The Kickstarter closed with over $1 million in pledges! You’re literally a millionaire!
Well, you may not like this… Let’s look at what might be your final costs:
- $300,000 on Facebook/Google paid media ads (How do you think you jump from $100,000 in pledges from the initial PR/pre-list purchases to $1 million?)
- $200,000 (19% to your Kickstarter agency for pre-launch/PR stuff, $10k upfront for their work)
- $150,000 to build the products (this will vary based on your product, this is a low estimate)
- $80,000 in Kickstarter card payment processing costs (Normally around 5%-9% so I went for 8% here, better for you to plan for it to be high)
- $100,000 taxes/associated costs on $850,000 money received (If you’re a UK company this will triple because of VAT, deadly)
- $30,000 in refunds (presuming 3%, which is pretty low)
- $20,000 in card failed payments (Again, 2% is a low estimate)
- $60,000 staff costs (Design/development/hours spent creating product right through until shipping is complete)
- $20,000 for a decent Fb agency to run your Facebook ads
- $40,000 Miscellaneous costs – (Factory issues, delays meaning more wages to staff, postage issues, additional refunds from product arriving late/not as expected, software)
BEFORE People go bananas in the comments:
- The above data is based on anecdotal evidence from speaking to many, many people who have done Kickstarters, articles I’ve read on companies who have gone bankrupt after huge Kickstarter launches, people who run Kickstarter agencies, and people who built multi-million dollar (successful) companies after a Kickstarter launch. I have also run successful campaigns on Kickstarter and Indiegogo.
To answer the questions I know I’m gonna get in the comments:
> So why the hell would I give six months of my life to do this if I make zero on the other side?
The point of an E-commerce company is to gather emails of customers who buy from you. You can then sell different products to them, over and over, for free. Hope you’ve got some new products or updates in mind!
A Kickstarter is a great “Kick-start” (duh) to building a company, rather than begging for investment. You can now raise investment money with major validation, or use your Facebook ad learnings to build a money-printing machine (the normal route most companies who make seven-figures do).
Does this mean I shouldn’t use paid media or Kickstarter agencies?
They can be amazing. Most people who do innovative Kickstarters are where I was when I was on welfare. Getting a huge injection of cash changes your life overnight, and both of the above are, loosely speaking, the MOST PREDICTABLE ways of being successful.
I wrote this so anyone thinking this will understand the maths behind most Kickstarters.
The exception to all of the above is, of course, info products (videos, eBooks courses) where the margins are astronomical, but you’ll still need media buy to get to the high six-figures).
If you’re aiming for seven figures, like anything in business, you need to understand the maths so you don’t get tripped up. It could cost you more than you think. Erm, on a more positive note, good luck with your Kickstarter!