So far, I’ve talked about different crowdfunding platforms, their users, and types of rewards you can offer. This time, we’ll take a look at creating a project budget that will help you reach your goal. Each project I’ve done has had its own budget needs, and I hope I can pass some of my knowledge on to you.
Over this series of posts, we’ll be looking at:
- Picking the right crowdfunding platform for to fit your schedule and funding needs
- Looking at who is really going to contribute to your campaign and why
- The types of rewards that work and don’t work
- Deciding on the cost of your tiers
- Figuring out the timeline and schedule for your campaign
I know. The money stuff is nowhere near as much fun as the creation part. But don’t give in to the urge to just put down a number and deal with it later. There is no such thing as too much planning before you launch a campaign.
Depending on which platform you choose, different parts of it will be more or less flexible—the cover image, the video, the number of each type of reward you offer. But in most cases, once you set your budget and launch your campaign, there is no going back and changing those kinds of things later. So it is vital to get things right the first time.
Using crowdfunding is no excuse to slack off on your self-publishing budget homework. Yes, you may find people to help you alleviate your costs, but that doesn’t make you any less accountable to a budget than if you were spending your own money. In fact, it makes your MORE accountable.
These crowdfunding websites do not have a means of forcing you to fulfill your rewards or compel you to use the money for what you say you will, but if you burn your backers, don’t expect them to help you out or buy your book later. They may even go out of their way to leave you poor reviews if you don’t live up to your promises. But on the flipside, when you deliver once, they are much more likely to support you in the future on and off the crowdfunding platform.
So, do the legwork (or “fingerwork” as the case may be) and find out about the costs of publishing through different platforms. Ingram Spark, for instance, varies greatly by the number of copies you order, so try out different numbers to see what your per-unit cost is likely to be with different numbers of backers. As an example, my pair of Steampunk anthologies had 112 backers and was 300% funded. My current campaign was fully funded at around 75 backers, is currently sitting at 82, and had a budget twice the size as the previous campaign. I expect to get to around 125% funded by the end, which is actually about the same amount of money as the last campaign made.
The per-unit cost should be calculated using the printing cost and the cost of shipping the books to yourself, divided by the number of copies. The same goes for any of the other rewards you plan to offer. In general, the wholesale cost of an item is 2x the unit cost. The retail cost is x2 the wholesale cost. This can be a useful formula when you are deciding on your pledge levels and rewards, too (more on that next time). I usually offer my book rewards at a slightly lower than retail cost in order to offer an incentive to contribute to the campaign. The trade-off of course is that I don’t get the boost to my Amazon stats, but getting the campaign funded is another kind of reward.
Physical Reward Costs
Think hard about how much your materials are going to cost you if you are making physical rewards, such as artwork. Decide if you will include all of your travel costs, or only some of them. For my two campaigns involving a travel zine, I paid my own way to and from the location, but used the campaign to pay for museum and tour tickets.
If you are hiring an editor, cover artist, or formatter with your crowdfunding money, be very clear about their expectations for payment, as well as their timeline. You will need to give a target date for delivering rewards to backers and the closer you get to that date, the happier they will be. There is a little wiggle room for unforeseen problems, but do your best to foresee them! If possible, you may want to use the campaign to pay you back for money you put up front earlier in the year rather than waiting until the campaign is over. And of course, you can always build in extra time. No one will be sad if they get their rewards earlier than promised.
For my current campaign, I commissioned the illustrations for Fairy Tales Punk’d long before the campaign even started. It was a bit of gamble, because I do feel that I need to pay the artists whether or not the campaign is fully funded. But I also felt confident that I could run a good campaign and reach my goal (or at least get close enough that I could make up the difference if I needed to). I’ll talk more about the timeline of your project in another post, but these things are all entwined to some extent.
I also designed and ordered my pin reward before the campaign began because they would take 6 weeks to manufacture and deliver. I am so pleased with the result! Plus, because they arrived during the campaign, I could send a fun update to my backers to show them off.
Never forget that these platforms have their own taxes and fees, so make sure to read the terms before you set your budget. In addition, I often add a 10% buffer on small campaigns or 5% on large ones to help me deal with things I overlooked and for taxes.
Yes, you have to pay taxes on your campaign gains, but only on the money that goes beyond what you spend to fulfill campaign rewards (profit). If you make $1000 and spend $1000, then you don’t have to report the money to the IRS if you are still regarding your writing as a hobby rather than your job. If you are declare yourself a writer as your job, then you can submit itemized deductions for fulfilling the rewards and you won’t have to pay taxes on that money.
Also, make sure to research how much shipping things both domestically and internationally will cost. The more places you can ship, the more potential backers you have, but it is not cheap. On Kickstarter, the shipping cost gets added automatically to pledges and counts toward your campaign goal, so that can help give you an extra boost. However, you still must factor these costs into your budget. Otherwise, you’ll end up paying for it out of pocket.
You’ll need to decide if you want to ship something using the media rate, flat rate boxes, or some other option. (Tip – the US postal service “media rate” is the cheapest way to mail books, but if there is ANYTHING besides the book in that package, they won’t give you that rate. So if you want to send bookmarks or any other marketing materials, too, this won’t be an option.) I like the padded flat-rate envelopes for a single book, and they cost around $8. They are nice because you can put in other rewards that fit in the envelope for no extra charge.
One way to minimize the risks when it comes to getting the shipping wrong is to limit the countries you are willing to ship to. Many Kickstarter campaigns only ship to the US if that is where they are created. However, that also cuts down on your pool of potential backers. At minimum, having a Canadian option is a good idea. So if you do want to offer international shipping, keep in mind that everything is waaaaay pricier right now than ever before. Just to send an envelope from the US to the UK could cost as much has $60! Though you are able to pass that cost on to your backers, that can also be a big deterrent to back the project in the first place.
One key workaround that I have found is that if you use a service like Ingram Spark to print your books, you can send the backer their reward directly from them. It drives up the per-unit cost (there is a set-up fee for every order regardless of size) and their shipping cost will be higher than using a flat rate envelope. However, it will still be massively cheaper than shipping thing internationally yourself.
For the first campaign where I did this, the questions were from Australians. So I got their zip codes and put a sample order into Ingram to figure out their personal costs. I added the same price on top as I had for domestic orders (but in Australian dollars) and had them pledge at the lowest tier but for the correct rate. It meant things were a little more complicated at the end, but I had the email trail to follow to get them their rewards at a rate that they could afford.
For Fairy Tales Punk’d, I already had a good idea of how this would shake out, so I could just set up my tiers with this system in mind.
What About Your Time?
This is something you’ll need to decide for yourself. Of course, writing and editing a book takes a ton of time and effort. You could reasonably add something to your budget to act as your “salary” for the time you already spent. This can be a little problematic.
First, if you are using Kickstarter or IndieGogo, these are project-based campaigns. The understanding is that your budget’s purpose to create the final product. Patreon, on the other hand, is more of a way to get paid for your time, though the expectation is still that you are going to be giving your patrons something in return.
You should also keep in mind that planning, running, and promoting a campaign takes a lot of time and effort. Even if I don’t calculate my time into the equation, I often end up breaking even in terms of the money I raise vs. what it costs to fill rewards. Remember, you want to set the lowest possible goal for your campaign to increase your chances of getting funded, so breaking even is winning.
However, I also always order extras of my rewards, and that cost is not included in the project budget. Let’s say I need to order 60 copies of a book in order to fulfill my campaign obligations, and it has a unit cost (printing and shipping to me) of $6 per book, so that costs me $360. But if I actually place an order for 100 books, the unit cost goes down because bigger orders cost less per book to print. And with Ingram Spark anyway, the shipping cost may remain the same because it’s based on cartons, not weight. This could drive my unit cost down to $5/book, so for an extra $140 out of my pocket, I can get 40 books at a lower unit cost (about $3.5). Ordering just 40 books on their own, the unit cost would be closer to $7/book ($280). So I save myself $140, and then I have products I can sell at events or use as rewards for future campaigns. For me anyway, this is enough of an incentive and acts as “paying” myself for putting on the campaign.
We’ll leave off here for now, because the question of your budget and your reward tiers are intertwined. Come back next week, we’ll take a look at different types of rewards you can offer to get those pledges!