So You Want To Start a Game Business?
Step Zero: Stop! Do you have the money?
I’ve been asked by a lot of people to write a guide to show how to start out as a game business, instead of focusing on how not to do it. In light of these concerns, I think it’s time to clarify some things about how startups should (and shouldn’t) work, so that people understand what is proper and what is ridiculous. I’ll let you guess which of these things are more commonly suggested.
First of all, if you are thinking of starting a business, any business, I want you to stop right there. Stop thinking of your awesome game idea, stop developing amazing setting details, stop considering how your production model is going to change the industry. Stop!
Have you stopped? Good. If you haven’t, or you don’t want to, then you’ve already failed the first test. You probably want to write games, not publish them, and you should pursue that. It’s a difficult field, but you (and your games) will be better off.
We’re going to go over some things that everyone needs to consider well before we start talking about actually producing a game. The first one, of course, is money.
I mentioned this before, but I want to emphasize it: undercapitalization is one of the biggest killers of small businesses. You need money to start a business. There is no way around this. Any business needs capital sunk into it. But how much?
The quick and dirty method is all of your costs for the first year, plus twenty percent. Let’s take a hypothetical situation: new startup Badwrongfun LLC is interested in calculating how much capital it needs.
1. We’re planning on producing three games in the first year, which we have done our project cost calculations for (more on that later). These games are small-cost, small-run projects that will get us on the map as a game company and open up room for expansion into bigger, more profitable products.
The total costs for these games are:
Game 1: 1,000 (writing), 500 (art), 500 (layout/editing), 3,000 (production), 1,000 (marketing)
Total: $6,000
Game 2: 500 (writing), 1,500 (art), 1,000 (layout/editing), 5,000 (production), 1,000 (marketing)
Total: $9,000
Game 3: 1,000 (writing), 1,000 (art), 500 (layout/editing), 4,000 (production), 1,000 (marketing)
Total: $7,500
Total Production: $22,500
2. We’re going to run these projects virtually as a home office, so our adjusted costs for that are (essentially) zero. Since this is obviously a part-time endeavor, we’ll assume that the principal in the business is getting his main income from another source. As such, there’s no need to include any payment above and beyond any of the credited payments above.
When we do an income statement, we’ll write off part of the rent as a business expense, but there’s no reason to take care of that now.
Other expenses include a proper website and hosting ($1,000), LLC/tax registration ($300), and proper desktop design software ($1,000), for a total of$2,300.
3. We add a twenty percent cash buffer, rounded up to an even $5,000.
Okay, so our grand total is $29,800. Let’s call it thirty grand.
“Wait!” you say. “This is supposed to be a part-time business! How can I need such a ridiculous sum to get a part-time business running? That’s unreasonable!”
You’re correct. In this sort of industry, and especially for this sort of endeavor, that’s a large sum for a part-time business. Some of these costs are mitigatable, or delayable, and a few reducible or available in trade.
Notice that I said some. You cannot start a business, a real business, with no assets. I cannot emphasize this enough: The less capital, the more likely failure. It is an absolute truth. Do not ignore it.
Now, let’s say we’ve got writers willing to work on profit shares, an artist or three who will do our art on 20% advance, and we’re going to do our out editing and layout. In addition, we’ve cut back the costs of our marketing plans to half. How much money do we need now?
1. Our total production costs are reduced to just $14,100.
2. We happen upon a software license, and find a student to do our website ($100).
3. Here’s a key: your 20% buffer doesn’t change; this is why we did the original calculations. You’re going to need that cash, I guarantee it.
This brings our total to $19,500, 65% of the original figure. Yes, that’s still a very lot of money. It is, however, how much investment you’re going to need, in advance, to start this small, part-time company. You’re going to need this money when something goes wrong, and it will.
If you’re wondering why I’m running numbers for a business of this magnitude, and not the traditional idea of a lone hobbyist publisher, I would like to point you to my previous article on why this is such a bad idea.
Does it seem foolish to sink twenty grand into a game company? Well, we can’t answer that properly yet. Next time, we’re going to go into Step One: Define and Research Your Market, and determine if there’s any money to be made.
Nice. I take it this assumes that internal flows are self-funding starting in month 13? Otherwise they have to keep pumping.
“happen upon a software license” = best euphemism of the year to date
Not to detract from your central point that you need cash, these numbers are pretty meaningless.
Firstly, what type of game are you talking about. There is a big difference between an RPG and a boardgame.
Writing costs – How much are you planning on paying the writers? If you are finding work-for-hire writers, expect to pay between $0.01 and $0.05 per word. This makes a big difference to the size of your product – anything between 20000 words (a 32 page scenario) and 100000 words (substantial rule book) – which in turn makes a big difference to your production costs.
Art work – In most games, art work is the biggest waste of money. Thousands are spent on it but it does nothing to improve the game. Spend the money on better writers and use public domain or CC art.
Typesetting – If you can’t write the game, you can’t do the art work and you can’t do typesetting, you shouldn’t be even be in the business.
Production Costs – Heard of a thing called Print-on-demand? No need for more than a few hundred dollars to print more physical copies than you are ever going to sell. Which will be about 10 copies, if you are lucky.
One point you’ve missed off is that you don’t need all this money at once.
Even if everything you do is outsourced, it will take months to bring a single project together. Especially if your are depending on writers and artists who are also working part-time. This spreads the costs out over months, or several pay checks if you are in work.
Not needing the money all at once is really just a time factor. If you can pay contributors out of your real life paycheck, then you could also just delay start until you had a pile of ready capital, too. The point is that people are naive about production actually requiring capital in the first place. This stuff costs money, even digital releases.
I cannot disagree strenuously enough about artwork. Unless I’m paying $2 for a throwaway digital module, the artwork is second only to the writing in setting the product’s tone. Random amalgamations of clipart don’t cut it. In B&M retailing, coherent art can be the difference between getting two seconds vs. two minutes of page flipping time in the customer’s hands. Maps, vistas, character scenes… they create a visual impression to a customer that tables and words cannot.