It seems that a lot of Kickstarted projects run into trouble when trying to fulfill their reward levels because of the difficulty of predicting the future. A reward level could have been unexpectedly popular or unpopular and the cost of fulfilling it could be way off from predictions. Stretch goals are sometimes added without understanding their effects on costs.
I’ve looked at how a bunch of creators describe their math and I think that I may have a better simplification of how to do the financial planning.
Marian Call has an interesting article on Kickstarter Math which I think is useful for people making games because she doesn’t make games and so it is a little easier to be detached about the project and just look at the analysis. She allows access to a copy of her spreadsheets and makes this insightful observation:
The most important variable in the sheet above is the very last cell on the lower right, “Fulfillment cost as percentage of total funding.” This ratio is EVERYTHING. Let’s call it fc/tf.
I think she has the right idea, but her method is to then keep testing made-up scenarios to see if they “break” the system. That’s a lot of work in trying to guess whether too many or too few people will back at each reward level.
Here’s my simplification as applied to Kickstarting a printed game product. I’m going to use my first Kickstarter attempt for my game Dysfunctional Families as the example because it is very simple and straightforward.:
The Goal: Fund a print run of at least 100 copies with MakePlayingCards (the minimum quantity needed to get a low enough unit cost for the product to be viable).
Remember: The Goal is to keep the Goal the Goal.
The number to watch: I set my percent of funding going towards printing the game (The Goal) at 50%. Which means that at least 50% of every dollar of Kickstarter funding would go towards printing copies of the game.
At the time I was running the Kickstarter, MPC pricing was such that I could get 100 copies delivered to my address for $650. Thus I set my minimum funding goal at $1,300. (50% of $1,300 is $650)
ALL rewards were put through the 50% criteria. Additionally, all rewards had to cover their own cost of production and shipping.
Instead of offering a $1 reward level, there was a $2 level. Of that $2, $1 went towards printing the game, $0.20 towards Kickstarter fees, leaving at most $0.80 to mail a Thank You to the backer.
For the $15 reward level, a rough breakdown would be: $1.50 to Kickstarter fees, $3.50 towards shipping the game to the backer, leaving $10.00 towards printing the game (which is more than the $7.50 the percentage requires, with the hopes that I would fund enough to print an even higher quantity of the game and thus have copies on hand to put into distribution and thus have actually kickstarted the business instead of making a one-time product).
To look at a hypothetical reward level, suppose I wanted to offer a T-shirt. If I located a supplier that could deliver a T-shirt to me for $15 and then it would cost me an additional $5 to ship that out to my backer, that means it would cost a total of $20 to fulfill the T-shirt reward. Since the reward level needs to cover its own cost AND put 50% of the funding towards printing the game, I would need to price the T-shirt reward level at around $50. This breaks down to:
|Kickstarter Fees (approximately 10%)||$5.00|
|Make and ship T-shirt reward||$20.00|
|$ to put towards The Goal||$25.00|
I think this is where creators can run into problems. In this situation, if I tried to price the T-shirt in the above example at a “reasonable” $25, then $2.50 would go towards Kickstarter Fees, $20.00 towards sending backers their T-shirts, and only $2.50 would go towards The Goal of funding my print run. This is how a creator can sell a ton of T-shirts and reach their funding goal, but not actually have enough money to produce their product.
The way Marian Call watches for this is by running the numbers of a whole bunch of scenarios. I prefer to do it by building the right numbers into each individual reward. This is where using rewards that can be produced in a quantity of one (QTYONE) can make calculations easier.
Ideally, rewards other than the actual Goal are things where their perceived value is so high that they pay for themselves and contribute extra funding towards the Goal.
This is an excellent write-up about fulfilling a Kickstarter campaign by Carol Mertz. She had extra reward items like buttons that were cheap to produce but had a high perceived value so that they contributed additional funds towards the Goal. However, it is important to note that items like buttons can be cheap (per unit) when manufactured in bulk, but they get very expensive (per unit) if you aren’t reaching some minimum quantity. If you are truly kickstarting your project and want to make sure you are able to manufacture some minimum quantity of your project’s Goal, you don’t want to also have to worry about reaching minimum quantity of non-Goal rewards.
An example of this kind of error would be counting on T-shirt rewards costing you only $7 each to get manufactured so that you can offer them for $25 and have each T-shirt contribute at least $12.50 towards funding the Goal — but then you have to have orders for at least 100 of the T-shirts in order to manufacture them at that price.
All of the above is just looking at a small-scale campaign where there are a lot of costs that are potentially ignored (like the creator’s time spent stuffing envelopes to ship rewards). If the Kickstarter is too successful for that, some of the gains that come from lower costs per unit are going to need to be used to compensate some people or service to do all the packaging and shipping. Part of scaling up from a condition of just-funding to a condition of overfunding is being able to afford to handle the additional services required to fulfill the larger number of backers.
On top of the above is the addition wrinkle of shipping funding being included within the overall Kickstarter funding amount. (Presuming a USA-based Kickstarter) it can be easy to fold “free shipping” into the reward levels and do all the calculations with the rewards needing to pay for themselves (production and shipping) as well as contribute to funding the production of the Goal product. However, foreign shipping can get very expensive very quickly and the money from that shows up as funding even though none of it is going to go towards production of the Goal.
In my case with a game that is basically a deck of cards, the shipping to most countries is roughly $14 — and collecting an additional $14 (or even just an additional $11 to discount the amount of USA shipping that was included in the reward level) is all money that won’t have 50% going towards production of the Goal. This is something to watch for and when combined with all sorts of other issues that come up with foreign shipping, makes some creators reluctant to offer foreign shipping at all. Having all foreign backers would be a way to have a lot of funding, but not have enough money to do the project — fortunately that isn’t a likely scenario.
I hope this provides some creators with some useful, simpler ways of thinking about calculating funding goals. Please comment if you have any questions or need any clarification.
A future post will cover the relaunch of Dysfunctional Families using QTYONE production and the extension of my ideas above about calculating funding goals.
As an example of a well-planned funding goal described, here’s some explanation from the Bring Back MYSTERY SCIENCE THEATER 3000 Kickstarter for why they had a $2,000,000 goal (and looking at their reward levels, it looks like their t-shirt was $50):
We don’t get to keep all of the money we raise on Kickstarter.
- Out of the first $2,000,000, we have to pay about 8% – that’s $160,000 – in CAMPAIGN FEES to Kickstarter and the credit card processor.
- Then we have to cover all of the REWARD AND SHIPPING COSTS to design, produce, print, sort and ship all of the rewards we’re offering in exchange for your pledge. (Those t-shirts aren’t free, you know!) That costs about 27%, so that’s another $540,000.
- We’re not charging you twice for shipping, I promise. Even though Kickstarter asks you to add more for shipping after you pledge, they count that money toward the total we’ve raised, but we still have to spend that money on, you know… shipping!
- So, out of the first $2,000,000 we raise, we have to spend $700,000 just on the costs of this Kickstarter campaign!
So for them to effectively raise $1,300,000, they needed to raise $2,000,000 — which means that they had roughly 65% of the money from any reward going towards production of the show. That’s even better than my 50%.
For fun: That same post has some good discussion about nostalgia and people having cast favorites from different seasons of the show depending on when they started watching the show.