Crowdfunding Best Practices

Creating a budget for your crowdfunding campaign

Jules

by Jules

On 2019 M02 8

by Jules

Just like budgeting is important for business planning and strategy building, it's especially important for crowdfunding, as you'll be managing money from multiple backers around the world who believe in your vision and product (no pressure)!

It'd be unwise to run a campaign and raise money online without having a clear idea on how the funds will be spent. Being able to communicate this effectively will allow you to build trust with prospective backers and show accountability as a campaign manager.

There are several things you have to take into account when running a crowdfunding campaign, such as production costs, marketing spend, and platform fees, to name a few.

What to include in your crowdfunding campaign budget

There are many different aspects of crowdfunding that will require your attention in terms of cost and budgeting, such as:

Product costs

The cost of the product not only includes the manufacturing and getting a prototype for the minimum viable product. You'll also need to factor in the cost of getting the product designed (if you're not doing it yourself) and the  packaging design. These are a very basic costs that you definitely need to factor in.

3D printing and modeling are very commonly used to design prototypes. Showing a working prototype of your product will show backers that you are committed and serious about your venture.

Marketing costs

There are many different ways to market your project to raise awareness and reach your funding goals.

Marketing costs may include some or all of the following:

  • High resolution photos. Getting professional photos taken and edited by a photographer will help show off your product in the best light and angles.
  • Video production. Videos are very powerful marketing tools for your crowdfunding campaign, and a professional videographer can help bring the vision of your campaign to life. Effectively telling your story will create the buzz needed to fund any Kickstarter or Indiegogo campaign.
  • Digital marketing costs. Facebook advertising and email advertising can help raise awareness for your campaign. (However, we don’t recommend buying email lists as you run the risk of having inactive email addresses or running into privacy issues outlined by GDPR.) You might also be interested in hiring a social media agency to manage all the social platforms you're on.
  • Miscellaneous advertising costs. This includes more "traditional" media such as print ads, flyers, or radio ads.
  • Press releases. Sending out a press release can be helpful in getting the buzz needed to sustain interest in your project - but of course getting it distributed will come with a cost too. You may also need to hire a blogger or a creative writer to draft the release or produce meaningful content for your blog as reference.
  • Attending expos or trade shows. Deciding on having a booth at one of these events will cost you, but it can be worthwhile in raising awareness or gaining the confidence of backers.

You can handle these requirements separately or hire a PR and marketing company to deal with all your marketing needs. Another option could be to hire a Kickstarter expert who understands campaigns inside and out. Of course, companies or professionals who offer these all-in-one services will come at a higher cost.

Platform fees

There are two kinds of fees that you will have to pay for your campaign. One is the fee payable to the platform that hosts your campaign. Indiegogo and Kickstarter are the most popular ones, and they usually charge 3-5% of the total funds raised as fees.

In addition to these, there are payment gateway fees to be paid as well. Some payment gateways charge per transaction, others charge a percentage of the total funds raised.

For example, for running the Kickstarter campaign you will have to pay 5% of the totals funds as a platform fee. The payment processing is 3% of the total funds and $0.20 per pledge.

Shipping costs

This is a very important cost that gets overlooked a lot! Depending on the size of your product and where you're shipping to, if you are unaware of the costs to ship, you run the risk of having all the funds you raised go towards shipping costs. Not cool, we know.

Shipping costs not only include courier charges, but also taxes and customs duties depending on the shipping destination. You may also need to pay additional charges for handling fragile or shipping restricted products. Knowing where most of your backers are located will help a lot in narrowing down which shipping companies can give you good rates.

In our experience, when shipping costs are accounted for, on average they take 12-18% of the funds raised; 20% maximum.

Packaging can also influence your shipping costs. By ensuring your shipment is efficiently packed, you'll not only secure your item from possible damage, but you'll also save a lot of money but not giving couriers additional volume to charge!

Order fulfillment costs

If your campaign becomes wildly successful and you find yourself receiving hundreds of orders, you can also consider working with a third-party logistics provider (3PL) to help with fulfillment.

You can choose a 3PL based on where the majority of your backers reside, allowing you to cut costs on last-mile delivery. You can also choose a fulfillment center closer to your production center, which can help reduce the amount of import taxes you need to pay (especially if you choose one located in a free port).

As a gentle reminder, Easyship offers special crowdfunding services for shipping and warehousing. We have a worldwide network of shipping facilities and warehouses that we partner with to help make your shipping affordable and effortless. These warehouses also use our platform to calculate taxes and duties, send tracking information to your backers, and access 100+ shipping options.

Rewards manufacturing and design cost

If you are planning to send additional rewards to your backers to thank them for their support (think: swag items such as t-shirts or mugs) then the cost to design, produce, and ship them needs to be included in the budget as well.

Tools to manage your campaign budget

Here are a few suggestions that'll help make campaign budgeting a tad easier.

Backerkit

Backerkit is a very useful tool that lets you gather information about your backers and prepare your campaign for shipping. It is also integrated with Easyship making it easier to upload information for order fulfillment. Their fees start at $199 and vary according to the packages offered.

Thrinacia

It is a very useful tool to manage all aspects of your campaign, including the launching of your own website. It also provides with a marketing and management package starting at $250 with a custom consultation facility.

Trello

Trello is a very powerful tool for communication between different role players of the campaign. You can use multimedia and file sharing to have everything under one umbrella. It's free to register and you can use the mobile app as well. Paid plans start from $9.99 per user each month.

Upwork

Upwork is a very good tool to find freelancers to help out with your campaigns. You can use it to find a bookkeeper to help keep track of expenses and make sure other transactions are in order.

Conclusion

While running a successful crowdfunding campaign is in itself a challenging task, proper budgeting will help you manage in the long run. If you know how much you can spend on different aspects of your crowdfunding campaign, in addition to how much you're willing to invest in your own project, then half of your hard work is already done!