Budgeting Your Kickstarter Book Project, with Free Worksheet

When you are budgeting your Kickstarter book project, making an accurate budget is important. You want to set your fundraising goal at a reasonable level, but you don’t want the project to fail because you underestimate the real costs. Book publishers have a very useful tool for addressing just these questions: the Title Profit & Loss worksheet, which is created for each new book the publisher is considering publishing. These P&Ls lend themselves well to creating a Kickstarter budget, with appropriate modifications. In this post, I outline a Kickstarter-adapted Title P&L for a project with book distribution limited to your backers, and selling direct yourself. Next week, I’ll provide a P&L for selling through broader channels, with options including the book trade and selling as an Amazon merchant.

You can download this basic Title P&L worksheet modified for a Kickstarter project here or at the end of this post. There are no doubt items in this sample P&L worksheet that aren’t relevant to your project, and probably relevant items that are missing. It’s easy to import and modify the worksheet to fit your project in Excel, Apple Numbers, or any other spreadsheet program. Be sure and check your work carefully after modifying—it is very easy to introduce errors into worksheets!

The Book P&L

Because book publishers have limited capital to invest in book projects, they examine the income potential for each new book prior to publication. If they don’t do this they go out of business, because they publish too many books that lose money. Its just that simple. This applies to both for-profit and nonprofit publishers: it doesn’t matter whether the capital comes from sales or donations or both, it is always limited. The main tool for evaluating a new book’s potential is the title P&L which, when suitably modified, is the perfect tool for building a budget for a Kickstarter publishing project.

Title P&Ls are built in five sections: 1) Sales estimates 2) Income, 3) Cost of Goods Sold, 4) Overhead, and 5) Net profit (or loss). To arrive at the net profit is simple arithmetic:

Income — Cost of Goods Sold — Overhead = Net profit

I’m going to change the terminology a little bit because:

  • You may very well be putting your project together as an individual artist or as a one-time collaboration rather than as an established organization with ongoing expenses, so instead of “Overhead” I’ll call fixed expenses “Project Expenses.”
  • Book publishing profits are highly sensitive to the number of books sold, so it is useful to strictly segregate costs that vary with the number of books sold, like printing and freight, from one-time costs like cover design. These kinds of costs are called “Cost of Goods Sold,” but to be crystal clear I’ll call them “Variable Costs.”
  • Net profit may not be exactly the right term, because you may very well not be in this for profit. I’m calling it “Surplus” instead, or “Shortfall” if it is a negative number.

Here’s the bones of a simplified title P&L modified for a Kickstarter project:

Income — Variable costs — Project expenses = Surplus (or shortfall)

The Title P&L, Modified for Budgeting Your Kickstarter Project

Here’s a simplified P&L with hypothetical numbers plugged in. The first section estimates book sales through various channels. The downloadable spreadsheet has more detail in it. Explanations of each item follow.

 

 TITLE PROFIT & LOSS
BOOK SALES Copies Shipments Sales
Copies sold to individuals at $45.00 200 0 9,000.00
S&H charged to individuals at $5.00 0 200 1,000.00
Copies given to backers at $0.00 600 0 0.00
S&H for backer copies at $0.00 0 600 0.00
Project copies for artist/team 20 0 0.00
TOTALS 820 800 10,000.00
INCOME
Book sales income $10,000.00
Kickstarter funding 24,000.00
Less Kickstarter fee (5%) (1,200.00)
Less card processing fee (3%-5%) (960.00)
TOTAL INCOME 31,840.00
VARIABLE COSTS
Printing, books sold 200 @ $25.00 $5,000.00
Printing, backer and team copies 620 @ $25.00 15,500.00
Shipping, books sold 200 @ $2.65 530.00
Shipping, backer copies 600 @ $2.65 1,590.00
Fulfillment services 800 @ $2.00 1,600.00
Credit card fees on sales at 4% 400.00
TOTAL VARIABLE COSTS 24,620.00
GROSS MARGIN 7,220.00
PROJECT EXPENSES
Development
  Editorial 250.00
  Artwork 50.00
  Cover design 700.00
  Text design and layout 1,100.00
  Printing setup charges 120.00
  Travel 50.00
  Equipment rental 50.00
Marketing & Promotion
  Project website 500.00
  Copywriting 125.00
  Launch party 400.00
  Miscellaneous 200.00
Fundraising
  Video—script 400.00
  Video—production 1,000.00
  Still photography 400.00
  Copywriting 250.00
Professional Services
  Legal 1,000.00
  Bookkeeping & Accounting 200.00
  Tax preparation 200.00
TOTAL PROJECT EXPENSES 6,995.00
PROJECT SURPLUS (SHORTFALL) 225.00

Book Sales

In this simplified P&L, books are only sold directly by you in person or through your website. I also include the no-revenue copies for backers and staff here because doing so facilitates keeping track of total number of copies required.

Income

Income is all the money coming into the project, including the book sales income calculated above and your Kickstarter funding. I’m showing Kickstarter’s fees and credit card processing fees as negatives in the Income section because those will reduce the total amount of cash you have to work with right off the bat.

Variable costs

Variable costs are all those costs that theoretically vary with how many books you sell and ship.

Printing: It gets tricky with book printing because printing cost per book depends partly on how many books you print in a run; so on one hand, you don’t want to print too few at a time and see your printing cost per book go too high, and on the other hand, you don’t want to sink money into printing books that will never sell or otherwise be distributed. Book publishers face this dilemma all the time: they never know how many copies of a book are actually going to sell, and therefore how many to print. Kickstarter actually makes the process a bit more rational, because you can estimate up front how many copies to give to backers based on your fundraising target and estimated average donation amounts. (Kickstarter has lots of data about average donation amounts and other stats.)

Shipping materials: check out online catalogs such as Uline for pricing. If you use a fulfillment service like Itasca Books shipping materials will be included in the fulfillment fee.

Shipping/Postage: You can estimate these by using the USPS or UPS websites using an estimate of the book’s weight. (See handy online book weight estimator.) Err on the high side here: it is very easy to underestimate shipping costs!

Fulfillment Services: There are services that will provide pick, pack ship services at reasonable cost. Here’s one: Itasca Books. (Full disclosure: Itasca is Bookmobile’s book distribution sister company.)

Credit card fees: It is probably wise to assume that people will be paying you with a credit or debit card. Square is handy for small organizations and projects.

Gross Margin

Gross margin is Income minus Variable costs. In a classic Title P&L this can be useful in determining how many books you need to sell to break even. I do not address a breakeven calculation here because the revenue from Kickstarter makes the calculation more complicated than it is useful for a simple budget.

PROJECT EXPENSES

Project expenses are those things that need to be done whether you sell one book or one million. The cover design, for example, only needs to be done once. Note that I have included fundraising expenses, so that the budget really covers the period prior to Kickstarter funding as well as after.

SURPLUS (or shortfall)

Surplus (or shortfall) is what’s left after all the costs and expenses are subtracted from the income. Obviously it can be a positive (surplus) or negative (shortfall).

The worksheet

Download the Title P&L Sample here. The great thing about worksheets is that you can try all kinds of scenarios with different selling prices, sales quantities, fundraising goals, etc. However, there are two seriously bad things about worksheets:

  • It is extremely easy to have an error in a formula that is hard to detect without systematically checking all formulae in the worksheet. In fact, two very influential economists got egg on their faces for just this. You have to double-check formulae!
  • It is extremely easy to fool yourself by building a plan based on a worksheet with too-optimistic sales or cost assumptions. (This is the bitter voice of experience speaking here!) You have to be optimistic or you wouldn’t do a Kickstarter project to begin with, but strive for realistic assumptions and ways to minimize risks.

Do your research and use the best numbers you can in the worksheet: the numbers in the worksheet are not meant to represent reality, though in some cases they may not be far off! Also, I make no guarantees that the worksheet is 100% perfect, and it is very easy to mess up a formula when you make changes to a worksheet. As I say to my fourteen-year-old regarding her math lessons: check your work!

Careful: A Project Surplus Does Not Equal Cash Flow!

This Title P&L shows the project surplus (shortfall) at the completion of the whole project. The numbers can work beautifully in this kind of projection yet you can still have periods in the middle of the project where your cash outlay is more than your cash coming in. Two things can help make sure this doesn’t happen: 1) set your fundraising minimum to cover all anticipated Variable Costs and Project Expenses, and 2) break out your cash flow month by month, showing money coming in from all sources and all money going out.

Next Week: Tackling the Book Trade in a Title P&L

Selling through wholesale book channels (aka the book trade) complicates the P&L because you wind up with two or more selling prices: the retail price, and wholesale prices for book wholesalers and bookstores. Also, you will need a distributor to sell to the book trade, and distributors charge fees that have to be factored in. Another complication is that to sell into the book trade, you have to allow books to be returned from stores for credit, which multiplies the uncertainty about how how many copies to print and increases costs. In fact, there are extremely good arguments for not selling books through the book trade. Next week I’ll run through a Title P&L with book trade sales factored in so you can get a picture of how it works, in case you have your heart set on selling your Kickstarter-funded book through the trade.

Need a printing quote or more information?

I’d be happy to answer questions—you can contact me via email.
 I welcome any feedback, including that pointing out my errors! You can request a printing quote here.

Don Leeper is founder and CEO of Bookmobile, which has provided design, printing, eBook and distribution services for book publishers since 1982.