How To Estimate Your Crowdfunding Fulfillment Costs
Launching a crowdfunding campaign is simultaneously one of the scariest and most exciting projects that any business owner can take on. It’s natural – healthy, even – to dream of huge financial success with tons of backers.
But crowdfunding fulfillment is deceptively hard. It catches a lot of first-time creators off-guard, and even creators on their second, third, and tenth campaigns worry about it. Unsurprisingly, a lot of those worries center around crowdfunding fulfillment costs.
Fortunately for you, it’s the lack of context that gives creators so much trouble. Estimating fulfillment itself is not terribly difficult once you know what kind of information you need!
In this article, we’ll talk about how you can estimate how much it will cost to ship your product.
Crowdfunding Fulfillment Costs: What To Expect
There are four kinds of crowdfunding fulfillment costs: freight shipping, customs, postage, and order fulfillment fees. Together, these four categories cover everything needed to take a batch of finished products from the loading dock at Factory A to the front porch of Backer B.
You may be wondering: “when should I attempt to estimate these fulfillment costs?” Our advice is to do it at least twice – once before funding and again after funding.
Here’s our logic. If you estimate your crowdfunding costs before your campaign launches, you have a chance to cut excessive costs and – if needed – adjust the price of your product.
Let’s put it this way – you never want to successfully launch and then find out that fulfillment is going to be far more expensive than you anticipated. That’s a worst case scenario, because it can turn your success against you. Each order shipped can put you further in the red!
But you also don’t want to assume your estimates from January are good in July. That’s why it’s smart to estimate fulfillment costs shortly after funding as well. Freight prices fluctuate, customs laws change from time to time, and order fulfillment centers and postal carriers routinely adjust their rates as well. Running a second estimate will give you a chance to adjust shipping prices in your pledge manager before you collect additional funding for that.
So with all that in mind, let’s start talking about the individual costs you need to account for.
#1: Freight costs.
Freight is how you transport large quantities of any good over long distances. For you, that will probably look like shipping orders from a manufacturing facility to a fulfillment center, or perhaps your private residence.
Freight prices are complex – more so even than commercial airline ticket prices. They’re based on where goods are coming from and where they need to go. The size, weight, and quantity of your products to be shipped are also a huge factor here as well.
In general, small, lightweight items shipped over short distances will cost less than large, heavyweight items shipped over long distances.
Freight can also be shipped by four different methods: air, sea, truck, and rail. If you’re looking for the most cost-effective option for international shipping, you will probably end up opting for sea shipping (with a little bit of truck shipping to and from the ports). If you need your goods shipped quickly, air is the way to go – it will just be many times more expensive!
The only way to be able to estimate how much freight will cost is to gather quotes. You can do this in two ways – either reach out to a freight broker or use a freight marketplace such as Freightos. If you’re just doing early research or you are comfortable booking your own freight, then Freightos will give you some good quality quotes. Otherwise, a freight broker should be able to give you a quote.
Before you fund, you can get different freight quotes to estimate the costs of shipping different unit quantities, such as 500, 1,000, 5,000, and so on – much like you probably did with your manufacturer. After you fund, you can get final quotes that are based around a specific quantity.
#2: Customs costs.
If you are importing goods from another country, there is a good chance you will need to pay duties and taxes. Those taxes will be based on three things:
- Your product’s harmonized system code (HS code, for short)
- The overall value of your product
- The import regulations of the destination country
Our recommendation is to do the following:
- Go to the US Census Bureau website and look up your HS Code.
- Then go to Simply Duty and plug in all the relevant information. The value of your import will be the manufacturing cost of the product plus freight costs.
It also bears mentioning here that the HS Code will be the same even if you are not based in the US – it’s a global system. Much like last time, try accounting for different quantities of items to be shipped when you are estimating import duty and taxes before your campaign funds. That way, you have data for low-funding and high-funding scenarios.
These estimates tend to be pretty reliable. For best practice, though, we recommend that you get in touch with a licensed freight and/or customs broker for a truly accurate estimate.
#3: Postage costs.
Whether you ship on your own or with a fulfillment center, you will pay for postage. These are the costs incurred when you mail or ship out rewards to your backers.
Much like with freight, the size and weight of your product are going to determine postage cost. Shipping over long distances will cost more than shipping short distances.
To estimate shipping costs, weigh and measure your product inside the packaging it will ship in. Make sure you include any goodies you plan to put in the box before shipping. There’s a huge difference between shipping 2.95 and 3.05 pounds with many postal carriers, and extras can push you over a boundary line!
This is much easier to do after you have a list of backers and their addresses. But you still need to be able to estimate postage rates before you launch, so for that, we recommend the following:
- Figure out which location items will ship from.
- Obtain postage rates for each country you plan to ship to.
There are two ways you can do this. The first is to use online postage calculators like EasyShip. The other is to ask your fulfillment center or centers of choice for their rate sheets. The former is better if you are self-shipping, the latter if you are not.
#4: Order fulfillment costs.
Order fulfillment costs include everything needed to package, handle, and manage shipment of individual items to backers excluding postage.
If you ship on your own, this is going to include shipping supplies such as boxes and labels. If you are working with a fulfillment center, you will need to ask for information on their pricing, including account, storage, pick-and-pack fees, and supplies.
To gather this information, you will need to take this information from the previous section regarding your item’s true shipping size and weight.
Much like with freight, it’s a good idea to create a spreadsheet and estimate the cost of order fulfillment costs for multiple quantities such as 500, 1,000, and 5,000. This will help you nail down your total costs and per-unit costs.
Final Thoughts
Once you gather all the information you need about freight, customs, postage, and order fulfillment, you will be able to piece together a clear picture of how much it will cost to fulfill your campaign. That will allow you to see both the total cost of shipping certain quantities and the per-unit costs.
It will also help you sleep at night!
Crowdfunding is scary enough as it is without the additional burden of unknowns. Use the tools we’ve mentioned in this guide, and you can get some concrete, tangible numbers to help you plan the next steps on your project!
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Brandon Rollins is Director of Marketing at Fulfillrite. His main areas of expertise are online marketing and supply chain management.