Borrowing largely from the multitude of kickstarter campaigns and tutorials, we thought we should put together an overview of Kickstarter as a funding source and knowing what to do to ensure it’s a profitable experience.
For an overview, there are a few quick keys to a successful and profitable kickstarter campaign:
1) Campaign properly with the following equation, (Story+Video+Friends+Rewards+Media)^Product = success, from the folks @bikeGOTHAM
2) Do your research and get guaranteed quotes for your product from multiple manufacturers, kitters and fulfillers.
3) Price your minimum goal and # of units properly, iterate your packages of rewards often, and drive volume higher for more profits.
First things first,
from the guys at @bikeGOTHAM, summarized from their C3 coworking presentation and the subsequent Udemy.com course for a successful kickstarter campaign. A successful campaign follows the equation of (1+2+3+4+5)^6 where
1 = Story – should begin with answering “why” and creating an emotional tie to the viewer
2 = Video – high quality, solid, and entertaining – focus less on $$$ cameras, more on good lighting and framing
3 = Friends – let people you know, know. Building a back story, posting updates and throwing launch parties all draw interest
4 = Rewards – Casual – something minor and inexpensive, product purchasers – core product, evangelists – the super delux limited version. On top of this, play frequently with your product offerings, kickstarter lets you add and remove frequently so take advantage and test new options.
5 = Media – although @bikeGotham didn’t go into much detail here, it seems like a good idea to build in a few pre-written articles during the #3 part above. Send out to bloggers in the kickstarter community and reach out to tech, art, or whatever niche publications fit your product
6 = Product – Don’t skimp on the customer market research: talk to people and get detailed feedback! Prototype early and often if you’re building a product. You learn an incredible amount from simply playing with prototypes – [and its not a bad way to add content to the back-story and video if it fits artistically]
Now, in reverse order, there are some things you should do to make sure that you don’t kickstart your way into a big financial hole. There are a few ways to look at kickstarter when it comes to your business. The first is to use it as a proving ground for a new idea, whether you get the profit you want – and improve later. The other is to go into the campaign intending to make money and eventually launch a follow-on business after the product.
The first option may seem willy-nilly, but can be extremely helpful if you’ve got at least a broad understanding of the manufacturing process and have worked with manufacturers before, therefore having at least a ballpark for your costs. In this case, your costs of producing a winning campaign will be more important to watch in the beginning because you’re using it as a testing bed for the product, as opposed to the second option where the product is the bigger variable.
In the second scenario, you’ve never manufactured anything before, maybe you’ve never even prototyped either! Never fear, assuming you’ve got confidence in your ability to produce a quality campaign, a few simple steps can help you make this a profitable endeavor.
First things first, you’ve got to do your own prototyping or at least accurate drawings to understand the technical specifications of the product. Once you’ve got these blueprints or models in working order, start reaching out for quotes from small or large batch manufacturers. There are differing opinions how to pitch these quotes, but it would seem like an advisable idea to make it clear cash will be in hand when orders are placed – how that happens doesn’t need to concern the manufacturer. What will concern them is that you’ll want very detailed quotes and fast response time. If you can finagle a prototype, all the more power to you but it doesn’t seem likely that a manufacturer will tool their lines to make you just one. Some places will have in-house sample makers who can work with you to come up with one or two units using you chosen materials. At the end of the day what you really want is a quote for each unit cost on a per-unit basis. This will necessarily change based on the size of your production line and every good manufacturer will tell you this. Take each quote down and create a spreadsheet so you can track per-unit costs at different levels from different manufacturers. You’ll likely find that some will be higher priced at low volumes but much lower at the higher volumes. Following additional guidance in the articles below, come up with 5-10 quotes and track them so you know the lowest price you can get for each volume across all quotes. Be sure to include any fees or startup costs.
Once you’ve got that information, add in packaging and shipping costs. Remember, you’re going to need to get these things to your customers! This is going to be the same process as the manufacturing search but a little more flexible. If you want a complete outsource option, look for packaging companies (if your manufacturer doesn’t do it), and kitting or fulfillment centers. Kitting companies will receive your separate product and packaging, then put both together for you. Some will ship out for you and others will only put them on a pallet for warehouse shipping. If that is the case and/or your manufacturer will package it to your liking, move on to the order fulfillment. These are awesome warehouses that will take your bulk shipment and separately divide/address/ship each unit to your backers. Pricing here can vary greatly, so the same as the manufacturer search – check around and compare prices based on total volume.
Now that you’ve got all this info with written quotes (make sure they’re written either in a formal quote response or via email so you can rely on it later down the line. Its not a bad idea to ask for an expiration date on the quote too), you can finally get around to pricing your kickstarter campaign and rewards!
Pricing the campaign is the first and foremost thing to do. Take all your lowest minimum orders and costs, and write out how many units and what it would cost total. This can be handled by you with a little help, your accountant, or going to a finance specialist for the best forecasting. Basically though, make sure that you’ve got every cost included and you’ve accounted for any mismatch in minimum order size so you know how much money you’re stuck shelling out to even fulfill one order. This should always include any professional fees you think you’re going to need (incorporating? setting up an llc? pay your quarterly taxes on all that revenue and profit?). Talk to a lawyer and a finance team up front to get estimates the same as a manufacturer. Now, that total amount is your kickstarter goal. No point in letting your kickstarter succeed unless it’ll cover your minimum costs right? Divide your goal by the number of units you can get in that minimum run, and set that as your base “product” price.
From there, diversify your product line and shoot for the moon! Add some low-value items you can order easily online for low prices (t-shirts with simple product logos, etc) to entice backers at lower levels than your product price, add multiple-packs and expanded versions. Add a premium for a serial number or info packet or even a few minutes of your time to explain the product or pick your brain after they receive it in the mail. The key is to add value without needing to go over your prices.
Now, if you were noticing, the pricing here is set at cost. Why? Because that’s the minimum and as I’m sure your estimates will indicate, higher volumes almost certainly mean lower costs. So entice the customer at the lowest price you can afford without taking a loss, then let the rest of your campaign and product offering skyrocket you to large volumes with ever-increasing profit margins.
Kickstarter can be a great place to raise money and showcase your product, but doing a little work ahead of time will save you from scrambling after you get hundreds of thousands of dollars from backers. Comment if you think we missed something, follow if you liked it, like us if you followed what we said, and as always: lets us know if you think we can help.