The Hidden Costs You Forget about When Crowdfunding

So you decide to use a crowdfunding campaign to raise the money needed to launch your company or product. You figure out how long it will be before your company/product has traction, and then you calculate your expenses over that period — product development costs, marketing expenses, rent, salary/wages, manufacturing costs, etc., and it comes to $100,000, so you set that as your goal. However, you’re going to end up short on cash (unless you gain traction faster than you predicted), because you’ve likely forgotten about some hidden costs. First, your crowdfunding campaign may have promised contributors copies of whatever your product is. Unless your product is software, have you remembered to factor in the manufacturing, warehousing, and shipping costs of each item into the contribution amount? Many don’t. Furthermore, if your campaign is successful, you’ll be in business for real. That means you’re going to need to retain service providers, such as attorneys and accountants, who you will likely need to handle the contracts and bookkeeping that your company will have to deal with. Finally, there is the issue of taxes. In all likelihood, the money you raise in your crowdfunding campaign will have to be classified as income which you will have to pay the tax on (you may also have to pay sales tax if you’re offering advance copies of your product). So of that $100,000 you raised, you may only get to use about $75,000 of it. Therefore, when you sit down to plan your crowdfunding campaign and set your goal, you should consult with an accountant who will be able to figure the taxes and all of your expenses and help you figure out what you really should be asking for.

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