Monday, December 29, 2014

My Dog Ate My KS Funds (Part 2 of 10)

2:  Income tax & profits

     In the United States of America, income received is taxable.  Not gross sales, but income which is based on profits for the year.  Profits are dollars received (gross sales) minus expenses paid (written off) and some other factors too. 

     Expenses should be written off in the tax year the crowd funded project ends.  Most expenses for miniature crowd funding projects include mold work, metal ingots, sculptures, crowd funding fees, packaging material and shipping charges. 

     If a project raises funds and the end product does not ship in the same year, then additional expenses such as shipping charges for example, will have to be written off in the following fiscal year.  Unfortunately, higher taxes will be owed the year the crowd funded project ends and possibly more shipping expenses too as rates tend to increase from year to year.

    Let’s break down the costs per basic pledge using my KS as an example.
$30 pledge for customers in the USA = 20 miniatures plus stretch goals and free shipping.

Metal costs by weight = $ 7.50
Zip baggies to organize contents x 11 = $  .55
Plastic bases x 25 = $  .75
Printed invoice and shipping label ink/paper = $  .05
10% KS took when project ended = $3.00
Shipping charge online = $5.20
Chipboard boxes x 2 = $  .32
Packaging tape = $ .10

Costs = $17.47 against a $30 pledge in the USA is a potential profit of $12.53

     I can now apply that profit toward other expenses not listed such as molds and sculptures.   I conduct business as an S-Corporation which means I'm self-employed, my time is not a factor in the eyes of the IRS, just my expenses, with my end profit for the year equaling my personal income. 

    Here are two examples of how expenses for a project spent in the same and different year can affect profits and put a crowdfunded project in jeopardy.   

Example 1 (Same year):   In 2014, you take in $10,000 and your expenses are $5,000.  You pay income tax based on $5,000 profit ( 10-5=5 ).  Let’s estimate 25% income tax owed ($1,250) on the profit leaving you with $3,750 remaining.
Example 2 (following year): However, if half of your expenses are received in 2014 and the other half in a later fiscal year, you’ll pay more against profits.  This new example is $10,000 received and $2,500 in expenses for 2014, with an additional $2,500 in expenses in the following year ( 10-2.5=7.5 ).  Your profit for 2014 is now $7,500  x  25% and you owe the IRS $1,875.  That is $625 less that you have to work with for your crowd funding project. You'll still be able to write off additional expenses in the following year specifically for that year, but how easily the money evaporates from a project putting it at risk of completion. 

Scale the pledges up to $100,000 using example 2 and your looking at $6,250 less to work with and possibly a higher tax bracket of 28% or more.

Your tax bracket, or the percentage you pay the IRS on income depends on if you are filing as an individual or married couple.  Rates are available online, but change from year to year.  Again, if you finish the project in the year the pledges end,  you'll know the tax bracket percentage, exact shipping costs, and your budget will be sound. 

Pledgers:  Watch out for projects that are scheduled to ship in the following year.    

Crowdfunders:  Start your project off early in the year to generate as many expenses against your gross sales so you can reduce any amount owed to the IRS.  A project that breaks even or takes a loss could mean no money owed and possibly a refund. Consult an accountant to see what type of business you should file under that would best benefit you. 

Next week:  Metal vs. Resin

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Johnny Lauck

Sunday, December 21, 2014

My Dog Ate my KS Funds (Part 1 of 10)

     Crowdfunding projects seemed to be a great idea at first, but I think a lot of people pledging these days are having second thoughts . Bear in mind that no matter how great the idea or offer may be, the majority of crowdfunding projects are launched by people with no or minimal business or production experience. No wonder many have failed or are extremely late and likely never to materialize.  However, we should expect some excuses, because problems are inevitable no matter how well you plan.  Regardless, excuses never resolve problems. People who pledge are not paying to hear excuses, but for goods promised.

     I will be writing an article each week on this very subject, a total of 10 in all, covering the “do's and don’ts” of crowdfunding, with a focus on miniatures.  You will find that excuses are often substituted for a lack of homework and are an attempt to point the blame elsewhere.      

     Recently, I launched my first Kickstarter.  I have generally been against crowdfunding for many years, but decided to give it a try and finish or expand several projects now that I do not make my full time living anymore in the gaming industry.  People who trust me pledged $12,000 and when the fund-raising ended, I had shipped every reward in 45 days. 

     The project required the casting of nearly 15,000 miniature parts sorted and shipped to 240 recipients/supporters and I did it all by myself on the weekends.  I will launch my next KS in the spring of 2015 (see Dungeon D├ęcor series 2). 

     Although I have many advantages over other miniature crowdfunding projects, such as I make my own molds and cast my own figures, I often spot common mistakes in the crowdfunding community that inevitably spell disaster.  In no particular order, here is the first of 10 things to avoid by both the fund raiser and the supporter.

1:  Sculptures
     Too often, a crowd funded project offers concept artwork as a selling point for a line of miniatures they are attempting to create.  The problem with concept art is a lack of final production costs per figure.  Miniatures vary in size or mass and without having a final production version of an actual figure, there is no precise way to determine the total amount of raw materials such as tin or resin.  The exact cost based on weight of the final production miniature is the only way to calculate the profit or a break-even point.

     Here are the basics in determining costs in metal.  Find out the current rate of the metal you are casting in.  I use a tin alloy that I purchased recently at $12 a pound (price includes shipping charges from the smelter to me).  There are 16 ounces in  a pound.  Take $12 divided by 16 = 75 cents per ounce.  Weigh 10 of the same master casting.  In the example below,  10 of this Salvage Crew figure weighed in at three ounces.  Three multiplied by 75 cents is $2.25,  then divided by 10 and rounded up is 23 cents per this specific figure. 
     Why do I weigh 10 of the same instead of a single figure?  To make certain the scale accurately measures the figure and to eliminate fractions of ounces.  Double check by weighing five and changing your formula to accommodate. 

     For resin figures, you will need to calculate volume of liquid as it equates to cured weight first to get your base weight per ounce.  Now keep in mind that labor is part of your production costs, but that can be overlooked if you are casting your own figures.

Pledgers:  Avoid projects that only offer concept art.  There are a few companies that have successfully created miniatures with just concept art, I applaud them for their commitment, but I can’t stress how critical hard numbers are to any business venture. 

Crowdfunders:  If you can’t afford sculpts and master castings prior to launch, weigh out other companies metal figures at comparable size and then have the sculptors create a piece at a similar mass using your comparable samples.    

Next week:  Part 2: Income taxes

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Johnny Lauck

Monday, December 15, 2014

Dungeon Decor series II

      My second kickstarter containing a collection of fantasy 25mm to 28mm scenery will be launched in the spring of 2015. This expansion contains over 40 never before seen pieces.  Series two was in various stages of completion when I made the decision to shut down Mega Miniatures, and like Road Kill Corpses, I want to finish this project. The majority of the master castings are nearly completed as of this writing as well as painted images.  Some of which I will share with everyone as teasers here on this blog once we are into the new year.

     There will only be two reward levels.  The first level at $30 and the second at $60.   All pieces from this series will be sold in my online store once the last kickstarter supporter's package has been shipped.  Because the purpose behind  is to focus on the Salvage Crew range,  at some point in time I will be selling the Dungeon Decor series II molds to other companies, just as I did with the first series of Dungeon Decor.

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Johnny Lauck

Sunday, December 14, 2014

Salvage Crew Humans Kickstarter (stats)

      My first kickstarter ended well and all rewards shipped to 240 customers within 45 days. Three customers did not pay and four customers pledged $1 for support. Rewards started shipping on November 3rd and finished on December 15th 2014.

The basic pledge of $30 was for 20 human figures at 28mm scale (slot bases included)
Each person received a stretch goal package of nine additional security drone figures consisting of 25 parts.

Total parts per basic pledge (45 x 236 =10,620 parts)
Road kill corpses (80 x 27 = 2,160 parts)
Add-on security drone 101 (107 x 7 parts = 749 parts)
Add-on security drone 102 (55 x 5 parts = 275 parts)
Add-on security drone 103 (95 x 5 parts = 475 parts)
Add-on additional Salvage Crews (16 x 20 = 320 parts)

Grand total parts cast and shipped was 14,599

     Now that all rewards have been shipped,  we are now offering singles and the set of 20 humans at

     The security drones will have their own Kickstarter with expanded parts / options in the fall of 2015 and are not available as singles at this time.  Follow my blog for updates when the security drones become available.  

Salvage Crew Body Count (basic game)

      In 2010, I bought the molds and rights to a game and miniatures line called Star Mogul originally produced by the defunct Alpha Forge Games. I absolutely fell in love with the figures and quickly made plans to expand the game system. Unfortunately, there was never enough time in the day to work on the new game retitled Salvage Crew.

      “Salvage Crew Body Count” is my second attempt at the game rules.  The first set of rules have been scrapped (no pun intended),  and I've started over from scratch with good results. The rules will be offered for free in the summer of 2015 focusing on the human figures and weaponry. This newest version is a fast-play game with action galore, the rules are easy to learn, and there are combatant deaths on both sides every turn. This game is great for the introduction of table top gaming for newbies,  plus you can use our figures or your own as weapon cards are part of this system. 

     After this basic game, I will add-on more rules as miniatures are introduced specific to light vehicles, security drones, and a few other races. I will roll out one Salvage Crew miniatures kickstarter a year to help defray the initial costs of mold work, metal ingots, shipping supplies, and other necessary expenses to help keep pricing down.  I simply don't have to raise as many funds to make a project happen, since I'm personally invested in the  initial sculptures before any offerings.   Be sure to follow my blog to get updated news about upcoming releases.    

Mega Miniatures R.I.P.

      During my 13 years (2001-2013) operating Mega Miniatures, I accumulating over 2,200 molds and offering some 1,700 figure products. Half of these various 25mm and 28mm ranges were originally produced by other companies such as Metal Magic Hobby Products Fantasy, late 1970s Archive, Grenadier Julie Guthrie Personalities, Alpha Forge, and Demon Blade Miniatures.

      The other half, were new pieces by various sculptors expanding upon existing lines or newly created pieces like our Animals range. The online store closed in October of 2013 with 95% of the molds sold to new owners. The only line I retained were some of the science fiction Salvage Crew figures and various unfinished projects that will eventually see the light of day.

      In recent years, I have not been able to devote my full attention to Mega Miniatures as I once did. Inevitably, Mega Miniatures was slated for the wrecking ball. My casting and mold equipment will remain in my possession for some time as I finish up projects beyond my closing date.

      Below is a list of most of the companies who purchased molds and production rights. Not all the molds have gone back into production as of this writing and a couple companies have since closed their doors.