One of the biggest components to a successful crowdfunding campaign is setting up the right raise goal.
There is a big misconception that starting a crowdfunding campaign on Kickstarter or Indiegogo will lead to thousands of dollars raised for your product or innovative idea. The reality is, most crowdfunding campaigns either fail or come up short from making any profit despite having an amazing product. This leaves many entrepreneurs wondering… how is that possible?
One of the biggest things to factor is that your campaign goal needs to take into account your business objectives…Why am I raising this money? Once you have answered this question, you need to take a look at the expenses associated with running a crowdfunding campaign
Let’s take a look at some key aspects in determining your campaign goal:
- Fixed costs: costs of producing a product, having an ecommerce website, rent, etc.
- Marketing expenses: advertising of the product, campaign outreach, creating a video to be used for your campaign, etc.
- Administrative expenses: costs for supplies, shipping, packaging, etc.
- Platform fees: Kickstarter and Indiegogo typically charge a 3-5% platform fee.
- Contingency: general rule of thumb is 10% of total expenses
Once you have taken into consideration all of the various expenses, you will want to get a spreadsheet going to do a sensitivity analysis on various revenue situations to determine how much profit you will make from your campaign. Once you have a profit number you are comfortable with, you can determine how many backers you would need to fulfill this goal based on the various rewards you will offer with your campaign.
Keeping in mind the above will set you on your way. Of course, there is a ton of other factors that need to be taken into consideration, but this will allow you to start thinking about your objectives and goals to help raise the money you need to bring your business idea to life.
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