September 26th, 2018
How to create a realistic budget for your crowdfunding campaign
CMF | Antoine van Eetvelde | May 12, 2014
One of the most important aspects of running a successful crowdfunding campaign is setting the right funding goal.
While it is important to set a funding goal that reflects your project’s financial needs accurately in order to ensure you gain the confidence of potential donors, it is also important to consider any expenses you may incur during the crowdfunding process and account for them when setting a funding goal. A good rule of thumb is to plan on setting a funding goal that equals 33% more than the amount you actually need to complete your project.
However, the best way to make sure you end up with the funds you need at the end of the process is to create a crowdfunding budget that outlines the core expenses related to running your crowdfunding campaign along with the amount you actually need to cover your project costs.
Below is a summary of the key items to consider when building your crowdfunding budget. Use this guide to set a realistic funding goal that will allow you to fund your project and cover your campaign costs.
Here are the things you should think about when calculating your funding goal:
Actual project costs
The first thing you need to do is to determine how much money you need to complete your project. This amount will vary greatly depending on what stage of completion your project is already at and what type of project you are completing. The number you come up with here is the most important one. Your ultimate objective is to end up with that amount left at the end of the crowdfunding process so that you can actually get your project completed. It is important to do your research and make sure you have a good idea of what it will cost you to complete your project before you set a funding goal. Once you know how much money you actually need, you will have to add enough to that amount to cover all the expenses associated with actually running a crowdfunding campaign.
- Typical project costs include (but are not limited to) expenses such as:
- Rights acquisition (if applicable);
- Scriptwriting and/or storyboarding;
- Labour expenses (don’t forget to account for all stages of project development right through to distribution);
- Sales and distribution;
- Marketing and promotion (of product);
- Office and/or studio space;
- Equipment and materials;
- Administrative and other overhead expenses.
If Haunts’ experience taught us anything, it’s that failing to properly estimate the cost of fulfillment for your crowdfunding incentives can mean that your successful campaign turns out to be less profitable than expected—or even leave you at a net loss.
Here are a few things to consider when calculating the cost of fulfillment:
- Figure out exactly how much it will cost to produce that awesome merchandise or host that cool launch party before you promise them to your contributors.
- Be cautious when choosing what incentives to offer. Non-material incentives (e.g. digital or experiential) are less expensive to produce and allow you to save on shipping costs, greatly reducing the impact on your budget. Otherwise, go for low-cost merchandise that is easy to ship at a low cost.
- Estimate how many incentive packages at each contribution level you will need to fulfill. And remember that it’s best to over-estimate than under-estimate, as long as you remain realistic.
- You are likely to receive a much greater number of contributions at lower levels (current popular wisdom suggests that the most popular contribution level is $25) so make sure those incentives are the least costly to fulfill. You may also want to limit the number of incentive packages you make available at higher contribution levels to keep your costs down.
- Don’t forget about shipping costs. If your campaign will be open to contributors from around the world, make sure that international shipping costs won’t outweigh the contributions you receive. Consider limiting the incentives available to international contributors to non-material incentives or charging a small shipping fee if international contributors would like to receive any material incentives you have on offer. Either way, it is important to consider both domestic and international shipping when estimating your shipping costs.
You should also factor in the cost of the time and effort associated with the fulfillment process once the campaign closes.
* Note that there is a slight calculation error of the average contribution amount in McNelly’s model so make sure to double check the calculations when using his model.
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