When it comes to launching a successful crowdfunding campaign, there are many cost factors to consider, most notably:
But you shouldn’t fall into the trap of ignoring extra costs that can really add up. Understanding all your expenditures can help you to more accurately define your funding goal so that you can make this product a reality without taking a loss.
Keep in mind that most Kickstarter or Indiegogo campaign creators don’t make a profit — especially on their first launch.
You want to be in a situation where you have plenty of breathing room, with potential to reinvest money raised from your campaign back into your business for ventures like ecommerce.
In this article, we’re breaking down all the costs you’ll need to consider for a monetarily responsible launch. Let’s get started!
Crowdfunding Fees and Payment Processing
Kickstarter and Indiegogo both apply fees for using the platform and credit card processing. You can check out those fee structures here:
You should expect to pay a 5% platform fee for both sites. Additionally, there is a credit card transaction fee between 3-5%, depending on the country of origin of a given backer.
Make sure to budget for these fees when considering your funding goal. If you raised $100,000, for example, somewhere around $8,000 of that would be lost to fees — which is no small chunk of change!
Crowdfunding Taxes
The implication of crowdfunding taxes can be difficult for creators to sift through, as it’s highly dependent upon:
- Country
- State
- Industry
You should be aware that funds generated from your crowdfunding campaign are considered taxable income.
Because I’m not an accountant, I’m not at liberty to give you tax advice. We recommend that you consult with an accountant to figure out the percentage you’ll need to pay before you launch your campaign so that you can factor taxes into your target funding goal.
Crowdfunding Design Costs
Gone are the days where you can just put a campaign on Kickstarter or Indiegogo and expect backers to show up. As crowdfunding has grown in popularity over the years, so too has competition — which has led to a rise of more polished, professionally designed campaign pages.
In order to build a great sales page that converts, you’ll need assets like:
- Graphic design
- Professional photography
- Professional videography
You might also want to consider bringing on an experienced copywriter to structure your campaign text.
Additionally, you might need more assets for things like social media ads, influencer marketing, and other PR strategies during pre-launch.
Acquiring all of these assets can add up quickly. Generally, we recommend budgeting enough to ensure that your marketing will lead to at least 2X of what you’ve spent.
When it comes to sifting all of this out, hiring a proven crowdfunding marketing agency can go a long way in organizing your assets and ensuring that you get the necessary ROI.
Crowdfunding Fulfillment Costs
Once you’ve hit or exceeded your funding goal and your funding duration comes to a close, that doesn’t mean that your work is over.
You have to fulfill your promised rewards. And that means additional incurred costs when it comes to:
- Pick and pack
- Storage
- Maintenance
- Postage
- Shipping
You can check out a more in-depth breakdown of crowdfunding fulfillment costs in this helpful article.
Many campaigns will also partner with an order fulfillment service that is capable of managing all of the moving parts that come with getting your product out to your backers.
Here at CrowdCrux, we always recommend our partner Fulfillrite — which has an outstanding reputation and specializes in the crowdfunding space.
When you register with Fulfillrite, their dedicated team will help you every step of the way, as well as provide you with an easy-to-use Shipping Rates calculator that outlines the costs you can expect to incur when it comes to fulfillment.
Paying Your Team
Launching a crowdfunding campaign has a ton of moving parts. And while it would be ideal for you to perform as a jack-of-all-trades, it’s just not realistic.
It’s a much better investment to assemble a quality team to ensure campaign success.
You’re team will likely made up a combination of:
- Friends and colleagues
- Freelancers
- Professional coaches
And you have to pay all of these people. Watch those labor expenses in relation to your bottom line.
Another option for you is to hire an agency that already has a team in place with vast experience. We’re not gonna lie to you, these agencies can be costly: but they can save you a logistical nightmare and provide a real opportunity to capitalize on your project’s maximum ROI.
At the end of the day, to get money out of a Kickstarter campaign, you first have to put money into it.
We hope that this article was helpful for you as you begin to navigate the additional costs associated with launching your campaign.
Need additional guidance?
Want to hire a proven agency to go to work on your campaign?
Book a coaching call with founder of CrowdCrux Salvador Briggman. Our hands-on team has helped tons of campaigns reach their funding goals — and your project could be the next beneficiary of our services!
And if you’re not ready to hire an agency, no problem. We have tons of education out there for you:
- Subscribe to the CrowdCrux email newsletter for weekly insights directly to your inbox.
- Visit our Youtube Channel for all the best insider tips, tricks, and secrets.
- Check out the Crowdfunding Demystified Podcast and this book for interviews with wildly successful creators who have run six-figure campaigns.
- The Kickstarter Launch Formula book and/or course gives A to Z processes for launching your campaign.
Good luck with your campaign! CrowdCrux is here to help if you need us.
