27 January 2013
The subtitle of this post is: It’s not too late to turn back.
Let’s talk finances. :)
You’re about to embark on a Kickstarter project that will hopefully result in you meeting your funding goal, after which you will be expected to fulfill the promises you made to your backers. Thus, calculating your funding goal (and your reward levels, which we’ll talk about later this week) is absolutely crucial, not just for your Kickstarter success, but for your financial well-being.
Here are the questions you should ask yourself when calculating your funding goal:
- What is the minimum amount of money needed to make my project a reality? I’ll show you how to calculate this for board game projects in a minute.
- Based on my personal investment, how much lower than that minimum amount of money can the funding goal be? As you’re pondering this, consider the scenario in which you almost exactly meet your funding goal. Hopefully you’ll wildly exceed your goal, but just in case, can you deliver the product if you just barely meet your goal (knowing that you’re already investing some of your money in the project)?
- What is the cost to you if you receive funding for 500 units? 1000? 1500? Know how your project scales and make sure you can afford the minimum.
As you can see, it’s a delicate balance between keeping your threshold for success as low as possible and preventing yourself from going bankrupt. The harsh reality isn’t so much the cost of manufacturing your product–rather, it’s the cost of shipping your product.
Let’s talk hard numbers for a board game project. If you’re making a light and compact game, these numbers won’t apply. These numbers are closer to a game like Settlers of Catan–medium-sized rectangular box, an assortment of cards, pieces, and cardboard, a variety of art, and weighing in just under 4 pounds (4 pounds is a key threshold for sending first-class packages via USPS).
If you go with a manufacturer like Panda Game Manufacturing in China (who I cannot speak more highly about–they’re fantastic to work with), the minimum order you can place is for 1000 units. So even if you sell 600 games and raise a decent amount of money, you still have to pay for an additional 900 games. The good news is that you can sell those games later, but there’s no promise or guarantee of that. You’re not going to want more than 500 in overages.
Thus this calculation is based on backers pledging to receive 1000 copies of your game, with another 500 in overages. You might balk at the cost of the graphic designer, but as I talked about in the Art & Design entry, paying for a good graphic designer can save you a ton of time and money in the long run. Although it’s not fully explained here, I’ve included 20 pieces of original art at $50 each, plus $300 for the game board. (There should really be another $300 in there for the game box too.)
Also, you might think that you can save money by packing and shipping the games yourself instead of using a fulfillment center. However, even if your game fits in a medium-sized flat-rate USPS box, you’re going to pay $12.50 per game to ship them, not to mention the immense amount of time it’ll take you to pack and ship them. Amazon is more cost-effective and faster.
With that said, here’s the minimum amount you’ll have to pay to manufacture a game using Kickstarter as a funding platform (the 1000 games have a higher per-unit price because you’ll have some exclusive elements included for Kickstarter backers):
Note that Kickstarter now processes payments through Stripe, not Amazon. Here’s the fee breakdown (as of October 2016, credit to Jonathan Politis for clarifying):
For a pledge over $10 the fee is 8% + $0.20 (5% for KS and 3% for processing).
For a pledge under $10 the fee is 10% + $0.05 (%5 for KS and 5% for processing).
$39k. That’s how much you’ll need to raise to make a fairly standard board game (Viticulture, for example, ended up with a much higher per-unit manufacturing cost than this due to all the stretch goals).
Now, does this mean you should set your funding goal at $39k? Definitely not. A goal that high will ward away some backers. So this is where you need to start considering how much you’re personally willing to invest, and you can hope that you’ll be able to sell some of the mass-market versions of the game. In this case, if you personally invest $5,000 and you sell 300 of the mass-market games at $20/each (to a distributor, who will get a 60% discount), then your optimistic funding goal will be $28,431. Round down to $25,000 like we did with Viticulture? The risk is up to you.
The challenge with Kickstarter is something I alluded to in the previous paragraph–even though backers have nothing to lose by backing the project at any time, many backers will be hesitant to back a project that they don’t think will succeed. Conversely, when you reach your funding goal, backers are much more willing to fund it. There’s that element of certainty that backers value. So if you set what appears to be a reasonable funding goal, not only are pre-goal backers more likely to support the game, but you’re also more likely to reach and then exceed your goal.
I started this entry with the subtitle: It’s not too late to turn back. By that I mean that there’s nothing wrong with sending your game to a board game publisher to see if they’ll publish it so you don’t incur the financial risk of having a successful project. You won’t get the thrill of running a Kickstarter campaign and connecting with backers, but perhaps you could raise the capital through royalty payments to afford a Kickstarter project for your next game.
If you do stick with Kickstarter, just make sure you consider all of these factors before you set your funding goal and launch your project.
Up Next: Kickstarter Lesson #8: Reward Levels
Also see this retrospective entry about my Tuscany Kickstarter campaign for notes on this subject, as well as a Funding the Dream podcast episode with Richard Bliss in which we delve into the funding goal topic.