Crowdfunding websites like Kickstarter and Indiegogo are rapidly innovating how businesses raise capital. In the old days, you couldn’t screen your ideas before an audience in the same way you can now. You had to do your own market research, manufacture your product on your own dime, and hope for the best.
These days, though, crowdfunding allows business owners to pitch their minimum viable product to an audience. If they raise enough money, then the product will become real! If not, then the business owners either fix the problems or cut their losses and move on. It’s a win-win all around.
But what happens if you raise way more money crowdfunding than you need? Do you pocket the excess revenue? Some people do, but that’s not necessarily in keeping with the spirit of Kickstarter. That’s why many project creators choose have one or more…
Kickstarter Stretch Goals
Kickstarter stretch goals are promises that creators make to their backers. If a certain amount of additional funding is raised, then the creator will improve the product in some way. For example, with Kickstarter board games, creators often promise higher quality game components as stretch goals.
Stretch goals serve two different purposes. First, stretch goals are a display of goodwill. It’s a way of saying to your backers, “thank you for helping us get this far. We will share our appreciation by making the product even better!”
Second, stretch goals keep backers engaged with the project. Much of the excitement of Kickstarter comes from reaching the goal. Once the goal is reached, it would be easy for the campaign to become dull. Stretch goals help prevent that from happening.
The Dangers of Kickstarter Stretch Goals
Believe it or not, Kickstarter stretch goals can be really dangerous if not handled well by the creator. By their very nature, stretch goals mean changing the final product, which can be very risky if the creator does not understand exactly what they are doing.
Fulfilling a Kickstarter on-time and under budget in the first place is very difficult. This is because on top of creating an excellent product and marketing it very well, a creator must also create a functioning supply chain. That’s no small task, and here’s a quick list of what that involves:
- Planning for demand
- Materials management
- Inventory management
- Manufacturing and production
- Warehousing and distribution
- Order fulfillment
- Returns management
- Customer experience
That sounds a bit abstract, so let’s use a concrete example. Take a board game. Instead of using standard wooden meeple pieces, one of the stretch goals includes making custom plastic ones. Here’s what that does to the supply chain:
- Manufacturing: The manufacturer has to set up a custom plastic injection mold. This adds thousands of dollars and a few weeks to the production time of the game.
- Transportation: The game winds up being a couple of ounces heavier than originally thought, increasing freight cost.
- Order fulfillment: The game is heavier and requires more postage to ship. Costs add up.
- Customer experience: The project is delayed, making customers angry.
See what we mean? None of these issues can be devastating if you have enough money or a loose enough schedule. Yet if your budget has little room for adjustment and your schedule little room for additional work, then stretch goals can quickly cause trouble!
Things to Consider Before Setting Kickstarter Stretch Goals
Don’t swear off Kickstarter stretch goals entirely, though. They’re really useful and backers generally expect you to have them on your campaign. The trick is to choose your Kickstarter stretch goals very wisely so that you don’t make promises you cannot keep.
First, make sure your stretch goals are feasible. If you’re selling a tabletop game, do not promise a video game version of the board game unless you have already created it. You would need to hire a software developer or do the programming yourself. You would likely need to get the game greenlit for the Steam store in order to distribute it.
Second, be careful about how much complexity you take on when adding stretch goals. It’s one thing to use slightly nicer materials that won’t dramatically change the manufacturing process. It’s another thing entirely to retool your basic product specs in order to add a bell or whistle that takes another three months to implement.
Third, pay attention to cost. Do not spend all of your excess funds on stretch goals. It costs a lot already to fulfill additional rewards once you go beyond your fundraising goal. Even if you account for the additional expenses, do not spend all extra marginal profit you receive. You never know when a stretch goal is going to cause you to incur downstream supply chain costs. Many successful Kickstarter creators find themselves paying bigger bills than the expected.
5 Best Practices for Choosing Kickstarter Stretch Goals
With all the above in mind, we’ll conclude with five best practices for choosing Kickstarter stretch goals. By following this advice, you’ll get the benefits of having stretch goals while avoiding the many pitfalls to which you could succumb.
- Plan stretch goals in advance. Do not come up with stretch goals on the spot. Plan every single stretch goal well before the launch of the campaign. Making up stretch goals as you go along is a recipe for disaster!
- Plan well beyond your fundraising goal. Even if may seem egotistical to plan stretch goals to a million dollars, it’s still a good idea. Planning stretch goals for unrealistic amounts help you avoid succumbing to the temptation to create stretch goals on the spot later.
- Stick to incremental improvements. Do not deviate from your core product! If you raise enough to start thinking about stretch goals, then people have shown already that they like the basic product you’re pitching. Stretch goals need to incrementally improve the product without completely revolutionizing it.
- Pad your budget. It’s tempting to set stretch goals at the lowest viable amount, but you should avoid this temptation. Stretch goals introduce uncertainty, and it’s smart to set a stretch goal a couple thousand dollars higher than it has to be in order to be possible.
- Pad your timeline. If you are running a Kickstarter campaign and you know that some of your stretch goals may increase the time to ship, then account for the stretch goals in your original timeline. If you raise enough to meet stretch goals, then you don’t have to say “we need more time.” If you don’t raise enough, then you can say “we’re delivering early!”