In April 2016 I ran my first Kickstarter, for a print collection of Irregular Webcomic! Fantasy comics. This Kickstarter funded successfully, and several hundred backers had their copies of the book delivered in time for Christmas last year! I also had a few extra copies printed, and you can buy them right now from TopatoCo, here.
Here is a post-mortem analysis of the financials of running this Kickstarter campaign, for general edification and posterity. All amounts are in Australian dollars (AUD) unless indicated (converted from US dollars at the exchange rate on the date of transaction, if applicable).
First, the good news! Here’s how much income I made from the Kickstarter! Wowee!
| Kickstarter income | |
|---|---|
| Kickstarter pledges | $23935.39 |
| Dropped pledges (backer didn’t pay) | -$255.00 |
| Refunds | -$160.00 |
| Subtotal | $23520.39 |
| Kickstarter fee (5% of subtotal) | -$1176.02 |
| Kickstarter payment processing fees | -$802.22 |
| Total transfer to me from Kickstarter | $21542.15 |
Now some mildly bad news: Here are the expenses I incurred in putting the book together, advertising the Kickstarter, mailing out original artwork as rewards for higher tier backers, and other miscellaneous things.
| Production and reward expenses | |
|---|---|
| Legal advice re trademarks (initial consultation) | -$1500.00 |
| Legal advice re trademarks (hourly rate)[1] | -$1800.00 |
| Fantasy world map commission | -$79.51 |
| Music licence for Kickstarter video | -$39.63 |
| Project Wonderful advertising for Kickstarter | -$234.29 |
| Rigid packaging for mailing original artwork to backers | -$26.55 |
| Postage of original artwork to backers | -$531.13 |
| Postage of proof copy book back to printer | -$22.90 |
| Postage of complimentary book to cover artist | -$15.90 |
| Total production/reward expenses | -$4249.92 |
[1] Since my comic relies on photographs of LEGO brand toys and miniature gaming figures, I wanted some peace of mind that by publishing a book, ostensibly for profit, I would not be opening myself up to copyright or trademark violation lawsuits. To this end, I hired an Actual Law Firm specialising in Australian copyright and trademark law to investigate for me. After some (expensive!) work, they concluded essentially that if I proceeded with the book, and I was to be sued for a copyright or trademark violation by the toy manufacturers, I would most likely be able to mount a successful defence in court. I figured that was about as good a guarantee as I could get.
And here comes the crunch. To actually print hundreds of copies of the book and mail them to backers, I used Make That Thing. This was to make things easier, as they dealt with finding a printer, getting the books and postcard rewards printed, taking delivery of the pallet of books from the printer, and then mailing them all out to the backers – rather than me having to do all that myself. It cost a bit in fees, but honestly if I had to do all of this myself I don’t think I could have mounted a cost-effective and successful campaign.
| Make That Thing expenses (book printing and fulfilment) | |
|---|---|
| MTT setup fee (US$1200) | -$1693.18 |
| MTT management fee (US$5000) | -$7054.92 |
| MTT customer service fee (US$509) | -$718.19 |
| Book printing (US$4701) | -$6261.12 |
| Postcard printing (US$234) | -$310.65 |
| MTT backer service fees (US$718) | -$959.91 |
| MTT book postage costs (US$2712.07) | -$3625.82 |
| Bank fees on international transfers to pay MTT invoices | -$80.00 |
| Exchange rate losses[2] | -$148.65 |
| Total MTT printing/fulfilment expenses | -$20852.44 |
[2] These “exchange rate losses” are losses incurred because Make That Thing charged me deposits on the customer service fee and postage costs several months in advance, then applied the deposit (in USD) as credit later when the expenses were actually incurred. Unfortunately for me, I had to pay using AUD, and the USD/AUD exchange rate fluctuated significantly in between, so I actually paid nearly AU$150 more than I would have paid if I’d been charged at the time of the expense, rather than in advance. (It took me some time to figure this out – I was adding and re-adding the expenses broken down by type versus broken down by payment date, and they just wouldn’t come out the same. After some time struggling with this, I realised the exchange rates were different at each payment date.)
As you can see by the various totals, if I’d had no book production and miscellaneous expenses, I would have made a grand profit of $21542.15 – $20852.44 = AU$689.71.
However, with the expenses I incurred in producing the book, advertising the Kickstarter, and mailing out bonus rewards, I made a loss of AU$260.21. And if I add the (one-off) legal fees investigating trademark law, I made:
Grand total loss: AU$3560.21.
For my next book: I won’t incur the AU$3300 legal fee again, and assuming I use Make That Thing again I won’t incur the US$1200 account setup fee again, so hopefully I’ll come much closer to breaking even.
Another issue I encountered was that I expected Make That Thing to bill me for the printing/postage before the end of June – but the bill didn’t arrive until August. In Australia, the tax year runs from July to June. So on my income tax for the financial year 2015-2016, I had to declare an additional income of $21542.15. I deducted the relevant expenses that had been incurred by the end of June, but this didn’t include the printing or postage bills. The result was that the Australian Tax Office assessed a significant income tax bill for me for that year, almost AU$3000 in extra tax. In hindsight, running a Kickstarter in April and expecting all the bills to come in by the end of June is overly optimistic.
What’s more, the Tax Office now has it on record that I am in the habit of making several thousand dollars more in income than my primary employer pays me, and has assessed me for tax in advance for the financial year 2016-2017. What this means is that they estimate the tax I will owe at the end of June 2017, based on my financials for the previous year. In other words, the Tax Office has helpfully estimated that I wil also owe roughly $3000 at my next tax return, and bills me in advance for that amount.
The good news is that under Australian tax law I can claim expenses incurred off income received in the previous financial year. So I will get to claim the printing expenses in my next tax return. And all that tax in advance that they’ve assessed and I am paying will be refunded to me when they realise that I haven’t actually made more than my regular income. So it will even out in the end. (Apart from the fact that I’m $6000 in the hole for roughly a year until it gets refunded.)
So there you have it! It was an interesting and difficult mathematical exercise juggling the prior knowledge of expenses, plus a buffer to handle unexpected expenses, against the expected income from the Kickstarter for various levels of backer support. As it was, the Kickstarter barely scraped through and funded with an amount just over the successful funding target (AU$22000). I knew if it just funded I would end up making a small loss, and was hoping that additional backers would help push the campaign into profitability.
I have no regrets though! I’m very glad to have the book out there in the hands of fans who have enjoyed my work over the years. And yes, I plan to publish more books in the not-too-distant future. Hopefully the next one will make less of a loss!
David,
I’m a big fan. I am a Patreon supporter. I once sent you a book because I thought you’d like it, if you recall.
I did not buy the book, and I thought that I should explain why.
For me, the annotatiosn are about half of what I enjoy in IWC. A collection that lacks the annotations is like a collection of, say, Calvin and Hobbes strips, but with half the punchline panels not included. It just seemed so fractional, so incomplete, as to defeat the purpose. To me (again, I’m speaking only for myself) Irregular Webcomic is very much panels plus annotations considered as a unified whole.
All of the above in service to this request: if you do publish another book, include the annotations. It works for Saturday Morning Breakfast Cereal and xkcd–the collections of which, by the way, I do purchase.
By the way, here in the United States our Internal Revenue Service does withhold some of our income based on estimates, and refund any excess after the fiscal year ends. The difference is that our tax code recognizes that the taxpayer knows more about his/her financial future than any mathematical formula based on the previous year, and allows us to adjust the withholding. (If we estimate too low, we can be penalized.) I’m sorry to hear you can’t make the same adjustment.
Carl – I’m sympathetic to including the annotations, and indeed would have preferred to include them myself. However the resulting book would have to have been something like 400 pages long, and cost $100 or more. You would have backed it, but hundreds of others wouldn’t have at that price, and nobody would now have a copy of the book. I don’t have anywhere near the volume of sales of xkcd or SMBC to make including the extra material economical – I’m selling probably less than one thousandth of their sales volume. The book price is already higher than many other similar collections, and I’m still making a loss. I wish it wasn’t this way, but it is.
Also, the ATO allows us to vary our tax estimates too, but also with penalties if we underestimate it. Since my income is now somewhat variable, I don’t have the confidence to vary their estimate.
Have you considered a DVD collection as an alternative?
I hadn’t… I will give that some thought! Thanks for the idea.
I ordered two copies of the book to give one to a friend who has since started reading IWC. I do hope there is some other book or such planned.
I sympathize with the tax implication as I live in Quebec, Canada which is two separate tax jurisdictions for income and they both do the income guess. However, you only have to pay in advance federally if you owe more than 2000.00 CDA and provincially if you owe more than 1800 CDA for three straight years.
What about making the dead tree book without annotations, but including a PDF version that has the annotations (at the end, so there’s no change in layout for the comic pages themselves)? This would be more work, but might be worth it.
I got the PDF version–but yeah, a DVD collection would be a particularly nice thing, especially if the annotations are searchable. Some of your explanations of science are very, VERY clear and well-written. (It shows that you’ve taught physics; my stumbling block there was that such things as the left-hand rule don’t work too well when you don’t know off the top of your head which hand IS your left…so a good chunk of physics I am rather horrible at if you want fast answers.)
David, thanks for the breakdown. And a BIG thanks for taking a decent financial hit for the fanbase. I will say, bring on the next book, I’ll be there on the Kickstarter!
Robert: That may be a possibility… I’ll look into how much effort it would be to generate a PDF including annotations. I expect it’ll be a significant chunk of work – proofreading, updating, formatting. But maybe…
Granted, a printed book costs a lot of money before you start making any. But it’s so nice to hold it in your hand, show it to friends (I ordered two, one as a birthday present – totally hit the spot, and thanks again!) and so on. Perhaps in a few years people say “I have ‘Burning down the Alehouse’, the original Kickstarter edition, you can’t get that for money or whatever!” – wouldn’t that be cool? I guess here in Germany aren’t very many copies around…
I sure hope you make another book!
I really enjoyed receiving my copy of the book at the end of last year. I appreciate your discussions like this cost break down. It is very interesting to see how the sausage is made, at least for me it is.
My small suggestion if you do another book like this, is to print the book landscape as opposed to portrait. Hopefully this wouldn’t make the page count too much larger, but the ability to print the comic larger would make them more readable.
Hi David,
first of all, congrats on getting this thing done! I am really happy to hold the book in my hands. I was wondering, how many books you actually printed and sold. As for the annotations – you could also just include QR codes with each comic leading to the appropriate annotation. Not the same as printed annotation but maybe the fastest wy from the book in your hand to the annotation on a screen…
cheers,
Carsten