Post-Campaign: Workflow & Delivering Your Product
So hopefully what this all leads to the o is a huge success, and so now we can talk about what happens after that huge success. You followed all of my teachings that I've been land down, you followed the best advice, you've got an amazing product, he did everything perfectly, and you've got three possible outcomes of smash success, a failure or something we call a win lose, so the smash success is either like you hit your goal handily or blew through it and did you know, five thousand five hundred percent of your goal? That's your best case scenario, your second best case scenario is you fail, you don't hit your goal and it was like, you know, you're sad, but you're like, ok, the market has spoken now they maybe respond, be responding either your product or to your marketing message and how you delivered the product it's hard to know exactly which one it is, so you don't always might have this doubt of like maybe it wasn't the product, maybe people really wanted to, I just sold it on, ...
or I didn't do the right paper click market, you know, there's ways you can second guess yourself, but generally speaking, if the product fails, you know you probably want to think, well, maybe this isn't the right product or the right product for the right market? One of the possible conclusions could be it just wasn't a crowdfunding product, it was a better be to be product or it just wasn't sexy enough. It was more of, like, uh, consumer household product, and it wasn't like something that people wanted to pre order and may not get because people are only doing that for, like I said earlier, sexy things, they're excited about toys, you know, stuff, that's fun, not super practical things for the most part, and so in your boring, practical, so, like that being said, you could be like, well, it just wasn't a crowdfunding product, and you can still give it a shot, but now you're ignoring the data unless you're really convinced that that just you're chasing the wrong audience. So is brad product of market fit? Or it could mean you're pricing, so you might want to reconsider prices so it's this timeto retreat and consider whether or not you want to move forward again based on the reaction you can also survey the people who did back you or your list, you know? You mean if its kickstarter, you're not gonna get their e mails if they didn't back you, but you, khun. Do this you know, surveying of your list or other things and try to find out why people didn't back and maybe you'll get some clear cut answers like the price is just too high or I just wasn't that excited about the product so failure to fund isn't necessarily failure you know I like to say you either win or you learn you know service like you learned something and way better to learn this way then tow learn by going out and producing the product and getting in the marketplace and then finding out people don't like your product don't like your price don't like your product market match so super valuable and not the worst thing that can happen to you if you don't hit your funding goal the worst thing that can happen to you if you run a crowdfunding campaign is that you hit your funding goal and I don't actually have enough money to deliver on your promise because now you've got that financial and emotional debt to your backers to deliver but you don't have the money and if you haven't set yourself up to win with the plan b in terms of generating the funding now you're in a really tough position because now somehow you have to deliver without having enough money and this is actually a way more common situation you would imagine because people typically vastly underestimate the cost to bring the product to market maybe they've gotten some quotes and the molds and they know how much the molds costs and they're surprised at how expensive there but they might not know about all the other factors that might come in to impact the cost and the other things and when you launch a company it's very expensive to develop in ship a product and if you haven't done it before there's a lot of hidden costs that you might not be immediately you know might not be immediately apparent to like ok, the molds cost fifteen thousand dollars and then you get your first samples and first of all they charge you for their samples and they charge you to ship and then you get him here I go these aren't perfect they need to be tweaked by the way that happened something like ninety nine percent of the time for samples come and they need to be tweaked okay great first for all the tweaking might take four to six weeks then they're going to make new samples then they got a set of new samples and then I'm going to send you the bill for the tweak then you'd have billed for another two thousand dollars plus the samples they're not I thought these things cost five dollars well yeah, but samples cost one hundred dollars each because they're just making five oh my god five hundred you know and all these things add up and where am I going to service that I got you know, I mean it just like all of these hidden costs that add up then suddenly like people run out of money and that could be very stressful because you gotta figure it out one way or the other you're on the hook so that's the worst thing that could have been trying to avoid that by having your plan be lined up and try to avoid that by, you know, not setting a goal so low that you're going to hit that goal and if you hit it it's gonna be the worst thing that ever happened to you like you wanted as low as possible but not so low that you're going to hit it and then regret it because I think that's happened way more times than people realize. So you've got that financial and emotional debt you've got to deliver regardless, and even if you hit your goal and smashed, you're going to have plenty of money now you get to welcome to the, you know, world of making products and you know, the the thing people are saying these days, you know, they call it hardware because it's hard and I actually think they should call it very hardware because until you've been down this road, you don't know what it takes to get something made in quantity in quality from another country and now there's a lot of people like I want to make it in america and then they find out that making america the molds cost typically for up to six times as much like a huge difference in the mold so like you might be able to get the multi maidens for seventy five hundred dollars in america you're sorry in china that are hearing a cost thirty or forty thousand dollars like it could be a huge difference because the moulder made by machine shops and machinists make good money they have like a high hourly wage and you've got like one machinists it also takes a lot longer because typically have one machinist working on it and takes a very long time where is in china? They have like four guys working on it it's faster, they make a lot more from there, you know? I mean it's just like the system is set up for things to be made in china of this nature. Now I'm a huge fan of making things in america and I've done it but like your running into a much higher cost structure in fact and then the products are typically cost fifty to one hundred percent more as well so that profitability of your campaign might be very different so you're so most of the stuff ends up being made in china will know you're dealing with china and I'm just here to tell you that the language barrier is much smaller than the cultural barrier and dealing with someone from a culture that's very very different and has a very different way of looking at things it's a twelve hour time difference a lot of times you would think you're on the same page I've done this many times where I'm like we're convinced we're on the same page everyone is agreeing where we've got it in writing one hundred percent online yes let's do it send me the samples and then the samples come with irrefutable proof that you weren't on the same page because they don't work or they're completely wrong in some profound way that you just everyone was so obvious to everyone that you assume during the same page about something and you got on the same page about all these other factors but the one thing you forgot to address isn't there like well of course it needed to fly it's a plane you know, whatever it is is like something got missed and it doesn't work and so now you're like holy crap I gotta like figure this out and it's very challenging and it's has it on expenses and the hardest part about it's actually quality control so once you get everything up and running and the things that seems like everything is perfect and you're trying to make thousands of the thing now this happened at their quickie where we had a great factory supposedly well recommended we had agent involved to certify the factory they make great prototypes of sending one hundred that were great they sent us a thousand were great and sent us ten thousand that were one hundred percent effective and you're like what happened like how is this part and when the quality control guy like how did you not know this before you should you know now we got this ten thousand unit problem and was trying to ship backers and anyway it turned into a big khun flag oration we ended up having fired the factory start over with whole new factory by the way this all happened fairly quickly in the grand scheme of things but when you've got thousands of backers being like where's mikey where's mikey where's mikey I'm mikey you're like oh you know so it adds a level of urgency and panic to it that isn't normally there and back in the days before crowdfunding all this stuff was happening it was just happening invisible to the public so somebody now people are seeing it and before it didn't matter because it's like I mean it mattered a little but the product at dawn when the product that done and you know we had a sign up in our office that says products only late until it ships a bad product is a bad product forever but backers do not care and so it's created new urgency now it's also I think creating a step up in this speed in certain processes in the manufacturing community is all these amateurs or getting in with these unrealistic expectation unrealistic causing people to revolve called causing the manufacturing system to evolve too cause you know these things to move a little faster and more efficiently but it's playing catch up so that's the reality of getting things made. And so given that reality, you've got two options for how do you bring a product to market and these air always the ways that you always had before before a crowd funding if either started company make it and sell it or you can license it to someone else. And we looked at those graphs comparing kind of the financial realities that there's two possibilities so licensing has been my traditional path historically have manufactured and sold a few things, but for the vast majority of the products have worked on what I did was I licensed them or helped other people to license their inventions so we would develop the product, get it to a prototype stage, get a patent pending and then shopping around the manufacturers they would take it over there would manufacture the product and we would collect a royalty and you gave up a lot of control and you gave up a lot of stress you gave up a lot of investment and they were able to distribute the product faster, but the downside being, you know, the loss of control and I are getting a relatively small percentage royalty, and you're not building up a company that has equity that you could later sell. So you're losing that company, but you're gaining the ability to keep your day job, you know, so this present constant, so that's been always my preferred way because I've always wanted to focus on the next product, not, like become consumed with one product. I want to move on the next thing, and if you start a company and then that company eats your life can't do it casually, like running a manufacturing concern. Selling products is typically the job, the full time job of a team of people and then, like, you can't just get one product, you need a lot of product because you need the next two one in the next one because every product goes to a life cycle, it goes up and then it goes down and papers off and then eventually peters out. So, you know you've got to get the next product that's, you know, peeking as these air trailing off slowly build up catalog. That's, our manufacturers working don't know many companies who are only selling one thing. They're selling lots of different things in the category, so we're selling rooms now we got a whole line of rooms and we got dust pans, we've got dusting brooms and all kinds of other stuff and scrubbing pads, and it started off with one thing, and now it's proliferated as we're trying to stay ahead of the you know, life cycle of every one of the products. So starting a company, however, is a lifestyle choice big time, because it's goingto be so time consuming. And so you really got to consider carefully before he started cos I'm gonna get a little more detail on what it takes to license a product or to start a company so that you can make an informed decision about which one you want to go with licensing it's typically, like been super challenging because so many stars have to rely on in order to get people to license a product like you're presenting a product to a company that wasn't their own idea. They didn't have ah set aside budget for it. They didn't know that it was coming, and so they have to create a new budget take on someone on outsiders idea instead of like the ceos idea. That means the ceo has to be like I like that idea better than our own ideas and I'm willing to work with someone we don't know who might be crazy so high barrier to entry and we're guessing that people wanted it seems like a really good idea so licensing then is very challenging and typically also need to have a patent pending or patent issued an order license products not one hundred percent but like ninety five percent that's been typically gotta have a patent pending to do that so typically what do you get on a simple consumer product? You know the kind of stuff most people invent you might get a small advance of you know five to ten thousand dollars usually in advance against royalties and then you get a royalty in the rings of you know you know it's really like three to six percent the golden standards five percent five percent of wholesale sales which means if I'm a company selling it to target target selling it for twenty dollars I'm getting ten dollars wholesale inventors getting five percent on the ten dollars to fifty cents per unit doesn't sound great to most people like really just five percent well the reality is a typical well run consumer product companies making back ten percent profit bottom line like five to fifteen percent but really ten percent kind of like the gold standard ebitda earnings before interest depreciation in compacts and amortization ten percent that means if they're doing one hundred thousand dollars in sales after all their expense to pay cost of goods, sales commissions, warehousing, insurance costs, delivery, all those things they're making ten thousand dollars the inventor is getting five percent they're making five thousand dollars, so for zero percent of the effort zero percent of the ongoing investment zero percent of the headaches there, making half a cz much money is the company doing all that stuff? It's a great deal for the inventor, especially if it's product doing eight million dollars a year in revenue at five percent like you could make a great living on licence products if you can get over the hump. The problem again, of course, being that it's just really hard to license products because they have to have a really great concept. Well, with crowd funding, you come in to it and manufacturing say have got something I wanna license, you know, I know people will buy it so I could just use the quick he is a perfect example. I know people will buy it because we sold forty thousand of them. We raised two hundred twenty one thousand dollars, I'd liketo license it to you and we can pay for the tooling like typically you're asking them to take on all of the expenses now you've got a situation where you've got proof of concept, and you could if you wanted to offer to pay for the tune you don't have to, because you've got that prove a concept, but then you can maintain more control. You have more negotiating leverage that you could get a higher royalty rate on the typical five percent, and, you know, maybe you can get, like, seven and a half percent or eight percent royalty, and you can get more up front money because you've got this proven track record. And so, like, you've dramatically reduced the risk for a potential licensee still challenging but a fractional amount of challenge compared to licensing someone where everyone is guessing that it's going to go so really a great opportunity. And then you have a couple opportunities to actually get the product made you say, ok, you guys going to make it a life is to you make it you provide me the first ten thousand units for my backers, I'll buy them off you, and then you go sell them and pay me a royalty or you could say, well, I'll make him ill something for my backers, and then I'll sell you my tooling or you can say, I'm going to just, like, give you my list of backers and you're going to provide them to my backers. After you've made him, and I'll pay you for them out of my money, so there's a lot of different options for how you can navigate getting to your backers so that's one option is licensing and it's still my preferred option, because I don't want to start a company selling middle keys to thousands of little stores, and each individual like they were taking me, like literally decades to repeat what night eyes has spent decades creating, which is distribution toe every major retailer. As a result, they've already got him in tow lows, bass pro shops, eddie bauer, et cetera, so that would have taken me years to achieve, because it's not easy to get into those places, they were able to do it like that in the year because of their existing network. Option b sacrifice your life to your invention, become an entrepreneur and work eighty hours a week to avoid working forty and all the every single one of the cliches about being an entrepreneur I found to be true, like it's awesome, it's engaging. I love being an entrepreneur, and I could never actually not be an entrepreneur, but it's definitely not the easy way to make a living it's much easier to have a job and collect a paycheck and sleep at night, whereas if you're an entrepreneur, you were committed to your vision more than you're committed to your comfort more than you're committed to sleep, and oftentimes, unfortunately more than you're committed to your family or your health, because it takes every bit of you and there's always an infinite amount of stuff you could be doing, and so we find time to do it. You've got to become a master of leading a team, building a team, finance payroll, chosen health care plans, warehousing, fulfillment, logistics gotta build the team that can do all that stuff. So if you're licensing stuff, you have to invent the thing, get it funded and handed over to someone else. Sit back on the couch, collect checks, that's fun building a company could be very exciting and ultimately could be much more profitable. You build a company with ten million dollars a year in revenue, then you could probably sell their company for ten million dollars plus. Meanwhile, you could have been collecting revenue on ten million dollars in sales, getting, you know, five hundred thousand dollars a year in royalties. We don't have that the big ten million dollars payoff, but you're sitting on the couch, so it just depends on what you want to do, I make it sound easy, but ultimately. I always recommend people not to become an entrepreneur and start a company, because if there's anything I can say to you that I'll talk you out of doing it than you probably should have been doing it anyway, because being an entrepreneur is for people who can't help it there, so excited, committed and passionate about what they're doing about the business that they're creating, that no amount of rational talk is going to talk him out of it. And that's, what an entrepreneur is so that's how you choose between being an entrepreneur and licensing your product regardless of how you get it made, then you don't have to worry about getting it for a film, getting in the hands of all the people and so that's going to cost a lot of money because you're going to ship out lots of products. So before you start your campaign, you actually want to try to get some really, you know, good idea what that's gonna cost by having a good idea of how big the package is going to be and how much is going away, how many of you were going to sell and get some quotes, there's a bunch of great companies that help people with shipping, um, products that have been crowdfunded, but you can also just get, quote that x and ups from the usps we're working with some call flow ship who's getting quotes from like the scandinavian post first like it's amazing what's out there you're gonna have stuff shipped direct from china directed people very cost effectively in some cases they're depending on the type of product and it cost the product in the size of it. That might be an attractive option for you. So again, this is a logistics in analytical type of things, so if you're like an artist or an inventor who like has big ideas but you're not super teen on find detailed numbers you want to have someone on your team was good at navigating those things, making important decisions around complicated little logistical challenges, and they are also the same kind of people who can help you navigate who's getting what if you've got a lot of complicated perks? What if you don't have enough money? We talked about this win lose scenario where you might run out of not have enough money to get the job done. So first of all, you're going to face some serious backlash from the backers if you have to can you but like again you just have to be, all you can do is do your best and you have to be up front ending communication ideally, you would not have set yourself up for this situation to really number one advice is, don't be in this situation, but if you find yourself in this situation, you're going to have to tell people and tell him sooner than later because if people feel like you've been hiding stuff from them that's not going to work or else you would like, hey, we got some bad news turns out these things even cost ten dollars, we thought they were gonna cost two and now we're you know it's not going to work when the refund, whatever money we haven't spent back to you, but you want to understand open communication and also, you know, you get to be a maniac and a mission to find the rest of that money better to do whatever you have to do to fulfill your obligation, but most people, when they're setting up a campaigner thinking I might have to mortgage my house, they're thinking this thing is going to be huge could be success and we're going to get rich and then they find themselves in a situation where their fifty thousand dollars short and they're like, how am I going to come up with fifty thousand dollars and then your face and I know people have mortgaged their house to fulfill on campaigns and then later it was worth it in some cases, in other cases people went bankrupt in cases it ruined people's lives or financial lives only two dramatic but like the reality is it's a possibility because the backers don't you know they just want their product even though it was a crowdfunding campaign they're committed to getting the thing that they backed it for so you really want to be prepared not to be in this situation in the first place a quick question that that came in this one's from taylor stone illustration and you know on creative live we do have a lot of people who are illustrators makers they're building their own brand and taylor wants to know as an illustrator how much is it ok to factor in paying yourself in the campaign cost so as they're kind of building out how much they're putting into their campaign and how much money they need to raise their trying to also think about how they can you know, pay themselves and that's something that we we try to do in a lot of these courses figure out how do you actually make that money to support yourself and the advice for someone let like taylor stone when when we looked at our goal calculator earlier there was, you know, there's a lot of slots that you could fill in and you could just rename one of their slots me and put in you know I want to make five thousand dollars for my efforts and then just see how that impacts your numbers ultimately you're going to make whatever's left over. And so if you're like, well, I must make this much, then, you know, well, you must. Then you must cause that much to be made through your strategies, actions and ways of being so you know. But in order to calculate what it's going to take to get you there, then you can use the goal calculator to figure out ok, going to need to do ten thousand dollars for me to make five thousand. That makes sense. Yeah, thank you.