How we turned $140k on Kickstarter into $40k in debt. And how we broke even.
There are two big questions that every successful Kickstarter creator has to ask. We got them wrong.
I’m John Teasdale. My friends and I created The Contender: The game of Presidential Debate. On September 9th, 2015 we received $127,827.01 from Kickstarter. This sounds like a lot of money, until we say that this week, November 22nd 2016, we have finally gotten out of debt. That’s 440 days of work after creating the product and running the Kickstarter before we made $1.
It did not have to be like this.
Here are the two big questions, our answers at the time, and what we learned as a result.
Question 1: Where to manufacture?
In games the big options are USA and China. Our tradeoff list looked like this:
- We get to put big old ‘Made in the USA’ large on the box.
- Faster shipping time, especially around the holidays.
- Transparent, quick communication. We were even able to visit the plant.
- Faster fixes if the quality isn’t what we expected.
- Waaaaay cheaper. Like 50% cheaper.
- I had printed games in China before, and have a good relationship with the company we used.
After a team meeting, we decided to go with the USA. We were wearing star-spangled glasses, but we also wanted to deliver by Christmas. October is when all companies make big orders to prepare for the holidays. If you’re late, manufacturing backlog and shipping congestion can make you miss the date.
We chose a large US manufacturer that printed cards for Uno, Settlers of Catan, and Magic: The Gathering. Because of their experience, we assumed they’d be ‘safety rails’ against bad production ideas.
Alas, large companies work with other large companies and move at the speed of large companies. We assumed that getting a proof and making updates based on the proof would be quick, but it took weeks. Not to say that they’re a bad company, just that we should have picked a vendor who understood the challenges a smaller organization faces.
Big Lesson: Work with companies that have track records of working with companies like yours.
Our assumption about safety-rails was also wrong. Here are three examples of the problems that cost us time, money, and backer good will:
- We wanted space in the box so expansion cards would fit. The printing company recommended a cheap cardboard insert. The empty cardboard insert created a crumple zone that caused hundreds of games to arrive damaged.
- We thought that the company would have experience shipping directly to Amazon fulfillment centers. I ended up having to figure out how to do this and, after a false start, teach them.
- Our Politically Incorrect (PI) expansions arrived at Amazon unlabeled. Amazon had to delay our inbound shipment for processing and many PI decks were then labeled incorrectly. We still see 3–4 returns a month from customers who received the PI deck instead of the Base Game.
All these delays stacked up until we were in danger of missing Christmas despite printing in the US. If you backed our Kickstarter, you might remember our message that said as much. People were not happy. To make matters worse, as Amazon processed games into stock, some people were able to Amazon Prime the game before the Kickstarter shipments went out.
The messages started pouring in. The challenge every American protagonist faces in mid-December was presented to us — save Christmas. We sent out a flash survey of everyone who was planning on giving the game as a gift. Everyone who responded was upgraded to 2-day shipping free of charge. About 1000 games made it on time, but some didn’t. It cost us about $10,000.
Question 2: How much to order?
Now you have to decide how much you’re going to invest in yourself. When you create your Kickstarter, you should have 2 goals. The public one is the amount of money you need to raise to make it worth making the product. The private one is the amount of money you need to raise before you start a company that makes this product. The latter goal is much higher. Ours was $150,000. That’s when, by our math, economy of scale would kick in and the business could sustain itself while being profitable.
We didn’t hit that mark, but we were soooooo close. High on our success, the next few weeks went like this meeting…
- We sold 4,000 games in a month, and it’s the beginning of an election year. If we can keep just 25% of our momentum, we’d sell about 20,000 games by election day.
- Hmmm, if we order 20,000, we immediately go $40,000 into debt. Not including being on the hook for the PI & 2016 expansions.
- Shut up #2. If we order 20,000 and sell them all, we’ll each make $150,000!
- Us: “We’d like 20,000 games please!”
- Manufacturer: “Here you go! Make sure to pay us the rest of the money you owe us when you sell them!”
7. Us: 😱
Turns out, Kickstarter is a magical fantasy land where people get excited about your stuff in a way that doesn’t translate into your small business. After talking to several folks in the industry, this is the norm. If you keep 8% of your Kickstarter momentum throughout the year, you’ve done well. We did 4%. The CEO of a much more experienced game company told us when he feels especially aggressive, he’ll order 2–3x what’s pre-ordered. We ordered 5x on a whim. Basically, we were overly optimistic.
Big Lesson: If you’re planning to sell beyond Kickstarter, order at most two times what you’ve already sold.
Had we printed in China, and only printed what we had to, we could have walked away with $23,000 each.
Whelp, now what?
The first problem we ran into was where to keep the things. Amazon.com has a starting max inventory cap of 5,000 products. I pulled out that famous northern charm and got them to give us a free upgrade to 8,000 units. This was lucky because we had 7500 units (Base Deck + PI expansion) to send out right away. Not getting that bump would have created serious delays. A couple hundred copies of the game line the walls of the Guts and Glory office. The rest of them, I’m not actually sure. Somewhere on the edge of space and time.
Which brings us to the second problem. How do we sell these? It was so easy before. Here are some of the things we tried:
Tried: Send free copies of the game to bloggers and members of the media.
Result: None. All the write ups we got were people reaching out to us. The bigger stations returned to sender unopened.
Tried: Facebook Advertisements.
Result: Spent ~$1000 on 30 different ads, ~20 clicks, 0 sales.
Tried: Featured on YouTube Channels with >1,000,000 subscribers.
Result: 3–4 games sold that day
Tried: Created comedic ads with sock puppet presidents playing the game.
Result: A LOT of lost time and frustration. No noticeable boost in sales.
Tried: Went to the Iowa caucus / NH Primary, got on local news, got written up by the Daily Dot.
Result: 75% boost in online sales while we were on the road. It about broken even because we were spending money to be out there. We attribute the boost being more active on social media.
Tried: Write articles ranking the niceness of the Campaign headquarters in Iowa / NH.
Result: Lots of laughs. No so mucho dinero.
Tried: Get a write-up in the Wall Street Journal. (kinda just fell in our lap)
Result: 100% boost in online sales for 3 days.
Tried: Rent a booth at Politicon.
Result: Netted ~$1000.
Tried: Get a space near GenCon.
Result: This was great for us. We were not on the convention floor, but we were close enough to get spillover traffic and could still meet a bunch of people who knew WAY more than us. We heard other small game companies lost money to attend in hopes of making deals.
Tried: Amazon Sponsored Products
Result: Actually works. We spend about $2.70 on ads per sale of the base game.
— EDIT —
Tried: Write a series of tell-alls about your business and hope someone blows it up on Hacker News / Reddit.
Result: Hi everyone! (Read about what happened when this post went viral)
— END EDIT —
Tried: Make more expansions and tell people who already like our game about them.
Result: HOLY SHIT WHY DIDN’T WE DO THIS THE WHOLE TIME.
We fell into a trap. We thought marketing meant we had to come at people sideways to get them to give us money. Turn’s out, the game’s just good and people want to play it. When we started focusing on improving and expanding the game, we not only saw an increase in revenue because of the new expansions, but sales on the rest of our games picked up as well. This was what got us out of debt.
Big Lesson: Use your energy to sell what you’re selling. Don’t use it to promote something that sells what you’re selling.
We still have over 10,000 games in stock, and are quickly running out of places to keep them. Our next Amazon long term storage fee estimate is $6,500. At this point we have to destroy thousands of games, just so we don’t go back in the red on storage fees.
Fortunately, we don’t have to destroy everything, and anything we sell going forward is, finally, profit.
If you’re interested in how this article went viral and what impact that had on our sales you can read: We Told You We Sucked: A Financial Breakdown of Our Biggest Sales Day Ever.