing copy?
- Product pictures: white background pictures, Gif pictures and 3D renderings
- Crowdfunding video: Do you need to hire a professional photographer, do you need props or scenes?
- Product mold making: Which materials, tools or third-party service providers to use to develop prototypes
- Advertising pre-launch promotion: social media advertising, EDM marketing, Landing Page (landing page) production
- Public relations marketing: actually includes PR media public relations & KOL unboxing evaluation
During the project launch period, project launch costs may include:
- Social media remarketing ad budget during launch
- Media PR & KOL Evaluation & EDM Marketing
- Kickstarter page operation and maintenance during launch
After the project is over, these will be all the costs associated with delivering the product to your backers once you secure funding. Things you need to consider at this stage include:
- Platform fee: Kickstarter platform commission, generally 8% of sales
- Taxes: The business tax that a company needs to pay when launching a project, generally 4% of sales.
- Product packaging cost
- Logistics transportation costs: including freight and customs fees
- Order management: You need to use some paid tools to automate surveys
Step 2: Estimate project costs
Before estimating these costs, simplify your Kickstarter project cost estimation by marking non-paid tasks that you can complete. Remember, copywriting, pictures, videos, and marketing are all very important, and you have to make sure you are competent.
Regarding the determination of various costs, first, you need to spend time researching. You may not have any Kickstarter experience, but others do. Just ask them, friends in related industries, agencies, or seek help on the Internet. Yes, maybe the advice they provide is different and sometimes even contradictory, but no matter what, you can still learn a lot from them and find a way that suits you. Second, make sure you understand every part of the entire project process. You'd better contact a Creator who has launched the same type of project to see if you can collect the cost information you overlooked. Of course, you can directly contact the crowdfunding agency to do it for you. to operate the entire project.
No matter how precisely you budget, there will be some unexpected expenses along the way. For example, for manufacturing costs and transportation costs, raw material packaging costs and freight costs may not be fixed. If you get a freight quote in April, it will not be shipped until December. The holiday freight is relatively high, and the freight will definitely increase. You should obtain quotes from multiple companies to ensure that all expected cost estimates are as accurate as possible. We recommend building a buffer to offset these surprises, overestimating non-manufacturing costs and non-shipping costs by 10-15%, while manufacturing costs and shipping costs are overestimated. The cost was overestimated by 30%.
Step 3: Set the target fundraising amount for the project
The goal of raising funds for a project must be set based on the total cost of the project (including unexpected expenses for buffering). Only in this way can the target amount set ensure that the project is profitable. This is why the entire expenditure is accurately calculated. Estimating costs is so important. At the same time, the final raised amount of successful similar products on Kickstarter or Indiegogo platforms is also a key reference factor for your prediction.
There is certainly nothing wrong with determining total revenue based on total costs. But you have to be aware that although the success rate of Chinese projects on the Kickstarter platform was the highest among countries and regions in the world in 2020, reaching 60%, Hustle’s research shows that 67% of successful projects around the world still raised funds. Funding is less than $10,000. It’s important to understand your purpose for entering the crowdfunding community. Also, if you want to make a lot of money quickly through crowdfunding, it may not be your best choice.
Step 4: Be as strict as possible to ensure implementation
The contents of each stage and the corresponding cost estimates have been listed in full detail. This is your Kickstarter project budget. It is important to implement it as strictly as possible.
Perhaps, you cannot predict every accident or overtaking in the process of project execution. However, if you budget your Kickstarter project costs, you will generally ensure that you are as organized as possible and on track to launch a successful project.