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Kickstarter Mistakes – Calculating Reward Fulfillment

Published by Salvador Briggman. Find him on Twitter.

This article is sponsored by FulfillriteKickstarter and crowdfunding reward order fulfillment services. USA & International shipping services. www.fulfillrite.com

So you’ve spent a grueling 30-60 days constantly marketing and promoting your Kickstarter project. Let’s be honest,  your time commitment was probably more than that. When you take the months of preparation into account, the time it takes to get together a great video, high quality images, compelling copywriting, and well-defined reward tiers, you’ve invested a significant portion of the last few months into the single goal of raising enough funds to make your dream a reality.

Wouldn’t it be horrible if after putting yourself out there and dedicating all that time towards preparing and marketing your project, you actually lost money from your Kickstarter project? Failing to incorporate a buffer into the project fundraising goal for miscellaneous or unforeseen expenses could put you in the red if the cost of fulfilling a large volume of rewards happens to be only slightly higher than estimated.

According to Kickstarter, “Kickstarter’s Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill.” At this point in time, you could forfeit the funds raised or continue on with the project and lose money. With your reputation at stake, possible negotiations underway with suppliers, and any press attention you have attracted, it can be difficult to do the former. The common mistakes below will help you stay out of the red and stay in the black when it comes to reward fulfillment.

1. Not Using Kickstarter Surveys

Kickstarter Surveys are there to help you collect necessary information before you begin spending the funds raised to fulfill reward tiers. Aside from gathering accurate mailing addresses, these surveys can be used to estimate the ratio of product variation among your backers.

For example, if one of your reward tiers is a t-shirt with your company logo, the size of the t-shirt is a variable that can significantly differ across your backer population. If you need to fulfill 100 t-shirt orders, Kickstarter surveys can help you minimize the risk of overstocking and spending more funds than needed. I would recommend using Kickstarter surveys for any reward fulfillment variable to avoid overspending.

You may realize that sometimes the costs for the same reward tier will differ. Using the t-shirt example, if you raise $20 per t-shirt reward tier and need to fulfill each of these orders, the large and extra large t-shirts will end up eating up more of your budget than the small t-shirts in terms of supplier and shipping costs. If you have a large campaign, the cost per unit is multiplied and you can easily end up spending more than you may like if you do not budget for the variable costs that can be incurred for a reward tier.

2. Failing to Develop a Written Budget and Timeline

A lot of creative types do not come from a business background and may not be as good at the details as the overall product vision. Creating a budget before beginning a Kickstarter campaign is crucial for making sure the numbers add up. Treat the project as if you were creating a product for a customer. Don’t wait until mid or post-project to call up suppliers and research shipping costs.

By making conservative and ideal estimates for the costs that will be incurred from the time of product creation to shipping, you will have a clearer idea of the margins that you will receive on each product, along with the buffer that you will need as a safeguard against miscellaneous items.

When I interviewed Kathleen of TouchDome Luxury Watches, who raised 30k on Kickstarter, she mentioned having spent upwards of a year and a half negotiating with manufacturers and designers for the best prices and planning the campaign from start to finish. Here’s a great example of a cost breakdown.

A written timeline will also help you assess when your the course of your project is veering off track and it will help you be more transparent with your backers. Treat your backers as customers and keep them up to date should any changes arise.

3. Incorrect Monetary Cost Estimates

Your written budget and timeline should address all of the monetary costs that will be incurred from the production of the product until its shipping date. This is a common source of project owner error.

For example, failing to include bubble mailers, postage stamps, transportation of all rewards to the post office, reward variation (t-shirt size), transportation insurance, or variable miscellaneous costs can put you from the black into the red.

Here are a few links that can help calculate shipping from the US Postal Service: A Customer’s Guide to Mailing, Bulk Business Mail 101.

You may have negotiated pricing with a supplier, graphic designer, web designer, or copywriter, but I’d recommend creating a buffer between the “ideal” price of these items and the market price in case one of the pieces of the puzzle doesn’t show up after the campaign end date. This way, you will be covered if you need to find a service provider to fill a missing gap and can’t obtain the same price.

4. Overlooking Time Costs

One of the common things that campaign owners overlook are the huge time-drains that include but are not limited to: stuffing envelops or packages, filling out customs forms, printing labels, talking with manufacturers, answering emails, and contacting service providers.

I would treat it almost as a part-time job with no-pay, aside from any profit-margin you might calculate into your project. This is a great time to enlist the help of a friend or a family member.

5. Dismissing Feedback Mechanisms and Customer Support

When you are at the stage of order fulfillment, you have an awesome opportunity to learn a great deal about your customers, operational costs, and your product. If you haven’t already, setting up a separate email account to deal with customer support and feedback will help keep your Kickstarter activities organized and let you easily go back in the future if you want to see the evolution of your campaign.

Encourage customer feedback, as this will shape actions going forward post-kickstarter. There may be problems that you did not anticipate or there may be a novel use for the product which could lead to your unique selling proposition or competitive advantage. Sure, raising money on Kickstarter gives great information on consumer demand, but the real information is gained when the customers have the product in their hands and can provide feedback.

Finally, this is all a learning process and it’s likely that no matter how diligent you are, since these are estimates, some mistakes will be made. By following some of these steps and creating a written budget, timeline, and careful analysis of variable costs, you can help minimize the impact of these mistakes and end up with a successful post-kickstarter campaign. 

 

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  • mapteam

    This is why we built the http://crowdfundingroadmap.com to help prepare all types of campaigns with the planing, budget and manufacturing tools they need to meet their objectives.

    • CrowdCrux

      This is interesting, but it seems more equity crowdfunding related than fulfillment for reward-based crowdfunding campaigns.

      • Yes I totally appreciate with @CrowdCrux. And thanks for the tips which are mentioned here.

  • LumaGlo

    This was a great read! Thank you for sharing. We are launching our first Kickstarter campaign in August http://www.facebook.com/LumaGlo or http://www.lumaglo.com. Thank you for the tips!

    • CrowdCrux

      How did your campaign end up going?

  • david pino

    Used this info to prep my kickstarter. Its hard tho because pricing art is difficult! Fingers crossed I didnt under budget :O

    http://www.kickstarter.com/projects/1077301887/chaos-math-10-trillion-computations-artistic-abstr

    • CrowdCrux

      Congratulations on your success! Would you like to share some tips for other creators? I can send you a few questions via email. If you have a chance, come back towards the end of your campaign and let us know how your budgeting went :).

      • david pino

        Sure, it still has a few days, but I can do the questionnaire, maybe it’ll help others… On a side note, dos your website have anywhere that I can mention the project? trying to keep it on the front page as long as possible on Kickstarter Popular 😉

  • David Delamare

    This is a much-needed article. Our business has a little shipping department so we can imagine what will be involved and we have many of the supplies on hand (purchased in bulk). But for a lot of companies this is new territory. Be sure, by the way, to calculate possible taxes into your budget. Some items might be deductible as “marketing” but if your rewards are from your normal inventory, you will only be able to write off the portion that have been sold or given away (excess inventory doesn’t get written off until it’s sold.). By the way, we buy most of our shipping supplies from a company called Uline at . They have a great selection of specialized boxes and envelopes and they will give you free shipping on orders over $300 if you ask (that’s a big deal). If you’re budgeting now, you can give them a call, get free samples, package your item, then measure and weigh it so that you can get an accurate shipping rate. (Remember, too, that shipping rates tend to go up at the beginning of every year.) —Wendy Ice (author of Alice in Wonderland book campaign http://kck.st/1hexPFb)

    • CrowdCrux

      Very good point regarding taxes, which appears to be a gray area for many entrepreneurs, Il’l check out Uline. Thanks for the recommendation.

  • DesignMachineGames

    Would you ever offer free shipping to international backers? If so, how would you incorporate that into your plan?

  • Annalee Pawlowski

    It’s hard to find good helpful information out there regarding this topic. I love structured points like this that help me think through all the potential costs that could be associated and help guide my thinking.

    One thought I had about the part:

    “Sure, raising money on Kickstarter gives great information on consumer demand, but the real information is gained when the customers have the product in their hands and can provide feedback.”

    This changed my perspective as I am preparing for a Kickstarter campaign, that the backers are really there to help with the next step in innovating a truly great product and not just there for financial backing. This is perhaps the most crucial moment to listen to their feedback as they are the first group to really test and use the product beyond the testing we can do ourselves. Thanks for a great article!

    • CrowdCrux

      😀 Thanks for the great comment! Yes, it’s easy to get caught up in the money and forget the most important part of crowdfunding – attracting early adopters that can provide feedback on your product so that you can get it just perfect before you try to scale the product.