How much should I charge for my kickstarter?
One of the things I get asked the most by people who come to me for advice is how much should I charge for my kickstarter?
If I charge too much they reason then no one will pledge and my kickstarter will fail.
But if I charge too little then I won’t make as much money as I could do.
What I tell them is it’s actually very easy to figure out how much to charge.
It’s essentially a simple math problem that’s easy to solve.
Although you should be warned. You may not like the solution to this particular math problem.
Before we get to the equation there’s a question you need to answer.
What outcome do you want from your kickstarter?
This is actually the question you should have answered before you did anything else but not everyone does. As far as I see it there are three basic outcomes you want from a kickstarter.
* You just want to make some money
* You want to create something because you’ve always wanted to create it
* You want to end up with a business at the end of it
Answering this question will help you to answer you’re main question, How much should I charge for my kickstarter?
So I hope you can see that just wanting to create something might lead to you charging less than wanting a business at the end of it?
If you’re unsure about this then get in contact with me and we’ll talk.
So let’s look at that equation
How much to charge
The most complicated version of this equation is for someone wanting to create a business at the end of it so that’s the one we’ll use.
If you want to do either of the other options then you’ll see there are parts you can leave out.
Let’s start at the front of a business and work backwards.
To run a successful business in the gaming industry what do you need?
The answer is people to buy your products.
Which means they need to be for sale somewhere.
Now at this point I’m going to make a statement and if you’re in doubt please go away and check it.
No one who sells their products exclusively on their own website has a business. They have a hobby that they make some money off.
Put simply you just won’t get enough people coming to your site to make enough money for it ever to be anything other than a hobby.
If you need to go away and check and see what you find.
So to run a business you’re going to want other people to sell your products for you.
This means that you need to supply them to retailers.
So how much less than the retail price does a retailer buy their stock for?
Fortunately in the gaming industry Games Workshop publishes that information on their website so I don’t have to divulge any trade secrets 😄
Retailers buy at 35-45% off the retail price.
So if you’re going to charge retail price for your kickstarter then you already need to be looking at 35-45% above cost.
But wait there’s more!
How am I as a store going to buy your products to sell?
Well you could sell them directly to me.
This is what Games Workshop does. It’s it’s own distributor.
Now GW is huge so that works for them. But would it work for you?
Let’s look at a few of the logistics.
You wouldn’t want me emailing you wanting to buy one of your things from you to sell on.
This wouldn’t be worth your time. Plus in the UK I don’t expect to pay postage on an order from a distributor so it would be costly.
So you’ll have a minimum order amount I can put in for. Typically that’s £150 before VAT.
That’s better for you because your dealing with solid orders.
But it sucks for me.
Because if I order £150 of your stock and then a customer comes in and asks for that one thing I don’t have I need to put in another £150 order for it.
That’ll cost me a lot of money very quickly.
So unless your product looks like it’s going to massively sell I’m not going to stock it in the first place.
And now your back to only selling on your site.
So what do you do?
Well you need a middle man.
You need a distributor.
I currently deal with four distributors to run my business.
Now what that means is I’ve got four businesses that can supply me multiple different ranges each.
So if I’m already selling 2 or 3 ranges from a distributor and they add your range to their list of available stock I can give it a go.
Because if someone comes in and asks for that thing I don’t have it’s fine. I’m putting in an order anyway so I’ll add it to it.
There’s much less risk for me so I’m much more likely to stock your products.
I really would recommend anyone who’s serious about turning their kickstarter into a business to start contacting distributors as soon as you know you’ve funded.
It’s also something I can help you with 😉
Now here’s the thing. The distributor wants a cut of the money too.
Well that gets a little Non Disclosure Agreementy to talk about in detail.
So let’s put a ball park figure of 20% on it.
And now you’re looking at your retail price being 55-65% less than your costs.
But we’re not done yet.
Because remember we said you want this to be a business?
So you need to make a profit!
And currently you’re just breaking even.
As a rule of thumb you need to make a profit of at least 100% on everything you sell.
Well you need money to run a business. To pay bills and wages and to invest in new products.
Otherwise we’re back to you having a hobby not a business.
So what does that equation look like?
(Cost of product X2)x1.65
So you make a 100% profit and there’s enough slack for a distributor and retailers.
Again if your struggling to get your head round this then get in contact.
So let’s look at this for a model that costs £9.99.
Retailers and a distributor need £6.50 if that money.
Which means you’ve got £3.50 left.
So your product needs to cost £1.75 or less.
And you make £1.75 on every one sold.
Now that’s as a business selling through a distributor to other businesses.
Of course the beauty of kickstarter is you’re cutting out the distributor and retailers for the initial batch. So you make more on your initial orders.
And that extra money is what you’ll use to recoup initial start up costs.
Because taking something to kickstarter isn’t free. You’ll have to make an investment upfront. Does that answer you’re question How much should I charge for my kickstarter?
But when I calculate the amount I need to charge it’s way too high for anyone to buy what do I do?
Well first congratulations.
Without running the kickstarter you’ve realised that what you have planned won’t work as is.
Now you have three options
* You can go back to your plan and look to change things to bring down costs
* You can shelve the idea because you know it won’t work
* You can stubbornly refuse to pay attention to this advice run the kickstarter anyway and then blame everyone other than yourself when it doesn’t work
You’ll forgive me if we only look at the first of those options here.
As someone new to the whole game production industry I can guarantee you you’re not getting the most bang for your buck.
When I got together with the guys behind Awful Orphanage and we started looking for artists for artwork and 3D models we were getting quotes between $50 & $5000 for the same pieces of work.
And when we looked at their portfolios we found that price and quality did not go hand in hand!
We looked at multiple companies for production and again the amount you can be charged to create the same thing varies enormously.
Which I why having run two successful kickstarters of my own and having helped get another to the point of being ready to go I’m in a very good place to help you out.
So check your coatings again. Go back and look at other manufacturers and contact me for advice.
The majority of people who have come to me whilst their kickstarter is running for advice have all had the same problem.
Their costs were too high.
I’ve seen some limp on to produce something at a lot of personal expense.
I’ve unfortunately seen others just fail.
Please don’t make that mistake.
I hope this has been an enlightening look into pricing around kickstarters.
I’d love to hear your thoughts on the matter.
And if you think you’ve got a game that you want to bring to life through kickstarter and you want some help get in contact and we’ll talk.
Neil Pritchard is the owner of Leodis Games and has run two successful kickstarter of his own. He offers professional coaching and mentoring for those about to dive down the rabbit hole of kickstarters.
As well as being the UK’s premier independent wargames retailer Leodis Games is also an independent Games publisher. Their first game Awful Orphanage is launching soon on kickstarter.