Crucial Crowdfunding Guide

For the funding to meet its funding goal it is important to correctly calculate the amount to be requested. One of the first things to do when setting your crowdfunding goal is to research similar campaigns to the one you are launching. You can benefit from their successes and shortcomings, and it will also help you structure your reward system to optimise your ultimate goal total.

It is important to distinguish a crowdfunding budget from a project funding goal.

A budget concerns strictly the operational costs (fees and taxes included), whereas the funding goal is the (minimum) monetary amount that you need to raise to make a ‘successful’ campaign.

One of the most common crowdfunding mistakes is not allocating enough money for marketing. In fact, project marketing may even require additional hands-on expertise. Yet there are a myriad of other costs to acknowledge. Professional videos, for instance, demand storyboarding, scriptwriting, staging, shooting and editing, many things that may be outside your scope of expertise. Campaigns may require designers for landing page mock ups, infographics, photos and more. Mentors, accountants and lawyers too are costly consultants. As one can see, budgeting a crowdfunding campaign is much more complicated than factoring in perks and portal fees. This is why it’s paramount to define the market approach before setting a goal.

For example, if your project’s funding goal is €20,000, perhaps the crowdfunding budget accounts for €4,000 of that total. This is where personal investment comes into play: In order to adequately survey a market and promote an opportunity, crowd funders require an initial financial commitment. This typically ranges from 5% to 25% and depends on the type of project and the range of expenses likely to occur.

According to www.entrepreneur.com, many ‘successful’ crowdfunding projects ultimately fail because owners discover that the funding they sought wasn’t enough to cover their expenses. These entrepreneurs may have reached, and even surpassed their funding goal, but they didn’t anticipate the high costs of creating or shipping their rewards (crowdfunding budget).

You need to take into account the total costs associated with a crowdfunding project and these costs include (but are not limited to) the following;

• Costs strictly associated with the project (day to day business costs)
• Actual, fixed cost of executing your project (whether producing a product, building a website, or renting a store front).
• Cost of using the platform including commission and payment processing fees
• Costs of creating your rewards.
• Reward fulfillment costs, including shipping costs, padded envelopes, boxes, bubble wrap and tape. (Be sure to include an additional shipping fee in your pledge levels for international backers)
• Potential tax implications
• Cost of making a pitch video(s), website etc.
• Advertising costs, such as pay-per-click or press release distribution.
• Consider building in the costs of hiring a campaign consultant, a PR company or creatives such as designers and a video producer to help make the strongest presentation possible
• Legal and professional fees
• It is also important to consider the possibility of over-subscription. Particular in reward campaigns. If you exceed your funding goals significantly what effect will this have on the overall project budget?
• Contingencies

Finally, when deciding how high to set your crowdfunding goals you may consider the following:

• If possible, try an initial campaign where you just raise money for idea development. Raise money for market research, legal filings and development of a prototype. This will give you a much lower target at which to aim and will be easier to fund. You’ll also have a successful campaign to show potential supporters in follow-up campaigns and you will learn about what it takes to run a successful crowdfunding project
• Let your pre-launch success help determine your crowdfunding goals. Campaigns that raise no money before their launch have a low average success rate. For campaigns that raise even as little as 5% of their goal, the success rate jumps very significantly. Raising funds pre-launch helps to show social proof that people already trust you and the campaign. Try raising money for a month before the campaign.