Crowdfunding isn’t easy money or sheer luck. Instead, it’s a path filled with many uncertainties and requires hard work, zest, and prudent resource allocation. Nonetheless, crowdfunding’s immense popularity continues to soar, and in a day and age dominated by technology and innovation, there is no doubt this phenomenal wave is here to stay.
But again, you ought to be strategic in planning, approaching, and executing any crowdfunding campaign. Pricing and budgeting are critical factors that determine the outcome of crowdfunding campaigns. To become the next big crowdfunding story, you must have a comprehensive and realistic budget that creates a roadmap for your campaign.
The following is a crowdfunding budget checklist to ensure your campaign runs smoothly and achieves optimal success.
Crowdfunding budget checklist: key things to consider
Incorporating various marketing techniques such as influencer marketing, email marketing, and social media marketing is consequential to ensuring your crowdfunding campaign garners mainstream attention. Marketing is a practical and effective technique to create awareness around your product/idea and make it easily discoverable.
If you are a novice in marketing, hiring a reputable marketing agency will go a long way in ensuring potential backers and your target audience know about your brand and project. But most importantly, it’s best to have excellent promotional material and videos in place.
Some marketing agencies offer several crowdfunding marketing services, from creating crowdfunding videos to providing end-to-end service from market research to fulfillment. However, you might have to pay 15%-20% of the raised funds alongside the initial upfront flat fee. Alternatively, you can opt for in-house or DIY marketing strategies to lower costs, but you will still require some upfront investment.
Campaign videos and photos
As highlighted above, it’s vital to have excellent promotional materials and videos in place before kickstarting your crowdfunding campaign. Campaign videos, photos, printed materials, and displays sell your story, build awareness, and arouse curiosity around your product/idea. Also, the masses want to see your products in action, and there is no better way to demonstrate how your products work and benefit the target audience than having high-quality videos and photos.
The good news is that you don’t need a high budget to make top-quality videos. Instead, you can shoot videos and photos with your mobile device. Still, you have to invest in a tripod and clip-on microphone and notably shoot in a well-lit room with the perfect lighting to optimize the quality of your videos.
Alternatively, the ideal practice is to hire a professional photographer and a video production company to create the perfect, compelling crowdfunding videos and photos. All in all, crowdfunding videos and photos bolster your chances of running a successful campaign, and therefore it’s paramount to factor in a budget for creating such promotional materials.
Referral programs are among the most effective practices for promoting your crowdfunding campaign. In a nutshell, referral campaigns enable individuals to earn rewards for spreading the word about your project. By requesting existing backers to share your campaign with others, you can generate warm leads who are more likely to be part of your crowdfunding journey. On the other hand, you successfully engage your best advocates by rewarding these backers for their referrals.
Ultimately, referral programs generate automated growth for your campaign and post-crowdfunding journey, bringing in a steady flow of new leads and fostering robust connections with existing backers. So it’s only reasonable for crowdfunders to capitalize on this powerful marketing technique to promote their campaigns and, notably, get into networks they wouldn’t have access to otherwise.
Therefore, factor in the budget to purchase reward incentives, such as branded mugs, embroidered t-shirts, or hoodies.
Crowdfunding platform fees
Most crowdfunding websites charge a fee that’s a percentage of your raised money. Also, you will have to settle a payment processing fee. For example, Kickstarter and Indiegogo, the two most prevalent and potent websites, charge 5% of the total raised funds. On top of that, they deduct an extra 3% payment processor fee.
Crowdfunding platform fees can wrack up, and understanding the principles of website charges is crucial in creating a budget for your campaign.
Implausible as it might seem, crowdfunding proceeds are taxable income that you have to account for in your personal or business taxes. Unfortunately, there is scant guidance on ramifications for income taxes and guidelines for compliance regarding crowdfunding funds.
Crowdfunding activities may be subject to several taxes, including sales and uses tax. In addition, crowdfunding income may be subject to business or occupational tax. The amount of tax you owe from a crowdfunding campaign’s proceeds depends on several factors, notably your locale. Similarly, whether you might be able to deduct expenses depends on various factors.
The best practice is to seek insight from a tax professional and research tax regulations about crowdfunding in your region to ensure compliance. Also, keep receipts and copies for any purchases or incentives you send backers.
Product manufacturing is a critical aspect of your crowdfunding campaign. Delivering on your project, promised goals, and assurances on your stipulated time frame are mandatory after a successful campaign. Else, you might be subject to endless legal disputes and tarnishing your reputation.
As such, prioritize how to handle your product manufacturing right from the beginning of your crowdfunding company. For a starting point, scrutinize what other industry leaders opt for. Next, research manufacturers, ask for their price quotations, and understand how they will bring your products to life. Finally, of course, costs will vary, so select a sustainable option.
Reward fulfillment and shipping
Honoring rewards and shipping is a significant expense in your crowdfunding budget. First and foremost, you must be strategic about your reward program, or else you might overwhelm your crowdfunding budget and incur losses. Offer incentives that you can comfortably fulfill without breaking your bank. This also includes shipping expenses. The ideal rule of thumb is charging for shipping during the campaign period in lieu of the post-campaign survey.
Rewarding backers is essential for a successful crowdfunding campaign, and therefore it’s paramount to consider shipping and incentive expenses in your budget.
Budgeting for your crowdfunding campaign doesn’t have to be complicated or an arduous task. Also, it’s not compulsory to draft the perfect crowdfunding budget. Instead, being organized and anticipating unexpected events will go a long way in ensuring you are well-prepared to run a hassle-free and successful crowdfunding journey. All the above-highlighted factors should act as a baseline on what to expect as you plan and budget for any crowdfunding campaign.