How not to lose money crowdfunding

Crowdfunding is a great way to launch a product, but if you don't plan carefully, you can lose money. Read this to learn how to avoid making mistakes.

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Joe Piperni

Launching a product on Indiegogo or Kickstarter can be risky, but there are ways to make sure that you won’t lose money crowdfunding. It involves a lot of planning ahead of time, and we’ve outlined the steps you should take in this article. If you want to set yourself up for financial success, make sure you follow these guidelines!

Make sure your product is viable

Before you do any of the rest of this, you need to make sure that your idea will actually sell in the real world. Figure out what makes your product different from your competitors. What problem are you solving? Is it a problem that enough other people have to make it worth producing?

Once you have the answers to these questions, run ads to see if your audience is interested. We call that TestBoom, and we won’t try to launch a product without it—that’s how important it is. Not testing the market to see if there’s an audience for your product means you have no idea whether or not crowdfunding would be worth it, and you could end up losing everything you invest in your campaign. Test, test, test!

Figure out why you’re crowdfunding

Crowdfunding is about more than just raising money; it’s just as much about creating a dedicated community of supporters who will follow your company as it grows. It’s okay if one of these goals is more important to you than the other! You just need to know what your goal is so you can plan accordingly.

You need to think about the type of product that you’re launching when you decide on your campaign’s goals. If you’re launching an expensive hardware product, it might cost a lot to make per unit, but that cost could decrease if you order in volume, so it might be more important for you to get a lot of backers. On the other hand, if your product is something more low cost, you might not need as many backers to make your campaign profitable.

Neither one of these strategies is right or wrong—all that matters is that it’s the right strategy for you. Knowing your goals will help you decide what to do with your budget.

Decide on a reasonable budget

This is one of the most important steps of your entire pre-campaign. You need to know how much money you have on hand and what all your costs will be so you can figure out how much you have to invest in your campaign itself.

So what costs do you need to figure into your budget?

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Fixed costs.

    • These are payments that you’ll only have to make once. They include things like tooling, design costs, photography, videography, agency setup fees, and travel associated with promoting your product, among other things.

<liVariable costs. These are costs that will need to be paid on a per-unit basis, or things that you will have to keep investing into as your campaign progresses. Variable costs are things like price per unit, advertising money, shipping costs, and the percentage of your funds that will be paid out to the platform and to any agency you’re working with.

These are just some examples of fixed and variable costs; there will probably be some specific to your campaign that aren’t mentioned here, and it’s important to include them in your budget as well. If you’re spending money on anything, even if it’s a very small amount of money, keep track of it. The more closely you track your budget, the more wisely your decisions can be made.

Use your budget wisely so you don’t waste money

Looking at your budget can be a scary thing! Knowing what it is, though, can help you plan for how to make good decisions with what you have. Here are some things you can do to save money:

<liConversely, if you don’t have the cash on hand for a large fee, ask if a company is willing to do a payment plan. Don’t stretch your budget too thin by shelling out a fee that you might be able to split into smaller payments. The worst that can happen is that they say no, and you’re on the same payment plan that you would have been on anyway, so it’s worth asking!


Important budget considerations

  • Plan ahead for success and for failure. Know what you’re going to do if you don’t hit your goal, if you reach your goal but don’t make much over it, and if you blow your goal completely out of the water.
  • Think about charging for shipping post-campaign. This will allow you to have a more accurate lock on what your shipping costs will be. It will also avoid your crowdfunding platform taking a percentage of what you charge for shipping. Remember, Kickstarter and Indiegogo take a percentage of your total fees raised, not just of your product raise.

Crowdfunding isn’t easy, and it’s not a guaranteed success. However, if you follow the steps in this article, you’ll be much less likely to lose money while doing it. You need to test your product in the market, know your goals and your budget, and do what you can to save costs if you want to see success. It’s a lot to keep track of, but luckily we’re experts in doing so. Book a call with us today to see if we’re a good fit for your crowdfunding project!

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