Managing a Crowd-funded Budget

A common reason for kickstarted projects failing after having a successful campaign has been running out of money. Many first time developers are turning to crowd-funding for their projects without understanding what really goes into making a game. 

Today's post examines the incidentals and considerations that must be factored into your crowd-funding goals and can make a difference between success and failure.

The Cost of using Crowdfunding:

The Tax:

Obviously the first element we have to talk about is the cut the crowdfunding site will take from your project. Each site has its own guidelines and rules for this matter which you should be examining when deciding who to use. Kickstarter for example takes a 5% cut of whatever you make from a successful project. This may not be a huge deal for most developers, but if you are budgeting development down to the dollar, this is still something to factor in.

Living off of Crowdfunding:

A lot of kickstarted game projects on the service are coming from either first time developers or members of the game industry who are starting their first studio.

It's a common mistake from these two groups that they believe a successful kickstarter can replace a full time job. Many people have that dream of quitting their day jobs to work on a video game with friends which is a lofty goal, but not always viable.

The problem is that there are a lot of costs that have to be tailed in when starting a studio that a kickstarted budget may not pay for. First is the big one -- buying a development space for your studio. One of the supposed elements that hurt the kickstarter for The Doom that Came from Atlantic City was that the kickstarter owner used the funding to help buy a new home.

Overhead is a big deal: Food, electricity, water and upkeep, these are all monthly factors that must be considered when figuring out your cost. Now if you are still working at a full time or part time job, that money can help pay for things, but it's a different story when you are exclusively using the kickstarter funds.

Despite having a successful kickstarter, funding issues led to the project almost being cancelled.

Another consideration comes with your team. Of course part of the kickstarter funding will go towards paying the rest of your team to work on your project which again equates to a monthly cost. This can add up pretty quickly if your employees are just as eager to quit their jobs to work on your game.

You need to budget not just how much you need over the course of development, but what your employees will as well. A bad sign that you messed up is if your team has to go several months without receiving money.

Lastly we have the incidentals: costs that can come up during development or little things that can add up to big problems.

Escalating Costs:

Chances are when you are coming up with the budget for your kickstarter, you are thinking about living costs, wages and the rest of the ones we mentioned above. Yet there are still more costs that come into play that must be considered.

First are any additional elements you need to complete your game: Hardware, software licenses or even new team members to work on the game.  These are all new costs that can come up during development which will take a chunk out of your kickstarted funds.

With software licenses this can be especially damaging if you promoted your game being multi platform. Each platform has a dev kit that you will need to buy, figure out and use to get your game working on it. This also means more time and money spent on development that you may not have budgeted for. This is why if you do promise multi platform support, it's better to complete the version for the platform you know the best so that you have a finished product as opposed to working on multiple versions at once.

Yacht Club Games with Shovel Knight stuck with developing the game for the platforms they could the easiest first, before working on the rest.

And lastly we have the rewards which can cause problems. There is a big difference between digital goods vs. physical goods. Digital goods only cost the amount of time needed to create them and after that can be produced infinitely. Physical goods however require the time of development, manufacturing and shipping on every item.

You may think producing 20 inch tall iron figurines for your game is a great reward, but if you don't factor in the cost of creating and shipping, you could easily lose all your money just on fulfilling these orders.

After all this doom and gloom, you may be wondering what you can do to avoid a kickstarter failure. And while you can't prepare for everything, there are two tips to help mitigate problems.

Steps to Take:

Research:

Simply put, you want to spend as much time researching the costs of everything related to your project. You should be able to come up with an idea of what your yearly budget will be including incidentals that need to be purchased.

Some kickstarters try to low ball their goal in an effort to get the bare minimum to hopefully get additional investment later on. This is never a good sign and more often than not will backfire on you. If someone puts up a kickstarter saying that they can create a game on par with Grand Theft Auto 5 for $50,000, they will be laughed right off of kickstarter.

Delay:

And finally just delay your kickstarter for as long as possible. Do as much of the development that you can without needing to go to kickstarter. This will give you two things: A more concrete representation of your game to show people and will also lower the amount needed for the kickstarter. A prototype is a good start while some people go as far as having an alpha or beta build ready.

The Darkest Dungeon kickstarter went up after months of research, game prototyping and preparation by the developers.

It's no longer viable to go onto kickstarter with nothing more than an idea and an asking price. The more projects that fail to produce will hurt the viability of the platform. In order for kickstarter and crowdfunding to remain viable, the consumer confidence cannot disappear.

And while nothing is ever perfect even if you prepare, you can still tilt the odds in your favor by following these tips and understanding the risks involved.

(Reprinted from the Xsolla.com Blog)