Crowdfunding a Book Project
While attending a writers' conference, I was a bit puzzled at the audience inquiries about crowdfunding a book project. What? Yes, crowdfunding where you ask people to donate to your dream, business idea, or cause.
So I wrote it off as just some hair brain idea until I ran across it again. This time it was a genuine campaign to crowdfund a new self published book project.
Is this just a new level of self publishing crazy? Is it a scam? Or is it a way to legitimately make money from self publishing?
What is Crowdfunding? Is Crowdfunding the Same as Crowdsourcing?
First, let's clarify what we're talking about. Crowdfunding is a campaign whereby someone seeks pledges (begs?) for financial donations from friends, family, or the general public, usually via online platforms such as Kickstarter and GoFundMe.
If the campaign reaches its pledge amount goal, it goes forward and the person or group seeking the funds gets the money. If it doesn't, no money is collected from donors, the campaign ends, and funds will need to be obtained by other means.
In addition to the emotional satisfaction of helping someone out, crowdfunding campaigns may offer something special to their pledge donors in exchange for their help. This might be a promotional giveaway, a discounted price for the funded product or service once it is ready for the market, an invitation to a special event... some of these offers get very creative with these perks to help attract donors.
Conversely, crowdsourcing is gathering non-financial help or input. This assistance is sought to help create better products, services, or outcomes. For example, a conference may want to offer a customized educational session based on input from potential or actual attendees.
In this following discussion, we'll be specifically talking about crowdfunding.
How Does Crowdfunding a Book Work?
When self published authors seek crowdfunding for a book project, they are asking family, friends, and fans to support them financially in writing and self publishing a book. If they reach their pledge goal, they will go forward with the book. If not, they will have to decide if they want to use their own funds for the project, or scrap the idea altogether.
A special perk may be offered to attract pledges. This can include a copy of the book as soon as it publishes, with upgraded perks for higher pledges. Upgrades could include signed copies, promotional giveaways, invitations to book signing events, and more.
Why Would Anyone Want to Pledge to a Book Crowdfunding Campaign?
Like other crowdfunding campaigns, people may want to pledge purely because they are family or friends of the author.
But what about fans or prospective readers? It's less likely they'll pledge unless the perks—on top of a copy of the finished book—are very good. For them, it functions almost like a book or eBook pre-order. With pent up demand for a self published book unlikely to be high, readers may wish to skip the crowdfund offer and wait until the book is officially available to buy. This lowers the chances of meeting a pledge goal.
What Motivates Self Published Authors to Pursue Crowdfunding?
Making money from self publishing can be tough. Getting a traditional publishing book contract and advance can be even tougher. Frustrated by these options, authors may believe that their chances of making money through a crowdfunding campaign could be an alternative to get paid for their writing and self publishing investment. Once their costs are covered and they deliver the book copies and perks to donors, then they can get self publishing revenues and royalties off the book in the future.
Could be an innovative way to get paid for writing. But it is not without challenges.
Challenges of Crowdfunding a Book
Could Crowdfunding Hurt Your Image as an Author? Getting crowdfunding is a sales effort in itself. Unless the perks are very attractive, it's likely that only friends and family will be motivated enough to want to help out an author in this way.
Since using crowdfunding can appear as a "beg" for money, and not a "sale," carefully consider how that action could impact your image. People may think, "If he's such a great author, why does he need a handout?"
Understand the Costs of Crowdfunding. When setting a crowdfunding goal, authors will need to do a thorough cost and profit margin analysis to make sure that if the pledge goal is achieved, all costs are covered. Those costs include any donor perks, advertising for the campaign, shipping and handling for any physically shipped books or items, and costs to use the crowdfunding platform.
The cost of using platforms such as Kickstarter needs to be considered in the cost and profit projections. There will be fees for both using the platform and processing the pledges.
Consult a CPA Regarding Crowdfunding Platform and Taxes. For for-profit self publishing projects, Kickstarter, and other platforms that are geared for venture capital, would be appropriate. Pledge proceeds are taxable as income. If funds are raised and books (physical or digital) are delivered to donors, sales taxes may also need to be paid.
Even though GoFundMe donations are often considered "gifts," they may be taxable as income since you're self publishing to make money!
Because Facebook's fundraising tools are primarily for personal emergencies and nonprofits, using them for your for-profit book project would be a violation of the terms of service.
Again, consult your CPA or tax adviser to discuss applicable tax regulations and reporting.
Will Pledge Donors Want a Piece of Your Book's Future? In your crowdfunding documentation, you should be very clear about who owns the copyrights, revenues, and royalties for the work that's being created. If the book becomes super successful, there could be some donors who incorrectly feel they own a piece of the book's future. Consulting your business attorney about the legalities of crowdfunding your book project is highly recommended.
Would you consider running a crowdfunding campaign for a self published book?
Disclaimer: Both the publisher and author have used their best efforts in preparation of this information. No representations or warranties for its contents, either expressed or implied, are offered or allowed and both parties disclaim any implied warranties of merchantability or fitness for your particular purpose. The advice and strategies presented herein may not be suitable for you, your situation or business. Consult with a professional advisor where and when appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other damages, including but not limited to special, incidental, consequential or punitive, arising from or relating to your reliance on this information.
© 2017 Heidi Thorne