Whatever the final goals of the many crowdfunding campaigns out there, most have one thing in common: a need for crowdfunding fulfillment. This means that once funded, project owners must ship something tangible, like a newly launched product or thank-you reward, to their backers.
Believe it or not, crowdfunding project owners often overlook this key element in their plan. In fact, many fully-funded projects find themselves short of the hoped-for cash when all is said and done. That’s because they didn’t factor in the total cost of fulfilling and shipping promised items to their backers.
“One of the biggest mistakes we see crowdfunders make is not accounting for their shipping and fulfillment costs during the planning phase. They typically include product costs in their budget, but don’t realize how inbound freight and packaging and shipping costs can add up. As a rule-of-thumb, 20% of their total product costs should be added to their budget to cover crowdfunding fulfillment and shipping.”
— Anthony Watson, ShipBob
“One of the biggest mistakes we see crowdfunders make is not accounting for their shipping and fulfillment costs during the planning phase. They typically include product costs in their budget, but don’t realize how inbound freight and packaging and shipping costs can add up. As a rule-of-thumb, 20% of their total product costs should be added to their budget to cover crowdfunding fulfillment and shipping.”It’s easy to avoid this mistake by building crowdfunding fulfillment costs into your project plan from the start. This guide will show you how to do that. First we’ll take a quick look at the order fulfillment and shipping process and show you how to estimate those costs. Then we’ll explore the ways a fulfillment company can assist in all of these tasks, and how to know if your project is a good candidate for their services. If you’re considering a fulfillment company, we highly recommend ShipBob. Click here to speak with a representative and get $100 off.
Armed with this information, you’ll be ready to launch a campaign with a realistic budget, deliver on promises to your backers, and have funding left for your target project.
Now let’s take a quick look at the basics that every project owner should know about the crowdfunding fulfillment process.
What You Need to Know About Crowdfunding Fulfillment
The crowdfunding fulfillment process applies to every venture that needs to deliver something to someone. It really doesn’t matter if you’re shipping a thank-you reward or a pre-purchased product, the overall process is that same. And at every step, there is a cost that needs to be considered in your overall funding plan.
Let’s explore the four major elements that make up a crowdfunding fulfillment operation:
1. Get Products or Rewards In
This is the process and cost of getting whatever you’re shipping into the location that you’ll ship it from. If you produce the items yourself, great. Just remember to account for your production costs in your crowdfunding plan. If you have to bring these products in from a supplier or manufacturer, be sure to include the product costs, plus inbound shipping or freight fees in your plan.
— Anthony Watson, ShipBob
2. Store Products or Rewards
Where will you keep these items until it’s time to ship? This might be a long-term solution if you’re kicking off a new ecommerce venture, or a short-term need if you’re just shipping out a batch of thank-you rewards, like tee shirts, that you can store at home. So, this cost could be $0, or far more. Whatever it is, include it in your plan.
3. Pack Products or Rewards
This is the actual process of preparing products or rewards for shipment. This step, and the packaging required, will vary based on what you’re shipping. Whether it’s a splashy custom-printed box for a subscription kit rollout (from $3 to $10 ea.), or a simple envelope to ship a tee (around 13¢ ea.), be sure to include your packaging costs in your plan.
And don’t forget to budget in labor costs, even if you plan to do it yourself. This includes the time spent picking and packing items, and labeling packages.
4. Ship Products or Rewards
This last step in the fulfillment process can be a costly surprise if you don’t plan for it. So it’s important to figure your potential shipping costs and include them in your project plan. Since many crowdfunded rewards ship just one or a few items using identical packaging, you can estimate shipping costs fairly easily. We’ll discuss how to do that in detail below.
Remember, You Have Choices
If handling crowdfunding fulfillment yourself seems daunting, remember that you have options. A great number of successful crowdfunding projects turn to fulfillment companies to handle these tasks. Some fulfillment companies, like ShipBob, even specialize in small startup and crowdfunding fulfillment. They can help you estimate costs, devise a budget to cover expenses, then roll it all out in a timely manner once your project is funded.
Now let’s look at how to estimate your crowdfunding fulfillment project’s shipping costs.
How to Estimate Your Crowdfunding Fulfillment Shipping Costs
Shipping rates are based on several factors which can be addressed in a simple four-step process. We’ll show you how using this sample project:
- Funding Project: Printing an Olive Oil Soap Recipe Book
- Backer Reward: A copy of the paperback book and three bars of handmade soap
Step 1: Figure Your Package Weight & Size
This is pretty simple, just measure the size (l x w x h) of the box or envelope you’re using to ship, then and weigh the final packaged item. Note that you need the packaged weight, because a box or even a chipboard envelope can add several ounces to your product weight. And note! Carriers always round up to the next pound, so try to keep your packaging as light as possible to keep your costs low.
- Our example ships in: 4” x 6” x 1.5” box
- Packaged weight: 4 lbs.
Step 2: Estimate Your Number of Packages
If you’re sending rewards out all at once upon funding, called batch fulfillment, the total number of packages you’re shipping matters. This can be hard to predict since you won’t know exactly how many backers you’ll end with. But you can estimate this number by dividing your total funding goal by the reward or tier amount. For an ecommerce product launch, you’ll need to estimate the initial rollout batch, plus forecast ongoing sales based on demand.
Our example will ship in one batch:
- Funding goal: $5000 ÷ Reward Tier: $50 = 100 Total Shipments
Step 3: Estimate Ship-From & Deliver-To Locations
This is hard to predict since you don’t know where all of your backers will come from. Though, if you market to groups in certain geographic areas, say local clubs or associations, you can estimate those as delivery locations. Ditto if you project is of local interest. If your project accepts worldwide backers, you’ll need to budget for international shipping, too.
If you’re casting a nationwide net for funding, it’s safe to spread percentages among major cities for your estimate. Say, 25% New York, 25% Los Angeles, 20% Dallas/Houston, 15% Chicago, 10% Miami, 10% Atlanta, and so on.
- Our example: Project marketed heavily to California olive growers and regional luxury spa and personal care markets, so we’ll estimate 50% CA, 50% rest of US
Step 4: Choose Carriers & Service Types
What carrier do you plan to use? UPS, FedEx, USPS are your top choices for US-based shipping. Each offers several service levels. Ground shipping is the least expensive method with UPS and FedEx. USPS offers inexpensive First-Class Mail and Priority rates for light packages.
Of these, USPS is ideal for lightweight items under two pounds. Also check out their flat-rate boxes if you’re shipping a small, heavy item. For large or heavy items weighing more than five pounds, UPS and FedEx generally are better choices.
- Our example: Our item fits in a USPS priority Mail flat-rate box that costs $7.20 shipped anywhere in the US
Next, Look Up Your Shipping Rates
Once you completed the four steps above, you can find shipping rates to different locations using these six steps:
- Visit your chosen carrier website (UPS, FedEx, USPS)
- Enter your package size and weight
- Enter your ship-from zip code
- Enter a sampling of ship-to locations based on your delivery estimates above
- Select the rate for the service you want to use
- Write down the shipping rates for different destinations
This gives you the cost of shipping packages to backers in different locations. Average these together to get your shipment cost estimate. Multiply that by the estimated number of packages you’ll be shipping, and there’s your shipping estimate for your project as shown in our sample below:
- Shipment Cost Estimate: $7.20 per shipment
- Number of Packages: 100
- Shipping Estimate for Project: $720.00
Remember! This number just covers shipping. You still need to add in your product costs, inbound transportation, storage, packaging, and labor costs for get the overall cost of your crowdfunding fulfillment. If you’re considering doing it all yourself, shipping software can save you time and money, and some is even free to use. See the top options in our guide here.
Next, let’s see how a fulfillment partner can make this whole process easier, while saving you you time and, in many cases, money.
What a Crowdfunding Fulfillment Company Can Do for You
Fulfillment companies do every task we discuss above for a living. And certain fulfillment companies, like ShipBob in particular, specialize in helping small businesses, startups, and crowdfunding campaigns meet budget-minded fulfillment needs. See how several top fulfillment companies compare in our article here.
Almost 90% of crowdfunded projects used some kind of fulfillment service or software to help them ship their rewards.
— Backerkit
A fulfillment company takes on all of your crowdfunding fulfillment responsibilities, from product receipt and storage, to packing and shipping. In itself, this saves you a mountain of time so you can get on with your successful crowdfunded venture. But some, like ShipBob, bring quite a bit more to the party.
First, they consult with you every step of the way
Remember the process we just discussed to determine your shipping costs? Fulfillment companies like ShipBob will do all of that for you, and with far greater accuracy. If you work with a fulfillment company from the beginning, you’re almost guaranteed to sidestep the costly shipping miscalculations that have sunk many fully-funded crowdfunding projects.
Second, they are experts in packaging and shipping
A fulfillment company like ShipBob knows how to ship your products or rewards safely, and for the lowest possible cost. Plus, if you’re looking to create a splashy custom-packaging program, they can help there too, and find ways to bring it in on-budget.
Third, deliveries arrive to you backers faster
A fulfillment partner helps you plan and stage all phases of your project so shipments roll out in a timely manner to meet your backers’ expectations. Another major plus, companies like ShipBob operate warehouses across the country, so items are delivered faster than those shipping from a single location. This is something backers will remember when they see you next crowdfunding campaign.
How Do You Know if a Fulfillment Company is Right for Your Project?
The simple answer is, contact them. It costs you nothing to talk to ShipBob or another fulfillment company about your crowdfunding fulfillment project, even in the early planning stage. That’s the best way to determine if your needs are a good fit for their services.
— Anthony Watson, ShipBob
If ShipBob or another fulfillment company finds they’re a good fit for your campaign or product launch, they’ll help you devise a fulfillment budget from the start. This give your crowdfunding campaign the professional edge that potential backers will appreciate, and want to be a part of.
The Bottom Line
The crowdfunding model is a terrific way to launch startups or creative ventures. Backers provide money without any expectation of a return, other than the product or token of appreciation that’s promised them. Be it a newly-invented product, or a reward like a tee shirt, every fully-funded project owner is obligated to deliver on that promise. For most, that means shipping some type of good to their backers.
Unfortunately, this is where many otherwise successful crowdfunding projects fail. Project owners unfamiliar with the costs of fulfilling and shipping products often under-budget these important elements, if they budget for them at all. That leaves backers upset over late or never-shipped goods, and project owners short-funded, or worse, facing overall losses.
A sound understanding of the crowdfunding fulfillment process and every cost involved is key to avoiding this critical mistake. Only then can a crowdfunding project owner handle it all themselves with confidence. Or, they can turn to crowdfunding fulfillment partners like ShipBob to fill this role, plus provide valuable guidance and every step of the way.
Have you launched a crowdfunding project yourself? Let us know how you answered your crowdfunding fulfillment needs in the comments below.
