Wednesday, February 22, 2017

The REAL Cost of Running a Kickstarter

-By Guest Blogger: Sam Flegal



In March of 2016 I ran a successful Kickstarter to fund my book “The Illustrated Havamal.” With the help of 472 backers,  I raised $35,108 for the project.

As I was running the campaign, I spoke to Dan Dos Santos about the idea of writing an article on running a Kickstarter and submitting it to Muddy Colors. Dan's response was that everyone wants to do an article about running a Kickstarter, and there are tons of them online already (go ahead, do an internet search, he’s not wrong), but there are very few articles about what a Kickstarter looks like on the back end. Dan said "I’m way more interested in the real cost of running a Kickstarter."

I imagine if you’re still reading this, like Dan, you're interested too. So here it goes…


FEES

For starters, Kickstarter takes a cut and the credit card processing company takes a cut. For simple math, it’s about 10% total. That means out of the $35,108 funds raised, I'm only actually getting 90% of that.

New Profit Total is: $35,100 -$3500 = $31,600.


PRODUCTION TIME

After that you need to get moving on production. I’m lucky because my wife is an amazing graphic designer, that means my time and her time weren’t hard costs. But believe me, we put in a lot of time! I spent 6 weeks working on the illustrations for the book. My wife spent a month on design and layout. I spent a month prior to the Kickstarter planning it and a month promoting it during the life of the campaign. You will pay in time.

Total time expended so far: 600 hours


PRINTING


Once the layout was done, and the Editors gave it their approval, it was time to print.

I sold about 500 books via Kickstarter, but I wanted extra to sell online and at conventions, so I ordered 2000 books. Because we were printing using offset printing it wasn’t much more expensive to add the extra books. If I’m remembering correctly it was the difference of about $2,000 to $3,000. The per unit cost changed dramatically though. For 500 books it was around $9-10 per book. At 2000 books it’s about $4-$5 per book. I also had to pay to ship those books from China to the USA, all said and done, the total cost for printing and shipping was around $12,000.

New Profit Total is: $31,600 - $12,000 = $19,600.

At this point I entered printing limbo. You start to deal with printing problems, and proofs. You have to wait for the proofs to arrive from China. You have to send them back a signed note with any changes. If there are problems (and there were), you have to repeat all this until your project is right.

Remember you don’t want to rush all this stuff. You want a kick ass book that delights people when they see it. It’s the same idea as when you’re working on a painting, “Delight your viewer.” All this took months. From May until October I worked on all this stuff. Back and forth with the printer. I’m VERY happy with the book and the printer I used, On the Mark. They are great, but things crop up. During this phase of the process you are essentially a Project Manager. People get paid good money all throughout the world to do all this stuff for major and minor brands alike. You will be doing it too, but you're not getting paid for it. That said, it’s not constant. Every week you will spend a couple hours keeping up with your project's production.

Total time expended so far: 625 hours


STRETCH GOALS


Another part of Project Management was the extra stuff offered via Kickstarter rewards...

 -I offered 2 small prints to go with the book. Those prints cost me $150 to have printed.

 -I did a small sketchbook as a companion book. Those cost another $250.

 -The Collectors Edition needed bookplates, and I did a sketch on each bookplate, that was $150.

 -We made T-Shirts, that was $835.
(By the way don’t do T-shirts on Kickstarter, keeping up with sizes is a nightmare! I’m serious, DO NOT DO IT!)

 -I had silk screen limited edition prints made for another $800.

 -We also had custom hand carved drinking horns, that was $900!
(Those drinking horns are sweet though. Zero regrets on those.)

If you can create a unique item that fits your project as a custom thing without adding a ton of cost, go for it!

Total extra item costs $3,085.

New Profit Total is: $19,600 - $3,085 = $16,515


DELIVERY


Finally I received word in November that the books would be shipping. They arrived in California and made it through customs by the first week of December. A truck drove them from California to my home town of Nashville, TN by the 18th of December. Another truck delivered the books from the Nashville warehouse to my house on December 23rd. Two freakin’ days before Christmas!

Now let’s be clear about what this means. I am about to spend another big chunk of money on shipping and supplies. I want all those expenses to go on my taxes for the year so I don’t get taxed on money I never really had. That means we have until December 31st to ship 500 orders. Also in that time we have holiday travel and time with family, and the post office will be closed for several holidays in that week as well. All this considered we had about 5 days. That means we had to ship 100 orders a day. My wife and I did it, but we pulled 12 hour days, turned our house into a shipping center, and I signed about 300 books. My mom helped by watching our kid, thanks Mom!

Total time expended so far: 745 hours

When I say that I turned my house into a shipping center I also feel the need to clarify what exactly had been shipped to my house. Of course it was 2000 books plus 100 Collectors Editions, but what does that look like exactly? Well I’ll tell you, it looks like 5 pallets each stacked full of boxes of books, wrapped in plastic wrap, with wooden reinforcements to protect the corners. Each pallet weighed around 1000 lbs, or 1/2 a ton. We had to clear out our garage in order to hold the pallets, and depending on where you live and the time of year that might be a bad option due to humidity, weather, etc… Food for thought!



PACKING

Onto the money! You need good boxes that fit your project. We order ours from Uline. We needed 500 boxes, with delivery, those cost about $500, or $1 per book shipped.

You're going to need tape to close up those boxes. We actually spent $120 in tape. Didn’t expect that!

If you’re going to ship a lot of stuff you will need help and a way to ship orders in batches. What you want is a service that lets you select 20-50 orders that are all the same. Enter their info at once, and print labels. I used www.stamps.com. It worked pretty well once I figured out the kinks. Stamps.com has a free trial, but you’ll spend $10 shipping to get your starter pack, and then $16 for the first month.

You’ll note I mentioned printing labels earlier, you will need a way to do that. Some experienced friends recommended a hot label printer, which saves time and money in the long run. But this was my first rodeo so I went old fashioned and used my ink jet printer. I have an Epson Work Force 7620. I used up 2 ink cartridges for $100.

You will also need label paper to print the postages labels on, that cost $140.

At this point our costs are $886, and we haven’t even paid for shipping yet! This might seem like a lot, but for 500 orders that’s roughly $1.80 per book shipped. Not the end of the world, but something you want to keep in mind.

New Profit Total is: $16,515 - $886 = $15,629


SHIPPING


As for the actual postage costs, the average book could ship Media Mail within the US for about $5 per book. I factored this into my Kickstarter and charged $5 for shipping. Shipping to Canada was $21. Shipping to Europe was $32. The most I spent on international shipping was $80, the average was about $40. I screwed up estimating those fees and only charged $20 for international shipping, so I took a hit on those costs. All in all shipping was about $3,000.

New Profit Total is: $15,629 - $3000 = $12,629


PROFIT

At this point, that’s the profit... $12,629.

If you dived that by the roughly 745 work hours my wife and I put in, that comes to about $17 per hour. I don’t know about you, but that’s not the worst I’ve been paid by a long shot!

On top of all that, I have 1,500 extra books that I can now sell (retail price of $45), and 40 extra Collectors Editions (retail price of $150). I also have extra prints and sketchbooks (retail price of $20) and 40 Limited Edition silk screen prints (retail price of $60).

I was able to fund all of this extra merchandise through Kickstarter, so future sales are now pure profit, aside from shipping. That's upwards of $75,000 in potential revenue.



FINAL THOUGHTS

If you’re still reading along, all this must look pretty intense at this point. But it's worth mentioning a few things. First off this was my 6th successful Kickstarter. I also had 1 failed Kickstarter. That means I had some previous experience and already knew a lot of the potential pitfalls. This is why I recommend people start with small projects for your first Kickstarter. Jump in, but don’t drown!

Doing a Kickstarter and coming out profitable was amazing! It involved a little luck and a lot of support (It’s called crowdfunding for a reason). Even though my Wife and I spent hundreds of hours working on the project, we have very few regrets, and those are mostly just things I would do differently next time. I got to be my own boss, create a project I was passionate about, and connect with others passionate about the same thing. It helped grow my internet audience, the number of people following me, and my personal mailing list.

My experience with this Kickstarter was so good, I’m already working on another book. We worked a lot kinks out on the first book, and now have vendors already in place for a lot of different products. Keeping the momentum going is much easier than getting started

I’m very excited for the future, and I hope you’re excited to try crowdfunding for yourself now that you're a little better educated on the real cost of running a Kickstarter!

Thank you!

To see more of Sam's work, please visit: www.samflegal.com

32 comments:

  1. Thanks Sam (and MC) for a very interesting and informative article. You made a complex subject very easy to understand. All the best on your next project.

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  2. Thanks, Sam. Really appreciate you going into such detail — this is a great post!

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    1. You're welcome Jacob, glad you enjoyed it!

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  3. Superb article! Thank you for taking the time with the details.

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  4. Running a successful Kickstarter campaign (or in your case, several successful ones) is amazing. What I find more amazing is your ability to present the end result in a very information article that does not lead the reader in a maze of numbers and details. Thank you for sharing. You definitely got me excited about Kickstarter.

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  5. Excellent Sam! Great to see you on Muddy Colors too. :)

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    1. Thanks Howard good to "see" you too. :)

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  7. Great article Sam. Thanks for taking the time to write and share. This is very valuable information for anyone running a kickstarter, not just artists. Also thanks for sharing real dollar amounts and hours invested.

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    1. You're welcome Shonn, thanks for reading!

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  8. Great article. Glad that you broke down the time costs as well as the monetary costs. After reading through the article and watching the costs add up I was surprised that you managed to still come up with $17 per hour! Not too bad!
    I wrote my own "real costs of a Kickstarter" blog post here: http://kmcmorris.blogspot.com/2015/10/the-costs-of-running-kickstarter.html

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  9. Thank you for this article, Sam. Yes, there are a hundred articles on running a KickStarter, but none outline and break down the actual cost of the project quite like this. It looks quite daunting to realize just how much the back end of a book kickstarter is and just how many things there are to consider beyond just "hey, I'm making a book, you really want my book!"

    Thanks again, Sam!

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    1. You're welcome Kitsune. It is a LOT to consider for sure!

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  10. Thanks for sharing. This is good info to know!

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  11. Enjoyed the article, Sam! I hope it helps to let you know that Corey was thrilled to get his book. It was a surprise and he was super happy.

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  12. Great post Sam, Thank You for contributing.

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  13. Very interesting - lots of details I wouldn't have considered up front. Thanks for sharing!

    After decades spent working in the printing trade I'm curious what your take is on dealing with a printer in the US versus China. Was your decision mainly price based or were there other advantages of going international? It would seem like dealing domestically would have some advantages (quicker turnaround on proofs, no customs, no trans-Pacific shipping).

    Nothing against international trade - just not familiar with that end of things :)

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    1. Like so many industries it was a lot cheeper to print in China. The book quality was also top notch. To print domestically would have sped up the process, but the cost was prohibitive.

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  14. awesome article. i use kickstarter all the time have a nice experience in general...cool to know all that numbers and the process. thanks

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  15. I didn't see it mentioned so one additional thing for everyone to remember: taxes. Kickstarter isn't free money and the government (both state and federal) will want their cut. How much? Depending on where you live and other factors, count on paying as much as 33% of the profit (if you file an itemized return and have all of your expenses documented) to the government. Likewise on the sale of extra books going forward. Death and taxes: can't get away from either.

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    1. SO TRUE Arnie! I haven't had to pay just yet, but April is looming ever closer.

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    2. It's my crying time of year, Sam. :-)

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  16. Going to go our on a limb, but some of those costs (mostly time) can be negated by going to a local printer and bindery instead of a chinese place.

    Otherwise, most people do not seem to understand that all kickstarter really is, at its heart, is an expensive ad. In order to get the most out of it, you have to spend money to market the ad itself. I gave up, and tried more direct marketing and for the same amount that most of the crowdfunding marketers wanted, got my products into a real distribution network instead of a limited crowd run.

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  17. Great article Sam! Great to see all that is involved. Thinking on doing one myself soon.
    see you at Gen Con.
    -Fian

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