Setting a Kickstarter funding goal is a critical part of your campaign's success. Set it too high and people may not back your project on the assumption that it won't succeed. Likewise, setting it too low can come of as disingenuous (e.g., you're trying to say you overfunded by some outrageous amount, even though you really needed more than your goal to begin with). Setting a goal for a board game is tricky because you have to factor in one more thing: Every pledge you get is going to cost you some amount of money.
This is where the two Kickstarter numbers come in. To explain a little better, let's use a fake example. The following numbers are not any game in particular, but instead some nice round numbers for the sake of clarity. They also don't include any extra rewards or stretch goals. Lastly, these numbers are based on the idea that your physical production & shipping costs are entirely Kickstarter funded (vs. putting part of the money in yourself and supplementing the rest through crowdfunding).
Producing the Game
The first number to consider is your raw production number. Let's say you have a game that can be produced for $6.00 a game at 1000 prints, so a total of $6,000 (including delivering the games to you).
Let's also say your game MSRPs for $25 (not an unreasonable number, considering distributors pay about 30-40% of retail, so even selling to mass distribution will at least net you a meager profit). So, assuming you're giving backers a discounted rate of $20, how many pledges do you need? At $20/game, you'd need 300 backers to reach your goal ($6000 / $20 = 300).
What About Shipping?
But wait. Now you need to get those games to those 300 people. Shipping is its own beast, and there are a number of ways to handle paying for it, but regardless of whether you build it into the pledge price or add it as a separate cost, it still eats into your pledge margins. Say you just hit your $6000 goal, now you need to ship 300 games at $3 apiece, that's $900 out of your pocket you need to pay, eating squarely into your profit margin.
The alternative is that you could add in the shipping cost, so now the game costs $23 to pledge. Cool, but now your numbers have shifted -- now you fund at ($6000 / $23 = 260 backers), but you still need to pay that $3 per backer to shipping, costing you $783. While this isn't eating directly into your per-game cost, it's still hurting your wallet in the short-term.
Let's stick with "free" shipping for the time being. In order to cover shipping, you need to increase your goal to accommodate the cost. To just cover the cost of shipping those games, you need to add $900 to your goal. That's your real number, right? Not really.
The problem is, funding a board game with Kickstarter is like fueling a rocket. The more fuel you add, the more weight gets added to the rocket, and the more fuel you need.
At $6,900 in our free shipping example, you need to sell 345 games to reach your goal. That means that you need to ship 345 games, at a total cost of $1035. So your total costs are now $7,035, meaning you're $135 short. Not as bad, but still not really breaking even.
You keep doing this for a couple more iterations. At a $7035 goal, your total costs are $7055. Almost there! At $7055, the costs are $7059, and incidentally, at $7059, your costs to produce and ship are $7059. This is called your break-even point. (Incidentally, if you had gone the add-in shipping route, the break-even point is $6900. However, the trouble with shipping is there is no flat-rate global shipping solution, so simply building a dollar amount into the price isn't viable, but it works for our purposes.)
Kickstarter Gets Paid
Great, so that's our number, right? $7059 and we're good? Well, you would be, except that there's also the matter of things like Kickstarter fees and taxes. Taxes are heavily dependent on when you fund, when you pay your vendors and when you ship inventory, so we'll pretend they don't exist for the time being.* We will look at Kickstarter/processing fees, which typically net out at a nice even 10% of your total funding.
What does this mean? Well, basically the same thing all over again. If you make $7059, expect $705.90 of it to go to Kickstarter, et al. That means you need to increase your funding goal again, which in turn adds shipping costs and more Kickstarter fees.
Ultimately, at our magical $3 shipping number plus 10% of your $20 pledge ($2), we can say that for every $20 you fund, you're only really getting $15 toward production. So if you're losing 25% of your income per unit to shipping & fees, your goal needs to withstand a 25% hit and still cover your production costs. $8,000 - 25% = $6,000**. So, $8,000 is your real break-even point in this scenario.
Solving the Per-Unit Puzzle
Of course, one easy way to solve all this is to just increase your price. At $25/game, you'd only need to increase your funding by 20%, about $7,200, and you'd have more surplus stock once everything was paid for. Unfortunately, in an industry where literally thousands of games come out each year, it's a risky proposition to drive up your pricing.
Another solution is to pass shipping costs to the consumer, like we looked at. Unfortunately, this doesn't improve your margins all that much, and is basically the equivalent of increasing your price. The true benefits of a separate shipping cost lie in the flexibility of pricing, which is a topic for another time.
The last option for improving your margins/decreasing your goal would be to increase your print run, making the physical game itself cost less to produce. That comes with it's own pros and cons, however, which we'll discuss in our next Kickstarter post in August.
*Not good business practice.
**Not good math practice.