The success of Amanda Palmer’s Kickstarter campaign in May of 2012 highlighted the potential revenue opportunities for crowdfunding creatives. Initially setting out to raise $100,000 for a new record, art book and tour, Palmer ended up exceeding the $1m mark. This enabled Palmer to cover the costs of album production, goods manufacture, promotion and touring, as well as remunerate her management and staff and repay some personal debt.
However, things got a little messy when she put a call out for additional musicians to play with her for free on her tour, proposing to pay them with beer, hugs / high-fives, merchandise, and gratitude. In light of her phenomenal Kickstarter success, the public response was swift and largely unfavourable; the creative community stating that playing = work, which deserved a paycheck. Palmer posted a break-down of Kickstarter expenditures on her blog in response to initial public reactions, but the furor failed to subside and she ultimately agreed to pay the additional players.
The controversy has been discussed extensively online, with arguments for and against her approach dissected like a frog in a biology class. There was even this piece in The New Yorker that suggested the affair was an accidental experiment with communism. The dialogue was important and timely, and provided an opportunity for creatives to check their approach to sourcing funds from the crowd, especially when budgeting for, and planning a project.
So, what things should you consider in this space?
Your budget is the financial breakdown of how much money you need to complete your project. It is important that your budget reflects all of your expenses.
For example, if your band is raising money to go on tour, you will first need to consider the costs of food, accommodation and travel costs – per day, per person. Driving? Petrol and insurance is costly, but necessary. Hiring or buying a vehicle is an extra expense, and you may also need to hire a trailer. Budgeting gives you space to consider different travel options, e.g. is it cheaper to fly than drive? Is a return ticket cheaper than a one-way ticket? Should you rent a bus and driver instead?
You’ll also need to factor in any additional costs; these may include equipment rental, touring crew members, management / booking agent commissions and merchandise. And what about the unexpected costs? Instrument repairs. Vehicle repairs. It’s important to include these unforeseen expenses, as they can quickly blow out a budget.
And remember to allow for PledgeMe costs – including any dollars you’ll need to create / deliver rewards to your pledgers!
Unless you’ve got The Roots as your support act, anticipating a million dollar result might be a little ambitious. Even so, you will potentially receive more money than you asked for, so it is a good idea to consider what you’ll do if your expectations are surpassed. Enhance the project? Donate the excess? Having different plans based on different budgets will help you prepare for a variety of outcomes. You can then explain how you will spend the money to your pledgers, being specific about what their donations will allow you to do. Planning to this level of detail will ensure you’re really clear about what you’ll do in each situation, and your pledgers will be really clear about what you’ll do with the money.
So, what are your obligations once you have the money? Firstly, keep to your word by rewarding the pledgers that contributed to your success. They donated in good faith – be respectful of this. Secondly, going forward, and throughout the duration of your project, it is important that you keep people up-to-date and informed on your project’s progress. They have already signaled an interest in your ongoing success, so tell them all about it! And heck, you may need to ask these people for their support again, so remember that, and be good to them.
Where to find more help
If you’re looking for guidance and a starting point for planning and calculating your expenses, there are a bunch of free online tools available. The excellent Sorted website, run by the NZ Commission for Financial Literacy and Retirement Income, can guide you to identifying your targets and goals, provides a template for listing your expenses, and the calculator function helpfully totals them as you go. The Event Planner calculator is a great place to start.
For many, budgeting and planning is right up there with cleaning the bathroom – an unpleasant but necessary evil. And whilst it may bring out momentary brain ache, it will also enable you to be clear and transparent with your intentions, and better position you for success – be your target $100 or $1m. Hey, you never know your luck!
And in case you were wondering…
Here are the PledgeMe 2012 stats for successfully funded projects by budget size: