Did you know that you can actually OWE MONEY after running a Kickstarter campaign?
Here’s why… Failing to calculate Kickstarter reward and shipping costs accurately can leave you in debt. Also, don’t forget about taxes.
It’s not sexy, but it’s a necessary topic to cover. I’ll save you tons of headache, money, and lost time.
In this video, I share with you a review of my book, the Kickstarter Launch Formula, and why I talked about this so much in it.
Let me know what you think of this review!
It was posted on YouTube by Synoply. You can look into their channel here.
My goal is to arm you with the strategies that you need to kill it on Kickstarter. Reward fulfillment, shipping, and of course taxes are a reality of raising money.
In this video, you learned a bit about that and…
1. Why taxes can kill you
In the Kickstarter Launch Formula, we discussed taxes and whether or not the pledges for your crowdfunding campaign are taxable. Why is this important?
Well, depending on when you earn income and incur expenses, it will affect the revenue, profit, and costs that you report to the IRS or your own local tax authority.
I’m not a lawyer or an accountant. My advice is not mean to be legal or tax advice. I’m just sharing some of my thoughts here.
If you successfully raise money in December, you’re going to need to be vigilant about getting your expenses in before the end of the tax year. Otherwise, you might owing taxes on the money you earned.
I have some students who, for whatever reason, didn’t keep track of their expenses. If they raised $100k and didn’t correctly track expenses in terms of reward fulfillment, they could end up owing a bunch of money because their reported income is higher than it is in reality.
Don’t make this mistake! Grab a copy of the Kickstarter Launch Formula to learn more.
2. Shipping and reward fulfillment can eat up your margins
Another cost that goes into a crowdfunding campaign is the reward shipping and fulfillment that every creator must do. We talked a bit about that in this podcast episode.
Basically, you have to figure out how much shipping is going to cost you based on where you are in the world and where your backers are. How will international backers affect your shipping rates?
Sometimes, creators don’t plan for these possibly variable shipping rates, and it catches them by surprise. The same can be said of the costs of fulfillment, which aren’t always monetary.
It takes a tremendous amount of time to fulfill these orders. You gotta ship them to your house, package them all, and get them sent in the mail to your backers. Personally, I recommend looking into a fulfillment company.
3. Secret reward costs…
There are also more costs that come with fulfilling a reward than you might think. For example, let’s say that you offer a stretch goal during your project. Now, your costs have just increased!
The same can be said for creators who offer too many variations in their rewards, which affects their manufacturing costs. Every variation of the product will affect your costs when fulfilling that order.
I discuss some more of these secret reward costs and other factors that affect your project in the Udemy course that accompanies my book, the Kickstarter Launch Formula. You can check out that course here. I would also grab a copy of the book, as it’s good to follow along via Amazon or Audible while you’re going through the course.
4. Make sure that you plan ahead with spreadsheets
An easy way to calculate all of these reward costs is to whip out an excel spreadsheet and go through every possible scenario.
What happens if you 2x your goal? What about if you 10x it? How will that affect your costs of fulfilling rewards.
Just having a spreadsheet that tracks these numbers and allows you to play around with different scenarios will make things a whole lot easier!
A lot of the time, as entrepreneurs, we have a lot of great ideas in our head. We have an idea of the product’s costs and margins. But, until you actually get those ideas out of your head and onto the page, no one else can work on it.
When you have an excel spreadsheet that other members of your team can view, they can come up with possible costs or scenarios you didn’t think about.
