If you are considering creating a Crowdfunding campaign, you will have to set a realistic budget for how much you want to invest into the project. Although you are creating the campaign to raise money, you will also have to spend some of your own money.
Setting a Realistic Budget
Most of the money spent will be for marketing purposes. Wheather you are trying to promote your campaign in the pre-launch phase or paying for a shoutout from a particular website.
The budget of your campaign should revolve around your campaign funding goal. This campaign funding goal should cover all of your expenses. The common practice is setting the funding goal 33% more than the cost of all the expenses. If you are running a rewards based Crowdfunding campaign, you will need to know what it costs to produce your product, this is critical.
You should be making a list of all of the expenses related to the Crowdfunding campaign. Keep in mind all items for the campaign. We have created a list of items for reference that will likely be included in your campaign. Here are the typical expenses included in a Crowdfunding campaign:
- Sales and Distribution
- Marketing
- Equipment and materials
- Labour (usually for the campaign video)
Of course, your list can include other costs, but the above list will be the main concern for many Crowdfunding campaigns. As mentioned previously, it is important to know how much it will cost to get your product produced. In some cases, the production cost can restrict the campaign from accepting more money than the funding goal. If you are running a rewards campaign, this will also affect your production costs as well. The profit margin may vary when adding in a reward to the campaign. The rule of thumb is to always overestimate these types of costs rather than underestimate them. Tip: If you can offer digital rewards rather than physical, it can typically save you money on shipping and production costs.
In addition, it is important not to forget the particular fees that it costs to run the campaign. It is typical for a Crowdfunding platform to take between 5% – 10% of each donation to the campaign. If you are not deciding to use Reach which Thrinacia does not take any percentage of donations, then you need to add in the percentage that the platform is taking from the campaign. This will typically force you to increase the funding goal, and make you re-evaluate the campaign further.
Along with the campaign, fees are the taxes that are deducted from your campaign donations. Depending on your country’s laws and restrictions, you will have to do your research to see how much tax is charged on your campaign.
Expect the Unexpected
The last thing you should consider when evaluating your Crowdfunding costs is the unexpected/contingency costs. You may find yourself spending over the budget. This is why you need to add in another margin for these types of errors. It is said that you should give yourself an extra 10% – 30% of the total costs in case of emergency.