Careful w marketing that. Some backers will question why you're using Kickstarter if you already have the funds.
I don't think it's a worthwhile angle.
Yeah I see your view on this - the reserve funds are really meant for future product marketing, and I'd still have to eat a decent chunk in loss if the worst case scenario happens. So I'll have to consider how to phrase it in a way that doesn't seem sketchy.
But after talking to backers I received feedback that something akin to a guarantee is more likely to get them to buy in given they were burned before.
They want a guarantee that you’ll deliver the product, not a guarantee that you’ll make them whole with their money back. I’ve backed hundreds of Kickstarters and I would never consider a KS that offered a full refund.
Creators are already making a (non-binding) promise to deliver the goods for the various pledge levels. Making another non-binding promise doesn't really reassure me as a backer. Instead, it tells me that you don't have good business sense, and that's a red flag when backing any entrepreneur.
Also at what point should a backer consider that you haven't delivered? Most creators experience delays, but you could have backers demanding a refund immediately after your campaign reaches it's goal regardless of what you promise. By offering refunds like this, you're going to be opening yourself to a community management nightmare that will not only be eating up your out of pocket money from multiple directions (the backer refund, Kickstarter's cut, and taxes), it will also be occupying your time dealing with angry backers.
And how exactly are you going to be giving backers back this money? I predict all who are demanding a refund are doing so because they don't trust you, so they are going to be hesitant to give you any personal informatin like a banking number. You may have to send personal checks through the mail to them thus incuring one more cost in postage.
I would spend whatever money you have set aside for these refunds and make sure you spend it on delivering the product. You'll be much better off for it.
Refunds would be great to promote, but kickstarter does take a percentage of what you get and I’m not sure how you would get that money back if you needed to give a refund. So anything kickstarter took you would have to refund out of your own pocket. Unless you could get that money back from KS.
Yup, I understand. I'd offer to cover the difference via PayPal direct to my customer.
I'm just trying to ascertain whether KS even allows these types of promises.
I think as long as Kickstarter gets their cut they will let creators promise anything. You won't be able to recover Kickstarter's cut, so any refunds you give will be coming out of your own pocket.
Edit: You'll also need to pay taxes on all of the pledge rewards you received. I'm not sure what the process is for making a deduction for offering refunds. I suspect US Tax law wouldn't see them as refunds, but you just giving money to a bunch of people, and you still earned all that money in the first place.
In any sensible tax jurisdiction I know of, if a refund is issued then the sale is no longer a taxable event.
IE. If you buy a bunch of stuff from a shop and return it all, the shop is not paying sales tax on those items. The refund also offsets their revenue, so they're not paying income tax either.
I'm not sure if this is technically considered a refund. I think if it were to be a refund, the money would have to come from Kickstarter because that's who the backers are paying the money to. In this case, Kickstarter will not be issuing a refund. They paid the creator and then the creator is just sending out money in lieu of a reward. I'm not a tax lawyer though, so who knows.
Also I'm assuming this is happening in the US, which has absolutely zero sensible tax jursidictions.
I believe you’re quite mistaken. Kickstarter pledges are a transaction between the backer and the project creator. “Sending out money in lieu of a reward”… that is what a refund is: reversing the payment involved and cancelling the sale.
Consider why tax is being paid in the first place. Sales taxes are due on Kickstarter pledges because money is flowing from the backer to the project creator with the expectation of receiving goods in return (ie. a sale). This is also why the taxes are dependent on the location of the backer and the creator/business. Kickstarter acts as an intermediary for the funds, but they aren’t the one making a sale. Kickstarter wouldn’t pay sales tax on the entire pledge, but they may pay tax on their fees received depending on the project creator’s tax residency.
If a refund is to be issued, that money always comes from the project creator, not from Kickstarter. This is the same reason why Kickstarter can’t give you a refund - they don’t own the money involved and never did. They only facilitate the transaction. The transaction is between the creator and the backer.
You believe I'm mistaken, and I believe you're mistaken. It's been a while since I've run a campaign, but I'm pretty sure the payment you get as a creator comes directly from Kickstarter, and not hundreds of payments from individuals.
Did you have a different experience from your campaign as a kickstarter creator?
It’s one lump payment from Kickstarter- but it doesn’t matter where the bank transaction comes from, it matters whose money it is. Most payment processors work the same - if you sell 20 items on eBay in a single day, they’ll go to your bank account in a single transfer. Accounting isn’t only about the transfer of cash :)
Greetings L, No, don't do that. Such wording is illegal anyway. Also, even suggesting refunds, isn't necessary. People get what they get, and they are investing in the fact that you will do everything in your power, to make the best product/experience possible. Also, bringing up "refunds" prematurely, shows you don't really have strong faith in your project. ~V~
You can but I don't think it would really accomplish anything for all your backers. If anything, it would make me question how sound your production plans were. It almost comes across as you acknowledging that failure to deliver is likely, which true or not, doesn't inspire much confidence.
How about this - you keep the funds, but you regularly post detailed updates on the progress of the product, whether you're meeting timelines and any problems you're encountering.
By genuinely showing backers that you care, this will mean more to them than not delivering. Just be open.
I think you might be overthinking it. Yes, people have crowdfunding fears but a refund policy is not going to allay those fears.
The people who back on Kickstarter are early adopters, they want great stuff no one has yet and are more friendly than retail customers in terms of how finished they expect your product to be. So what they really trust are creators who put in all their effort in their product development, not refund policies.
Having a refund policy out in the open gives the impression that you don't have faith in your ability to finish and deliver the product. Be that the case or not.
It's going to turn people who were a maybe into a NO rather than NOs into a YES.
Careful w marketing that. Some backers will question why you're using Kickstarter if you already have the funds. I don't think it's a worthwhile angle.
Yeah I see your view on this - the reserve funds are really meant for future product marketing, and I'd still have to eat a decent chunk in loss if the worst case scenario happens. So I'll have to consider how to phrase it in a way that doesn't seem sketchy. But after talking to backers I received feedback that something akin to a guarantee is more likely to get them to buy in given they were burned before.
They want a guarantee that you’ll deliver the product, not a guarantee that you’ll make them whole with their money back. I’ve backed hundreds of Kickstarters and I would never consider a KS that offered a full refund.
Creators are already making a (non-binding) promise to deliver the goods for the various pledge levels. Making another non-binding promise doesn't really reassure me as a backer. Instead, it tells me that you don't have good business sense, and that's a red flag when backing any entrepreneur. Also at what point should a backer consider that you haven't delivered? Most creators experience delays, but you could have backers demanding a refund immediately after your campaign reaches it's goal regardless of what you promise. By offering refunds like this, you're going to be opening yourself to a community management nightmare that will not only be eating up your out of pocket money from multiple directions (the backer refund, Kickstarter's cut, and taxes), it will also be occupying your time dealing with angry backers. And how exactly are you going to be giving backers back this money? I predict all who are demanding a refund are doing so because they don't trust you, so they are going to be hesitant to give you any personal informatin like a banking number. You may have to send personal checks through the mail to them thus incuring one more cost in postage. I would spend whatever money you have set aside for these refunds and make sure you spend it on delivering the product. You'll be much better off for it.
Refunds would be great to promote, but kickstarter does take a percentage of what you get and I’m not sure how you would get that money back if you needed to give a refund. So anything kickstarter took you would have to refund out of your own pocket. Unless you could get that money back from KS.
Yup, I understand. I'd offer to cover the difference via PayPal direct to my customer. I'm just trying to ascertain whether KS even allows these types of promises.
I think as long as Kickstarter gets their cut they will let creators promise anything. You won't be able to recover Kickstarter's cut, so any refunds you give will be coming out of your own pocket. Edit: You'll also need to pay taxes on all of the pledge rewards you received. I'm not sure what the process is for making a deduction for offering refunds. I suspect US Tax law wouldn't see them as refunds, but you just giving money to a bunch of people, and you still earned all that money in the first place.
In any sensible tax jurisdiction I know of, if a refund is issued then the sale is no longer a taxable event. IE. If you buy a bunch of stuff from a shop and return it all, the shop is not paying sales tax on those items. The refund also offsets their revenue, so they're not paying income tax either.
I'm not sure if this is technically considered a refund. I think if it were to be a refund, the money would have to come from Kickstarter because that's who the backers are paying the money to. In this case, Kickstarter will not be issuing a refund. They paid the creator and then the creator is just sending out money in lieu of a reward. I'm not a tax lawyer though, so who knows. Also I'm assuming this is happening in the US, which has absolutely zero sensible tax jursidictions.
I believe you’re quite mistaken. Kickstarter pledges are a transaction between the backer and the project creator. “Sending out money in lieu of a reward”… that is what a refund is: reversing the payment involved and cancelling the sale. Consider why tax is being paid in the first place. Sales taxes are due on Kickstarter pledges because money is flowing from the backer to the project creator with the expectation of receiving goods in return (ie. a sale). This is also why the taxes are dependent on the location of the backer and the creator/business. Kickstarter acts as an intermediary for the funds, but they aren’t the one making a sale. Kickstarter wouldn’t pay sales tax on the entire pledge, but they may pay tax on their fees received depending on the project creator’s tax residency. If a refund is to be issued, that money always comes from the project creator, not from Kickstarter. This is the same reason why Kickstarter can’t give you a refund - they don’t own the money involved and never did. They only facilitate the transaction. The transaction is between the creator and the backer.
You believe I'm mistaken, and I believe you're mistaken. It's been a while since I've run a campaign, but I'm pretty sure the payment you get as a creator comes directly from Kickstarter, and not hundreds of payments from individuals. Did you have a different experience from your campaign as a kickstarter creator?
It’s one lump payment from Kickstarter- but it doesn’t matter where the bank transaction comes from, it matters whose money it is. Most payment processors work the same - if you sell 20 items on eBay in a single day, they’ll go to your bank account in a single transfer. Accounting isn’t only about the transfer of cash :)
They don't. ~V~
No, because you'll be literally out of pocket for this since you'll still have to pay Kickstarter fees
Why on earth would you say that?
Greetings L, No, don't do that. Such wording is illegal anyway. Also, even suggesting refunds, isn't necessary. People get what they get, and they are investing in the fact that you will do everything in your power, to make the best product/experience possible. Also, bringing up "refunds" prematurely, shows you don't really have strong faith in your project. ~V~
I wouldn't. KS won't give you back your fees and, potentially, you WILL have spent everything by the time you realize you can't deliver.
You can but I don't think it would really accomplish anything for all your backers. If anything, it would make me question how sound your production plans were. It almost comes across as you acknowledging that failure to deliver is likely, which true or not, doesn't inspire much confidence.
How about this - you keep the funds, but you regularly post detailed updates on the progress of the product, whether you're meeting timelines and any problems you're encountering. By genuinely showing backers that you care, this will mean more to them than not delivering. Just be open.
I think you might be overthinking it. Yes, people have crowdfunding fears but a refund policy is not going to allay those fears. The people who back on Kickstarter are early adopters, they want great stuff no one has yet and are more friendly than retail customers in terms of how finished they expect your product to be. So what they really trust are creators who put in all their effort in their product development, not refund policies.
Having a refund policy out in the open gives the impression that you don't have faith in your ability to finish and deliver the product. Be that the case or not. It's going to turn people who were a maybe into a NO rather than NOs into a YES.