When you start a Kickstarter campaign you work out the cost of the product you want to sell. However, have you worked it out correctly? I mean it seems easy enough but here in the Uk there are other costs you need to add on top and then Kickstarter 10% (5% they take and 5% processing fee so it is basically 10%).
For example
100 copies cost £500 plus £125 shipping now that is £625 but in the UK we have to pay VAT (20%) and Duty (depends on the item to the value) on top of this.
VAT = £125
Duty (4%) = £25
The £625 game is now costing £775 for you to buy in, this means each game is costing you £7.75.
We now have a base cost but when it comes to selling the game we need to make a profit otherwise this is pointless. They always say you want to make around 40% to 50% profit on the item. However, we here at Samurai Games do not follow that rule and make way less! That is our choice and of course, this is not for everyone.
Let us say you sell the game for £15 you do not make £7.25 profit because you have to pay VAT (20%) and corporation tax (20%) on top! This is more to work out.
VAT is worked out first = 15/100*20 = £3
Our profit is now £4.25 which we then take the corporation tax from;
Corp tax = 4.25/100*20 = £0.85
This means the final net profit = £3.40
Now, why did I say net profit? Because you also need to think about other costs that will come out of this like wages and so forth.
The £15 game you are making £3.40 on.
We need £775 to kickstart the game that is the goal in this example, but we need to make sure we cover Kickstarters 10%! We need another £75 on top of that. We are now at £850 and to play it safe just round up to make sure you do not shoot yourself in the foot to £900 or maybe £1000.
On ours, we need £3000 to start the game and that covers all the costs above plus we have around a £75 breathing room in case we need a little more.
When it comes to your Kickstarter campaign create a spreadsheet with all the costs including Duty and VAT and any other tax you might need to pay out because you will need all that information to create a realistic target! This is so important to get right! Do not make a mistake here!
Now, remember to do this for each tier and add the Kickstarter 10% on to that tier so for tier 2 if you need £1500 ake sure you put £1650 or even £1700. This needs to be done for every tier to make sure you can cover the costs with the Kickstarter and you do not need to use your own money to make sure you can supply what you promise.
There is a lot of work involved with the numbers and finance part of this and you need to be careful to get it all correct. I really hope this helped anyone out there because I had to work out the costs 4 times because I missed certain elements.
Thank you for reading.