How much should you set for your Kickstarter or Indiegogo goal?
After running 2000+ crowdfunding campaigns, we’ve come up with a simple formula to determine how much your goal should be.
Set your Kickstarter goal to be your Least Viable Goal (LVG).
The LVG is the least amount you need to raise so the fulfillment on your product is viable (or possible).
Let’s say, for example, you want to raise money for a new wallet. Let’s also say that to produce, manufacture, and ship 500 of your wallets, it will cost you $4,500.
While $4,500 may be the amount you need to fulfill on your product, it may not be your LVG. Let’s say that either you or a family member has $1,000 they could chip in if needed. Then really your LVG would be $3,500, because to deliver on your product you only need $3,500 from the crowdfunding campaign. The other $1,000 you can come up with elsewhere.
In considering your LVG take into account your production quantity. As the amount increases, you should have lower costs per unit. This will affect your LVG.
“But Thomas!,” you might be thinking, “I don’t want to raise $3,500. I’m hoping to raise $15,000 or more on my campaign!”
There is a difference between your Kickstarter goal (which I recommend you set at your LVG), and your real goal.
When I work with clients before they launch I often ask them what their Kickstarter goal is AND what their real goal is. The Kickstarter goal is the amount they are setting on Kickstarter. The real goal is what internally they are hoping to raise; the amount at which they will be satisfied and happy with the outcome of the campaign.
Your Kickstarter goal and your real goal are two different things. They shouldn’t be confused or mingled.
If you are really hoping to raise $15,000 on your Kickstarter, that is great. But don’t set $15,000 as your Kickstarter goal, unless $15,000 also happens to be the minimum amount you need to raise to fulfill on your product.
There are 2 main benefits to setting your Kickstarter goal at the LVG.
Very, very often campaigns don’t raise as much as they had hoped to raise. With a few days before the campaign is over, they are having friends and family put in contributions of $1,000, $2,500, $5,000, or more.
Kickstarter takes 5% and credit card processing takes about another 3%, for a total of 8%. That adds up if your friends and family are putting in money just to help you out.
If your project has a goal of $50,000, and you have raised $40,000 on your own, when friends and family put in another $10,000, you effectively lose 8% on $10,000, which is $800.
Getting friends and family to put in money right at the end is not uncommon for projects that are close to their goal. You want to avoid this at all costs, especially when that cost is 8%.
When I first got into crowdfunding I use to wonder what would generate more sales: A project that needs a little boost to hit its goal OR a project that has already passed its goal and shown it will fund.
Said in another way: Are backers on Kickstarter motivated more to help out the creator with a new business idea that is close but not quite there? Or are people on Kickstarter motivated more to get behind a successful project?
The answer is the latter.
People prefer to back a project when it has 100%+ of its funding goal reached. People prefer to put money into a project they know they will actually receive because said project has already reached its funding goal.
When your goal on Kickstarter is higher than it needs to be, you unnecessarily make it take longer to look like you have reached success.
A project that has raised 250% of its funding goal ($250,000 raised with a $100,000 goal), sounds better and more successful than an identical campaign that has raised 41% of it’s funding goal ($250,000 raised with a $600,000 goal). Even though in both cases the project has raised $250,000, the 250% sounds better.
What I’ve just written is not always relevant. Here are two scenarios where LVG probably isn’t applicable.
First, you might have all the funds you need to deliver on the product, but you simply want to launch on Kickstarter because of the extended reach you’ll get. In such a case my recommendation is to set a reasonable goal that you are quite certain you’ll hit.
When I say reasonable goal, I mean reasonable in relation to what you are in the process of delivering on. A wallet might have a goal of $2,500. A smart luggage might have a goal of $50,000. Those are reasonable goals in relation to what you are creating. A goal of $5,000 on a smart luggage would seem unreasonable.
Second, you might only want to create & fulfill on your project if you hit a certain amount. Maybe you are launching a Kickstarter to validate a new business idea and unless you raise $50,000 on the campaign, under no circumstances do you want to proceed with the creation and fulfillment of the product. In such a case set your goal to exactly what you want it to be.
In short, crowdfunding is paradoxical in the sense that people only believe you are successful, once you are successful.
By setting your Kickstarter goal to your LVG, you have a much greater chance of hitting your Real Goal.
