The tricky part of Kickstarter is determining the funding goal. This is the method I used to arrive at my goal for Shiver Bureau which is running on Kickstarter now. There is no perfectly correct answer, but this can help to arrive at a decent best guess.
The basic equation is
Product cost + Shipping costs + KS/Xfer Fees
Step 1 – Determine production costs
Regardless of what you’re making, you need to know how much it will cost to make it. I will use graphic novels as the example because that’s what I know. We are going to print 2,000 books. Just an aside, if this is your first kickstarter, then printing 2000 books could be a bad idea. You need to look at your readership, similar projects, and marketing skills to determine appropriate print run. That is outside of the scope of this article. So back to printing 2,000 books. Using various sites like KA-BLAM, Lightning Source, RA Direct, Print Ninja and accessing their pricing calculators, we can get a pretty good idea of what 2,000 books will cost. Be careful when you price the books, some calculators include shipping and some don’t. Let’s say we decide to go with some random company called BookPrint and it will cost around $10/book. This includes shipping.
So our total production cost is 2000 books x $10 = $20,000.
Step 2 – Determine shipping costs
This cost is a little more elusive. The first part in figuring this out is by looking at your production costs, finding projects in same category and determining how many backers it took to raise that much. If we find other projects on KS that have raised $20,000 or more we will see something like this…
Project A raised $26,000 with 600 backers. ~$43/backer
Project B raised $38,000 with 900 backers. ~$42/backer
Project C raised $31,000 with 300 backers. ~$100/backer
Project D raised $25,000 with 600 backers. ~$41/backer
With the exception of Project C, a project is averaging around $42/backer. Project C actually brings up a very important note. Project C is a project to print the 3rd volume of a very popular webcomic. It has a huge builtin fan base and it also has the ability to sell book bundles. Book bundles are basically including all 3 books in a single reward tier. Book bundles are huge incentives for backers. So we are going to pretend this is our first graphic novel and our first kickstarter, so we will ignore project C because it isn’t in our same category. This research method can also be used to determine how many books you should try to print. How many backers do you think you can get compared to other projects on Kickstarter? That will give you an idea about how many books to print.
Okay, so now divide our production costs by our backer average, $20,000 / $42 = 476 backers. We’re not done yet, we have to figure out shipping costs to all these wonderful people. We figure that shipping costs (delivery costs plus buying all the tape, packages, tape, labels, printer ink, etc) is going to be about $7 per backer. Again this will require some research on UPS, Fedex, packaging suppliers, etc.
Shipping cost is 476 backers x $7 = 3332, let’s just say $3500. Of course our new total is now 20,000 + 3500, which means we need more backers, which means it will cost more to ship. This is an endless cycle and we will never reach the end. So what do we do? Nothing, the shipping costs will be baked into every reward tier. So that will offset the uncertainty. Remember this cost is elusive. Also, high level rewards will help to offset some of these costs, not everyone will pick the minimum. Also some people may pick a digital only reward which requires no shipping. But just to be safe, lets make $3500 into $4000.
Step 3 – Determine Kickstarter Fees
This part is easy, just add on another 10% (check the Kickstarter site before you run your campaign to make sure this is still the correct %) buffer to your total cost thus far. You just have to make sure you do the math correctly. Our total right now is
20,000 + 4000 = 24000
The incorrect math is 24,000 + 10%. This will put the total at 26400. If you subtract 10% from 26,400, you will get 23,760. That’s lower then our 24,000 goal. We could just make up some number and most likely be okay, say 27,000.
But for all you math heads out there, the correct formula to determine the amount you need is
Cost / (1 – (KS fee /100)
24000 / (1 – (10 /100) => 24000 / (1 – (.1) => 24000 / .9 = 26666.66
I think we’d end up calling this 27,000. So our guess above was correct.
This should get your pretty close to something reasonable. Every kickstarter is different and will require you figure out your own specific costs. For example, say you want to create shirts. You have to add that to the production and shipping costs. The more rewards you add, the more complex and error prone your goal could get. It could be a good idea to keep things simple for your first kickstarter and keep the amount of knick-knacks to a low or nonexistent amount. This means you wont be able to raise as much money, but the stress level and pitfalls will be a little more contained.
I wish you the best of luck with your project and I’d love to hear your thoughts on this method…especially if I screwed up any of the numbers. Dammit Jim, I’m an artist, not a mathematician. Same thing with grammar. I’m a writer, not an editor!