Setting your campaign’s funding goal is one of the biggest decisions you’ll need to make before your campaign launches. Getting it right can mean the difference between success and failure.
Luckily, there’s exactly one correct way to set your goal: ask for exactly what you need. Don’t ask for more or less than what it will cost to manufacture, sell, and ship the product in the quantity you plan on building. That may sound circular and obvious, but if you consider the alternatives, you can see that they are mistakes:
Ask for less money than you need and raise the rest later. This is essentially gambling with your backers’ money and is disingenuous, especially if you don’t tell your backers about this plan beforehand. You will come off as naive at best, criminal at worst.
Set your goal to be what you wish you could raise. An aspirational goal can be healthy motivation for any product developer and, under the right conditions, almost any product could make it big. However, that uncertain success shouldn’t be the gating condition for simply getting the product made in the first place.
Include already sunk costs in your goal. Sunk costs, such as the cost of prototypes, testing, or video production, are simply the entrepreneurial risk you take in developing a product in the first place. Sunk costs are funds that you’ve spent whether or not you reach your goal, so why reduce the chance of your campaign succeeding (possibly allowing you to eventually recoup some or all of your investment) by including them in the funding goal?
Shoot for an unnecessarily high minimum order quantity (MOQ). Yes, the per-unit cost of manufacturing 10,000 units can be much less than that of manufacturing 100 units, but if the only difference in the campaign is a high funding goal and more margin in your pocket, you’re only doing yourself a disservice by making the campaign less likely to succeed. Keeping your MOQ low also affords you the flexibility to quickly iterate and make changes to the product.
Set the goal high to convince the crowd you are serious. The reality is that as long as you have a great product and clearly present a reasonable plan for delivering it, backers won’t think twice about a low funding goal. For proof of this, look no further than Chibitronics’ Circuit Stickers campaign.
Setting your funding goal to be what you need will not only steer you clear of the above mistakes, but doing so also has its own benefits by virtue of (typically) being a relatively low, achievable funding goal. Asking for just what you need has these benefits:
Hopefully, we’ve convinced you this is the best way to set your goal. So, what should you include in the funding goal specifically? All of this:
In addition to your campaign’s funding goal, you may want to consider adding stretch goals representing further funding milestones. Stretch goals can be decided either before or during your campaign and should be designed to reward backers for helping your campaign raise funds well beyond the funding goal. For example, a stretch goal of double your funding goal could reward backers with a free accessory and a stretch goal of three times your funding goal could reward backers with an added product feature. As always, we can advise on which stretch goal strategy will work best for your campaign.
Watch Crowd Supply CEO Josh Lifton break down this whole process in a recent webinar.
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