Kickstarter: Plan For Worst-Case Success

So, the Dinocalypse Kickstarter is going really well — lots of “heat” in its first 72 hours, busting through stretch goals, forcing us to get more out there as quickly as possible (but with careful consideration — avoiding panic is critical). It’s a fun ride, and it’s easy to simply look at the big numbers (backers and dollars) and think, yay, yay, yay!

And I do, because I get to look at (and spasmodically refresh) this (click to embiggen):

But it’s important — well before this point — to make sure you have your cold shower handy. In essence, you should prepare for your worst-case success scenario, and make sure that’s acceptable to you, because once you cross that green line above, you’re going to have to deliver (short of canceling the project before its conclusion date).

What’s a worst-case success? It’s the one where the greatest possible proportion of the money you’ve received goes toward your costs-to-deliver. These costs to deliver can be manifold, but I’m going to focus solely on the cost of shipping, because it’s something that, once you spend money on it, “just” gets the product to the customer, and doesn’t produce any lingering positive for you as the publisher/creator (aside from, hopefully, a prompt and pleasant delivery experience for your customer). By contrast, money spent on, say, a print run, at least has a likelihood of producing additional, salable inventory for you — a lingering positive, an asset. Not so with shipping (nor, for that matter, the transaction fees and cut for kickstarter.

I’ll use Dinocalypse as an example, focusing on the moment that we hit our $10,000 “deliver the full trilogy” goal.

First, let’s look at our best case: our $10 tier. Here, the backers get three e-book novels for the cost of 2, and the cost to fulfill — to deliver — those to the customer are very close to nil. If we got 1,000 backers all buying in at this level, we’d hit our $10,000 goal, and we’d only lose money to the kickstarter cut (5% — $500) and the transactional cut for amazon, the payments processor (3-5% — $500). So our best case leaves us with 90% of the actual cash folks put towards the project.

Now, our worst case: that’d have to be our $25 tier, as launched. Here, we’ve got a single book with a shipping budget baked in of about $10. We might be able to shave off a couple bucks from that by trading sweat equity for dollars, packing it ourselves instead of using our shipping service, going for media mail, all that, but for right now we’re looking at a sort of rough, UPS-like basic ground shipment cost. Better to slightly overestimate that, especially, because you’re also on the hook for packing materials (padding and structure are as important as postage here; you want folks to get their spiffs in great shape). If we had 400 people buy at $25, that’s our $10k, but $4,000 of that would be marked for shipping costs. Add the $1k in kickstarter and transactional costs, and that’s $5,000 out of our $10,000. Massive! So our worst case is that this is the only tier folks buy in at, and we walk away with only half the cash we’re looking to have.

Knowing your bracket — in my case, 50%-90% being the actual take — gives you context, expectation, and planning. If I absolutely need all my costs covered, I have to look at that worst-case percentage and ask myself: should I be increasing the target to accommodate the cost of delivery? It’s pure algebra at that point, and will give you a more realistic sense of your ability to get what you’ve got to the people who want it. In my case, knowing that worst-case prepares me for how much cost Evil Hat might have to bear, period, in the face of big success. Potent and valuable information there.

Reality is, almost no project sees uniform backing. I ran the numbers — guesstimated and rough — on what things looked like when we hit $10k yesterday. Roughly eyeballed, it looked like it was coming out to about $1,600 in shipping fees incurred so far, so adding in the $1k transactional costs, meant that we were still likely to see about $7,400 of that to go towards our development costs. That certainly doesn’t cover all of the costs we’re looking at to develop the first three novels, but it’s a nice solid chunk that we’ll have taken care of before/as we take the product to market following the kickstarter campaign. Importantly, seeing that 26% of the cash so far was going towards that stuff did not produce a moment of sticker shock for me — instead, it looks a lot more like “at least we get to keep 24% more than we would in the worst case!” And that, for sanity and for financial planning, is worth gold.

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