Calculating the required funding amount isn't easy for every project starter. This isn't surprising, given that the cost structure of a crowdfunding campaign can quickly become very complex, depending on the project and the funding reach. The risk of missing the target amount or forgetting hidden costs in the calculation is high. The crowdfunding calculator is designed to help with this.
Indeed, a miscalculation can break the neck of even the most successful crowdfunding campaign. More is not always better. The most well-known example is probably the Kickstarter project "The Coolest Cooler." Despite raising tens of millions of dollars in funding, the project for the trendy cooler failed. The original estimate of the project costs, originally only USD 50,000 according to the target amount, was insufficient to cover the actual production costs for the contributions of the more than 62,000 backers.
A new tool aims to help crowdfunders keep track of costs right from the start. The crowdfunding calculator allows project starters to realistically estimate the profit or loss of a crowdfunding campaign before it even begins.
The calculator was developed by scientists and crowdfunding experts at the Chair of Electronic Commerce at the Goethe University FrankfurtInterestingly, the calculator compares its own calculations with figures from real crowdfunding campaigns. This gives project starters a good sense of how realistic their goals actually are.
And this is how the calculator works:
1. Select crowdfunding platform and project category
To generate comparative figures for previously funded crowdfunding projects, each project starter selects a platform and project category for their project. Unfortunately, Kickstarter is currently the only platform available. Indiegogo and the German market leader Startnext are expected to follow shortly. Nevertheless, you should take advantage of this opportunity, even if the campaign ultimately runs on a different platform. The comparative figures should be similar.
2. Campaign goal and rewards
In the next step, project costs and campaign costs, especially the costs of the promised rewards, are compared with the number of expected backers. How many backers do I ultimately need to reach to cover my costs and fund the project 100 percent?
3. International and national shipping costs
Next, estimate shipping costs. It's important to consider where most supporters are located and where the rewards need to be delivered. Whether to deliver domestically or internationally can make a big difference.
4. Fixed and variable campaign costs
What costs generally arise for the campaign and must be borne even if the funding is unsuccessful (e.g., campaign video, promotional materials, etc.)? And what commission do the platform and payment service provider charge if the funding goal is reached?
5. Development and production costs
What are the fixed costs for producing the promised rewards and what are the variable costs per unit?
6. Shipping and packaging costs
How much are the fixed shipping costs (e.g. the service fee for the service provider) and what does it cost to pack and ship the individual items?
7. Returns and Delays
In the event that sent rewards cannot be delivered or have to be re-produced due to defects, the calculator also calculates these costs based on the length of the delay and the number of backers. This point in particular should not be underestimated. In fact, the completion of the promised rewards often takes longer, resulting in additional administrative work for the project initiator, which can cost time and money.
8. Probabilities of success
When calculating costs, project initiators should also consider how high the chances of success of the crowdfunding campaign actually are and the probability of subsequent delays in project implementation (e.g., in the development and production of the consideration) and how much such a delay will cost.
The result: Based on the entered data, the system ultimately produces the overall calculation with the expected profit or loss. In addition to the calculation examples, it also explains the possible scenarios with their respective probabilities of occurrence. Depending on the outcome of the crowdfunding campaign, the associated costs for the project initiator are calculated. Additionally, some average values from real crowdfunding projects in the same category are provided for comparison with the assumptions.
Conclusion: Overall, the crowdfunding calculator is a good tool for crowdfunding beginners to avoid falling into the cost trap. Even though the calculator doesn't provide a definitive guarantee of a successfully funded project, every well-calculated project is ultimately a win-win.
