Little Things Add Up #2 - Other Kickstarter Costs
This is part 2 of 4 of our guest blog by Janice Turner - designer of Assembly (which funded on Kickstarter in July 2018).
We now move onto the costs post Kickstarter that may not be immediately obvious when costing your Kickstarter and when running your new business venture. They are grouped into types of costs with each section ordered from approximately highest impact costs to lowest impact costs. Obviously, this is all relative and will depend on the specifics of your campaign so make sure you add a good dose of common sense to this advice to make it relevant to your campaign.
But first, just a quick note on sole trader versus registered company. Some of the costs in the following sections are only, or more applicable, to registered companies and you will need to decide whether you choose to register or not. There are pros and cons for each and everyone’s situation is different. You can find a good summary of the pros and cons on Simply Business.
We decided to register Wren Games as a limited company for the nominal fee of £12. The main reason for this decision is a limited company means that Wren Games becomes a distinctly different entity to our personal finances. We have a house, 2 young children and careers other than games to think about. Having this separation gives us at least a little protection if something went catastrophically wrong (and we were not personally responsible for this issue). So, although it brings in extra costs, it also brings us peace of mind.
Other Kickstarter Costs
Although most of the manufacturing and fulfillment costs were included in the first blog post there are a few extra ones that you may or may not have considered and this section is about the ones that aren’t as obvious.
Samples: Depending on which factory you go with the costs of samples and proof may be in addition to your unit cost. Although you may have already budgeted this into your costs, what if it wasn’t right first time and you need to do a second, or third round of samples? What if you need them urgently and have to pay for express shipping? Again, you don’t need to include costs for 3 versions at express shipping but it might be worth having enough in your budget for a second iteration, especially if you have a complex product.
Advanced Copies: You may want some advanced copies to demo at an upcoming show or to get in the reviews queue of larger reviewers ready for the release of your game. You may choose to air freight production copies from your manufacturer or you may opt to get some made up by your manufacturer early or a more local one. Either way, sending stuff fast and making small batches is expensive.
Barcodes: If you plan to sell your games through Amazon and retailers you are going toned a valid barcode. There are many options here – you can go for an official one with an annual fee or you can try the ‘second hand’ barcode market. If you go the cheaper route, be prepared that if it doesn’t work that you have the money to reprint a load of labels so you can place a new barcode over the old on.
Manufacture Price Changes: Although you will have (hopefully) got a quote before your Kickstarter, quotes generally only have a validity of 30 days, plus your requirements inevitably change. Be aware of paper price fluctuations and anything else that may impact the price of your quote. Once your Kickstarter has finished you’ll need to get a re-quote for your finalised requirements based on current market prices, this could go up or down. If it goes up, be prepared to negotiate – ask for a breakdown. Understand why the quote has gone up and if there’s anything you can do about it, but best of all, have a pot of risk money to account for any price fluctuations when planning your Kickstarter.
Exchange Rate Fluctuation: Exchanges rates are fluid and unless you are buying all of your components in the same currency as your bank account you will have to factor in exchange rates. I suggest you take a worst-case scenario by looking at the lowest it has been in the past 12 months and base your calculations on this. But then also note, you are unlikely to get the exact exchange rate through your bank, they generally offer a worse one so find out roughly how different the two are and then factor this in as well. Depending on the size of your order this cost could be quite significant or you could be money in! For example, let’s say you planned your campaign during a high period where it was £1 = $1.42 but when you come to pay your manufacturer the value has fallen to £1 = $1.25. So that’s an additional £170 per £1,000 of cost.
Bank Charges: Depending on your bank and who you are manufacturing with you may incur a charge for each transfer you make. This is generally the case if you are transferring to a different currency and/or if you have a business bank account. These fees can be significant, particularly if you are making several payments so make sure you know what they are and how many payments you are likely to be making. As an idea, this could be anything from £10-50 per transaction.
Re-Work: Although we expect everything to go right first time, mistakes do happen, particularly if this is your first time through the process. Be aware how much a reprint might cost and where you draw the line for something to be ok and something needing to be reprinted. If you have tooling and/or moulds, consider the cost to alter these if your minis don’t quite work. Changes cost money.
Overs: In an ideal world, your manufacturer will make exactly the number of copies you order but this isn’t an ideal world and you are likely to be unhappy if they delivered less than you ordered so they make allowances for this. Overs is the number of additional copies they make, deliver and charge you for and tends be somewhere in the region of 5-10% of your order quantity.
Quality Replacements: In an ideal world, every single copy of your game will be perfect but it’s not an ideal world and there will be some quality issues with your games and your backers/customers will request replacements. Make sure you have some games/components set-aside for you to be able to provide replacements, and of course have the money for the shipping of them.
Replacement Copies: Not every copy you manufacture will make it to an end customer. You will have losses and damage throughout the process whether it be dropped as they are being load/unloaded, run-over by a forklift truck or simply lost in the post. It’s therefore wise to plan for this by buying additional copies to mitigate this risk. Other topics within these blog posts will cover the areas that this is likely to happen to help you budget how many extra to buy.
Safety Testing: All products must be safe however the degree to which this must be proved depends on the age target for your game. If it’s 14+ (13+ in US) then it’s considered not a toy and simply needs to abide by general safety regulations. However, if you put an age of less than 14 (and plan to sell in Europe), then you need to CE mark your product which requires that you comply to EN71. This is likely to require additional testing if you cannot provide adequate evidence in your technical file to prove abidance to these regulations. Interestingly you must not CE mark your product if it does not fit into one of the CE required categories.
Pick Costs: Fulfillment centres do not give you a free pass when picking your shipments. They tend to have a limit on how many items they will put in a box before they start charging you a pick fee. This may be 1 or 2 items or it may be as many as 4, but think about all those stretch goals and add-ons – are you adding extra pick items? If so, have you budgeted the extra 20p/26c pick cost per item? If not, those stretch goals and add-ons might be costing you more than you thought.
Labeling Fees: Unless you plan to adequately barcode and mark-up everything yourself you may encounter fees for your fulfillment centre to do this for you. To ensure every item is picked correctly, it needs a unique SKU which is ideally a barcode for ease of picking. If you don’t do this, your fulfillment centre probably will and they may charge you for the extra work that they incur doing it.
Lost/damaged shipments: Inevitably, a number of your shipments will get lost or damaged. A good general estimate is 1-3% of shipments. You have a choice here, pay for compensation which can work out very costly, or take the risk and replace all lost and damaged items (just make sure you have enough spare to fulfill all of your orders or can quickly get some more!). Note that replacements you buy are likely to be at a premium in low volume. And what about when the request for a replacement comes a month or two after you’ve finished fulfilling? You’re unlikely to get as good a rate as your fulfillment centre for shipping, so if you’re doing it yourself make sure you’ve budgeted for this higher cost.
Storage: Your fulfillment provider may provide free storage for games that they are fulfilling on your behalf, but if you have ordered additional stock and have had this shipped to them then they may charge you storage fees for this additional stock. Or perhaps they charge storage fees regardless. Make sure you know what their policy is.
Wastage: In an ideal world every game you make will be accounted for in some way however games do disappear. Whether this be due to being run over by a forklift truck, dropped during fulfillment causing damage, poor inventory management meaning they just go missing or due to an unscrupulous employee at your storage facility, games will go missing so make sure you have enough spare (c. 1%).