I see plenty of blogs and guides in gaming, but for small businesses in this field that is only half the battle. Besides making the actual product you also need to learn how to make a good business. This can be hard for young entrepreneurs who may have a dream of becoming the next big company but don’t even know how to ‘start a business’ let alone anything about business. Personally, I have always been a fan of entrepreneurs, perhaps even admire them more than professional game designers. Spending my entire life studying business, I think I have some advice that I can share with my fellow gamers in the community who may not fully understand the business side of running a “Game Company”.
So for those who are wanting to start your own business the first thing you will need is an idea, but chances are if you are reading this, you already got that.
The next thing you will need is a business strategy. You may have heard this word being thrown around a lot in your business 101 class, but it really is important. This is basically your entire battle strategy to rise above the competition (and I mean that in the most friendly way possible). It tells you how you are going to run your business, the costs and profits involved, and expected success that you can measure yourself to as time passes. Your business strategy should tell you at least the following:
What order are you going to produce your products? Do you have more than one idea? Which idea comes first?
Who is your target market? Are you going to target teenagers, adults, kids, boys and girls equally or is it meant for one gender over the other? Then remind yourself that you need to tailor the rest of the strategy expecting this target market is going to be your primary customer.
Details on how you are going to produce your products. Will you be able to make it at your home, or are you going to need a professional manufacturer? Will it be a manufacturer in China where it is cheapest but usually lower quality or in America/Europe where it is higher quality but may cost you a lot more?
Details on how you are going to sell your products. Will you sell it on a website directly to customers? To distributors only? Are you going to provide volume discounts? Charge for shipping?
Where will you store your products? Your basement, a storage facility? How much will it cost to store it?
Where will your business be located? Will it be in a mall, your own building, your basement? How much will it cost?
Will you have employees? Who do you expect to be helping you? Are they going to work for free (probably not or at least not for very long)? How much will you pay them?
Will you have any other costs? Taxes? Outsourced work (such as artist)? Paying yourself?
What will be your Cost of Investment? For a small business I recommend you be as accurate as possible for each individual product. For example, in your first product your COI will be all the costs you listed above. As you make more products and have a more steady stream of income from each of those product lines, your fixed costs (such as paychecks, bills, etc.) will be spread out across your investments, then your COI will be more and more just your costs associated to that one product line.
How long should it take for you to produce Net Profit? What is the Return on Investment ( ROI = (Net Profit / Cost of Investment) x 100)? What is the estimated Net Present Value of the idea (NPV)? This is a big mistake many people make – just because you sold a unit of a product for profit doesn’t mean you actually made profit yet. You need to recoup your investments first. Write down how much you will be selling it for to distributors, directly to the customer, etc. Then figure out how much of the product you think you can sell and how quickly. Be realistic, if you are not sure, then error on the side of cation by assuming the worst.
If you answer the questions above you are on your first steps towards a good business strategy. There is a lot more that goes into it, but I’ll save that future blog posts. This is meant to help get people’s feet wet and start thinking about the business side of things. Perhaps in future posts I’ll go into each of these in more details to help you answer these questions.
In the meantime, keep on playing!