Help me understand something with Kickstarter? (credit card, debt, sales, financing)

[rezfreak]

So while I understand kickstarter and how it works, I'm confused about the business side of it.

I saw someone who made a similar product to what I used to make. It was more of a hobby at best I'd say. Now this person raised over 10k for their project when they only were asking for 2k.

Now, I know the materials that this person uses are on the low side, she probably only needed roughly 1k in materials (at best). So what about that other 9k? If businesses exceed their project needs, do they get that money free and clear to do what they want to? Couldnt they theoretically just go on vacation with extra money? Pay off credit card debt?

[InventorGuy]

Kickstarter is geared to help you "kickstart" a business, and unlike a hobby, financing a business requires a lot more than getting cash for production materials. On Kickstarter, for people to contribute, you offer them something in return. For products it is usually the product at some future date, at a discount from the future "full" price, delivered once you get enough funding to get a production run produced. A huge problem with funding a business is the upfront money required to build the product economically --- which means "mass production". We're in a "now" economy, with people wanting things today or tomorrow, not six months from now, and while it might be easy to hand-make a few products and sell them to individuals, it requires some real money to develop tooling and to get a manufacturer to gear up and buy materials to produce your product. Kickstarter gives you the platform to reach a lot of people --- people interested enough in new products and helping others, that they are willing to risk the potential of losing some or all of their money, or risk getting a product that is different or delivered later than expected. (Of course the crowd-funding model goes out the window when investing people lose their money, so the Kickstarter leadership does their best to keep it legit.) In return, if the Kickstarter project is successful, the business gets a bunch of customers before they've made the product, which allows them to pay for the production run while getting some international market visibility (and maybe international competitors). If they're good at raising money, then the big chunk of "extra" cash they get, after covering additional obligations to deliver more product, could be used for anything they want. Assuming it can be made and sold profitably, a good business person would likely invest that "profit" in another production run. By the way, the rule of thumb is that a product should be able to carry a retail price of at least four times its cost to produce in order to be profitable given typical distribution channels (manufacturer -> distributor -> retailer). Of course if they want to pay off their credit cards instead of investing in the future, and they've met their commitments, then they're free to do so.

[rezfreak]

Yeah i do know about the business side of it, I do run my own, albeit small, business. My business is all funded by me, luckily I have low overhead/costs with high profit margins, but the "cost" of my product is tied up in my time.

I've been thinking of running a kick starter myself, which is why i was confused about this gray area. If I "charge" so much for each level of backing, is it considered normal to factor in your time (salary) as well in the project? I tried asking Kickstarter themselves but they seemed to not give a very clear answer on this matter. obviously, I'm just trying to ensure i'm doing things the right way. I'd prefer to re-invest my extra money back into the business for new equipment, but just unclear if kickstarter has any say in the money and where it goes (as long as the backers get their items).

As a for instance, the product I make now costs me roughly 3-4 dollars in materials. I sell it at 30-45. Why so high? Because the thing takes me about 2-2.5 hours to make for each product.

The new product I'm developing is a much faster product, it'll likely be about 2 dollars in materials and about 1 hour of work. I'll likely charge 20 for it. I have plans for other potential "unlocks" in designs. I have a VERY specific product but the demographic is a loyal crowd and they tend to love my product. Just trying to plan for potential overages and what my obligations with the money are.

[oregonwoodsmoke]

There are other start up costs besides materials. Advertising, promotions, time involved in sales, costs of shipping.

[rezfreak]

My question still remains, do people factor in time for their salary?