Crowdfunding projects that reach their pledge goal can still fail to fulfill because of unforeseen expenses. Thorough budget planning is key to success.
Musicians, artists, and music business entrepreneurs need cash to start a project and bring it to fruition. They are hardly unique in this respect, and share many of the challenges that the general public faces. Is the needed money for the short term or the long term? Is there a small or a large amount of risk involved? Today, fortunately, there is greater flexibility in the marketplace. Resources can be marshalled on a piecemeal basis, as needed by entrepreneurs or musicians to achieve a particular and often tactical goal. Crowdfunding and venture capital are two examples of a new type of milestone or ad hoc financing that both blurs the distinction between short and long money and helps defray risk. The implication for artists, musicians, and music business entrepreneurs could be momentous.
This article focuses only on crowdfunding. It suggests a simple methodology for a musician or music entrepreneur to budget his or her own project. The costs of rewards for fans are variable and depend on the number and category of fan pledges. Knowing in advance the possible distribution of such rewards is key, and so is the understanding of the average pledge per contributor gathered from historical data. The authors argue that raising funds online in return for rewards is based on too much guesswork, when it should be more informed. Using recent Kickstarter data, they demonstrate, step by step how to prepare a professional crowdfunding budget that includes taxes, service fees, and contingency arrears. This type of budgeting is not as clear-cut as it seems, so this article strives to fill a gap in the current music business literature in outlining how to budget for a crowdfunding project.