Calculate Kickstarter Profits…
Stunning How Some Writers Set Up to Fail…
And I am not talking about the total gross earned on a campaign or the number of backers or the amount of promotion a campaign will bring to a book or series. All that is really good in various ways.
Nope, talking money only.
There is no right number for a percentage of profit from a Kickstarter campaign. I have seen it vary from 85% of the gross down to losing money. Depends on the prices you set, the products you offer to backers, and the cost of those products.
So a simple round-number example:
You have a campaign that does well and ends up at $10,000.
Kickstarter and credit card fees take 8% of that. (Careful of Backerkit and other promotion and fulfillment things like it. They end up bumping that 8% fee to 11 or 12% by the time it all ads up.)
So you get around $9,000 after Kickstarter, credit card fees, and people who don’t pay.
If everything on your campaign is electronic, your profit is $9,000 or about 90%.
But most campaigns have physical products of some sort or another. Paper books, hardbacks, beautiful books, and merchandise such as t-shirts, mugs, and so on.
Each of those has a base price plus shipping costs. In theory you charged the right amount to the backer for shipping, but I have seen that go horribly wrong as well with shipping worldwide. (Do not mansplain to me how it can be done, I was shipping stuff worldwide before many of you were born.)
So you are stuck in the 1990s and think books should work on a 4% margin. You do that and you can only hope to get up to a 20% margin for profit on your campaign.
And remember you can charge single shipping, but if you have signed books, add in more shipping and packing and a ton of time.
One Kickstarter I watched recently topped out around $80,000, used Backerkit, had almost all rewards physical and shipped books from a printer (not pod) so ended up with double shipping and a ton of expense costs on packaging and labor costs and so on.
And the book prices and audio prices were set far, far too low.
So here is how I calculated it.
$80,000 (wow, great ego-building number)
$9,000 Fees for Kickstarter, credit cards, BackerKit, and non-payments.
Total production costs, double shipping costs, and so on of books and merch sold $52,000 by my best calculation.
That’s right, the campaign cost $52,000 to fulfill to all backers.
Not including costs of ordering in extra copies or printing press contract runs.
So $71,000 minus $52,000 is $19,000 net profit.
No idea as to sunk costs for recording the audio books and cover designs and so on. Or if those costs were even calculated against the Kickstarter campaign.
So about a 24% profit. Not bad at all in the real world. Horrid for the indie world. We function on 70% to 95% profit margins. 50% for paper and hard and merch that is not going to a store through the Ingrams 55% discount programs.
So wow, an $80,000 Kickstarter. Got new readers, people think you are rich, great promotion for the book on pre-order.
And honestly, a 24% profit margin ain’t that bad. But it easily could have been over 50% with better pricing on the books and merch. And above that if it could have had more interesting electronic rewards. And rewards that don’t have costs with them such as adding a character to the next book and so on.
Just a little thinking ahead about income could have made the same Kickstarter a $40,000 or more net profit instead of less than half that.
So as you are planning your next campaign, make sure your books are priced correctly and come up with a few extra no-cost rewards. Keeping 70% of your Kickstarter money is a ton better than 24%. But up to you to think things through before you start.
5 Comments
Michael W Lucas
Yes.
Start small. Figure out shipping. Figure out what your people will go for. Calculate every reward level so that it not only pays for itself, but you profit.
Every reward level has two expenses: how much does it cost to create the reward, plus how much does it cost to fulfill one instance of that reward. For a book, the creation expenses include cover art, print layout, copyright forms, etc. (Lots cheaper if you do this yourself, yes, but–it’s a number, figure it out and know what it is.) The per-item expenses include printing and shipping.
Assume you get 10 backers at each reward. How much do you make.
Repeat for 100 and 1000.
It’s a right pain to set up the spreadsheet the first time, but after that you can reuse it.
I expect those to show not less than a 60% margin on my Kickstarters, no matter what people choose to back. The trick is, every tier pays for itself.
AND:
Most authors STILL leave money on the table. If you have even a handful of readers, and they want your book, you can do ridiculous things and they will pay for them. If you make options available, someone will take them. The more creative you are in the spirit of your book, the more people will buy in.
I did a leather-cased version of my Prohibition Orcs omnibus, because it amused me. The description started with “When an orc dies, he leaves his body to his family. They use every bit of it. Here’s an omnibus bound in orc hide, complete with tattoos.” Creation expense was about $250 for “tattoo” art and the prototype. Making one cost $60. I charged $200. Because they had a story that referenced previously established orc lore, people bought them. You can see pics at https://mwl.io/archives/22514
If I sold three, I made SOMETHING. A risk. But if nothing else, I’d have one cool orc-hide omnibus for me!
Sold thirty-odd of them. They are now Legendary Items. I kept three for charity auctions. One went on the block last year, and went for over a thousand bucks.
These were one-time-only Kickstarter-exclusive items. But the next orc KS I do? I’m dang well doing another exclusive orc-hide version. It’ll be different. Gotta be honest, the first one was exclusive.
Every campaign I do now, I try to come up with something exclusive for it. My next one was going to include a 12″ action figure, but it turned out the company had seriously icky politics and I canceled that part. Oh well.
My last Kickstarter offered a complete collection of my indie nonfiction, signed. Several hundred bucks plus the USPS flat rate big box. I offered it as an experiment, but a couple of maniacs bought it.
My April Fools’ Kickstarter is offering that, my complete indie fiction, and my complete indie everything. Even with USPS flat rate shipping, that’s a beast–but if one person buys it, that’s money.
Oh no. I went off on a rant on your blog again, didn’t I? Sorry!
dwsmith
Agree completely, Michael. Thank you.
And I like the 60% and up profit number on every reward. If more writers would just follow that and spend the time ahead to figure out exact costs… ahh, but what do I know. (grin) I think the campaign launching the first of the month is my 49th or 50th successful one.
Jon A
Isn’t $52000 for printing from a printer (where presumably the per book cost is lower than POD) plus shipping to the author or fulfillment partner plus shipping to individual backers a bit high?
At $80000, I’m guessing we are in the 700-800 backer range (unless we’re talking about a $80-90 special edition). Generating that many individual POD orders would be a lot of work. And you have zero quality control since you are not receiving the books (less of an issue with paperback POD books but I’ve had so many issues with dust jacket HC POD books that I would not want to drop ship hundreds of those to backers).
If this is a book in a series, you should be able to sell the leftover stock from the print run in the next book’s campaign. Multi-book bundles sell really well on Kickstarter. And if it’s a series, even if your profit margin is low on this first campaign, you have paying customers now that you can contact to come back for the next campaign.
I agree that audiobooks are not worth the squeeze on Kickstarter; I don’t know if I’ve seen a campaign with a huge number of backers for an audiobook-only tier. Good electronic-only rewards for books are tricky if you don’t have a large number of ebooks to bundle together in a $30 tier.
dwsmith
POD orders are fulfilled off a spreadsheet, Jon. Ingrams is set up to do much larger than a 300 or 400 run. Just upload the file and they do the rest. Stupidly simple once set up.
And Jon, my experience (especially in the Pulphouse days) that touching a book and such brings in more damage than happens when it is shipped from the printer. Not counting damage from the printer in that shipping part.
Fulfillment partner won’t help you on quality control either. That is basically what Ingrams serves as.
I have seen numbers of the larger campaigns end up down in the $20,000 profit range. Again, nothing to sneeze at. But could have been so much higher if when setting it up the prices and margins were paid more attention to.
Also, I was talking about the costs for ALL the physical tiers, including paper, hard, limited, merchandise, and so on. Total costs.
Jon A
Got it, that all makes sense. Will have to try the Ingram spreadsheet upload for my next book campaign. I’m in comic Kickstarter land at the moment, which has its own set of parameters, but will be doing a fiction campaign in the fall, and trying to run that one with a much higher margin than I’ve had in the past.