Five forces that determine the right funding goal for your crowdfunding campaign
Producing reliable cost estimates is tricky at the best of times. If you’re considering crowdfunding your next project, deciding how much money to raise can be a seriously daunting task.
It can be tempting to simply set a budget so large that Nothing Could Possibly Go Wrong™ or so low that you’re practically guaranteed to hit the funding goal. Unfortunately, both of these approaches are flawed. Push too hard and the campaign may never get off the ground, or expectations may be so high that you can never live up to them. Raise too little and you’ll be stressed out, cutting corners the whole way and you might ultimately never reach your goal.
Understanding the most common reasons why projects fail and planning so you avoid them is crucial to finding a reasonable project budget. And finding the right budget is crucial to your project’s success.
In every project there are five forces that can be made to work for or against you. These are scope, time, resources, uncertainty, and fidelity.
All of these forces consist of both internal (within your control) and external (outside your control) components. Before setting a project budget, make a plan that addresses everything in your control, and avoids or accepts everything that you cannot.
1. Scope
The scope is the shopping list of what you want to achieve.
A clear and comprehensive scope is better than a vague or incomplete one. This is especially true for a crowdfunded campaign where you are asking other people to support you.
Does “Record and release an album” include hiring session musicians? A studio? Equipment? Producing physical CDs/vinyl/merchandise? All of this needs to be 100% locked down before you start campaigning for funds.
A smaller scope is easier to deliver than a sprawling one. This should be obvious but “scope creep” has ruined many well intentioned projects.
How to estimate scope
Write down all the high level things that need doing or buying. This is the list that you will show your potential supporters who are considering whether to pledge funds to your cause. Check out “How The Funds Will Be Used” on popular Pozible campaigns for examples.
For each high level item, write a detailed list of everything that might be needed to make this happen. Be comprehensive but not prescriptive. You don’t have to share this with your supporters, but it’s your scope which becomes the cornerstone of your project plan.
Put a reasonable time/cost estimate next to every item that you’ve outlined. For now this should simply be what you think is most likely. You can tally up a preliminary budget based on these lists, but don’t get comfortable, there’s more to do!
2. Time
Deadlines are an unavoidable reality for most projects.
Some deadlines are “harder” than others. Missing a key date might have disastrous consequences like extending a lease or reprinting expensive marketing materials, or it might be a relatively harmless “soft” deadline.
Some timelines are more restrictive than others. Being forced to make snap decisions, last minute bookings, and paying premiums for “express” services will constantly erode the quality of what is produced, increase expenses and destroy your ability to respond to mistakes made along the way.
How to estimate your deadlines
Identify all the key milestones for the project and highlight every item in the scoping lists that needs to be complete before each milestone.
Put two dates against each milestone, a “soft” milestone and a “hard” deadline. You should be able to comfortably complete everything by the soft milestones, referencing the time estimates you just prepared. The hard deadline is when Shit Gets Real™. Don’t put soft and hard deadlines on the same date, seriously.
Write down the main consequences, including the cost of “plan B”, associated with missing any hard deadlines. This might seem obvious but you’d be surprised how often people miss their milestones without any idea what that even means.
Sit back and look at all of your milestones and all your estimates so far. If any of your soft milestones are looking dicey, or too close to a hard deadline, add the cost of “plan B” to your project budget as there’s a good chance you’re going to need it.
3. Resources
Resources are everything you have available to help you succeed.
This covers the money you already have, but also includes collaborators, social networks, your personal expertise and availability, and other assets like equipment and space.
For a crowdfunded campaign, we already know that you don’t have 100% of the resources you need, otherwise you wouldn’t be campaigning!
However, it’s important not to assume that money can be readily converted into something useful. Finding the right people/space/equipment can be hard.
How to estimate your resources
Experts in their field can be hard to find, more expensive than you’d assume, or booked out for months at a time. The same applies for sought-after creative spaces or rare/expensive equipment.
Get a preliminary confirmation of cost and availability for anything that needs to be hired/booked before you commit to a budget. Explain the situation, that you’re about to start a campaign for funding that may or may not result in a firm commitment, and get an indication as to whether this might be problematic.
In the same way you planned milestones, consider the possibility and cost of “plan B”. Add it to your project budget now if you can’t get the confirmations you need at this stage.
4. Uncertainty
Uncertainty is how badly we predict the future. (Hint: it’s usually pretty badly).
Almost every decision we make is distorted by our innate biases, and we have a strong tendency to underestimate how long things take.
Uncertainty is not neatly spread across everything that needs doing. You may have heard of the “80/20 rule” — often 80% of the uncertainty comes from just 20% of your plan.
For example, printing costs for posters are easily researched but the work required to produce something interesting and creative is much harder to predict.
How to estimate your uncertainty
Because 80% of the problems usually come from 20% of the plan, we should set aside most of our planning time to focus on the riskiest items.
Identify which cost/time estimates from your scoping list you think are currently the least accurate or most likely to “blow out”.
For a lot of these we can probably still do some basic leg work and improve our initial estimates with a few simple tricks:
- Try to split the item into smaller, easier to estimate items
- Try to do some research to give you additional context, such as requesting quotes from local suppliers
- Try running a quick, cheap experiment to improve the estimate, such as making a small-scale prototype or sending an email survey to your target audience
For everything that is left, we have to accept that we’re dealing with a wide range of possible outcomes rather than a single number.
For each of these items write down what is likely to go wrong and:
- the cost of it going wrong
- how likely that it will go wrong (as a percentage)
- anything that can be done to prevent the problem
Add any reasonable costs of preventing problems to your total project plan and budget.
For everything that can’t be easily prevented, multiply the % chance that a problem will occur by the cost of it occurring and add that to the project budget. For example, if you think something is about 50% likely to cost an additional $1000, add $500 to the budget.
Now, add another 10% to the project budget. This is the “contingency budget” and is there to cover everything you haven’t thought of yet. Don’t remove this or you’ll regret it!
5. Fidelity
Fidelity is how rigidly every detail must match our pre-existing ideals.
It’s easy for the concept of fidelity to be confused with quality, but really it’s closer to flexibility (or lack of).
Of course, we can reduce costs by dialling down the quality, but we (usually) don’t want that. After all, you’re trying to fund something you love, right?
What we’re talking about here is being less prescriptive about individual details so that the same scope and timelines become more achievable at the same (or reduced) price, but maintaining the same overall quality.
For example, say you wanted to promote your campaign with a website. A high fidelity solution will require something built and maintained by an expert, easily costing upwards of $5000. A low fidelity solution could leverage a startup providing quality “off the shelf” websites in the $10–20 per month range, at the same level of quality.
How to estimate your project’s fidelity
If you’ve been following the action plan so far, you probably have a project budget that is uncomfortably large. This is totally normal, but now we’re going to reduce it, potentially drastically.
Throw out your ego, keep an open mind and lower the fidelity of anything that:
- Requires a specific (named) person/place/organisation/tool to be available at an exact time or comes with a premium price tag
- Requires expert skills to create something custom when a generic provider offers something comparable
- Requires extensive prototyping or experimentation to achieve
- Could be replaced 1:1 with a cheaper alternative without compromising the campaign goals
For example “Hiring Jenny Smith as drummer” may be too prescriptive. If she is unavailable it could be a last minute, expensive scramble to find a replacement. An item like this adds uncertainty and restricts timelines, increasing the budget. Replace Jenny with “1x drummer” — now you’re suddenly free to shop around (which you should start doing now 😈 — you know what Jenny’s like). She might not like it, but your campaign is in a healthier position.
Repeat steps 1–5 until you’re satisfied
There’s a good chance that your budget still seems too large (if not, woohoo! Go raise some funds!). Don’t despair, there’s probably still lots of opportunities to tweak and rebalance all five forces until things work in your favour. Go back to the start and work through the action plan a few more times, trying out different options along the way, to see what alternatives you can come up with.
During planning and right up to the moment that you start raising funds, you can freely iterate on your plan as much as you like. (Assuming you are doing this before you start raising funds, ahem).
Treat this phase as a golden land of unlimited opportunities. Take as much time as you need. Once your campaign is successful you’ll have a relatively fixed budget and timelines to get everything done, so make sure that you’re feeling prepared!
If you’re looking to estimate a project — crowdfunded or not — our tool, Estimate Work, might be helpful for you. At the moment it’s most useful for entering your items, grouping them and getting some smart numbers back. In the future, you’ll be able to prioritise, assess uncertainty, and visualise work streams. If that sounds interesting, sign up now — it’s only $9 a month.
If you’ve got a story to share about estimation, questions or don’t mind answering some research questions from us, we’d love you to join us on Slack.
This post was written By Amelia Schmidt from Estimate Work.
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