Whether you just are starting to draw up plans to develop your first game, or if you've just signed a huge development deal with EA: Congratulations! You're an entrepreneur. Not only do you love developing games, you want to make a living doing it (not to mention be your own boss).
If you think about it, an independent game developer is no different than Bill Gates, Steve Jobs, Walt Disney, Nolan Bushnell, Sid Meirs, Will Wright or any other entrepreneur that has walked the face of the earth. And, there is no reason that you shouldn't treat your business any different than they do. Thus, you should probably start at the same place as every other entrepreneur does when starting out: write a business plan.
OK. So what is a business plan?
In a nutshell, a business plan describes how you will operate your business, haul in the dough and how much it all costs (yes, all those things that you don't want to think until you have to). What specifically is in a business plan is discussed in greater detail below.
A business plan is NOT a "Game Bible" (i.e. a portfolio of game content). While, the content of a game(s) should be discussed, it should not be the main focus of your plan. Rather, your business plan should describe how you will use the content of your Game Bible to turn a profit so you will have more money to develop more games and make even more money.
If you think about it, an independent game developer is no different than Bill Gates, Steve Jobs, Walt Disney, Nolan Bushnell, Sid Meirs, Will Wright or any other entrepreneur that has walked the face of the earth. And, there is no reason that you shouldn't treat your business any different than they do. Thus, you should probably start at the same place as every other entrepreneur does when starting out: write a business plan.
OK. So what is a business plan?
In a nutshell, a business plan describes how you will operate your business, haul in the dough and how much it all costs (yes, all those things that you don't want to think until you have to). What specifically is in a business plan is discussed in greater detail below.
A business plan is NOT a "Game Bible" (i.e. a portfolio of game content). While, the content of a game(s) should be discussed, it should not be the main focus of your plan. Rather, your business plan should describe how you will use the content of your Game Bible to turn a profit so you will have more money to develop more games and make even more money.
Why do I need a business Plan?
Unless you have natural business acumen, taken a business course before, or have run your own business before, you may be thinking, "Why do I need a business plan? I why should I care about that stuff now?! If I just develop a great game, money will come flying in the door! Besides, that business stuff will just bog me down ane take too much time away from developing my game."
While a business plan may take time, if you ever wish to develop more than one game in your career or build your tiny outfit into a full fledged studio, you will eventually need to bang out a business plan. And, the best time to do this is when you're just starting out (believe me, you won't have the time to do it later). Besides, there are numerous advantages to having a business plan:
1) You have something in writing.
By putting your business model into writing, it will give you a solid and well defined plan to your end goals, whatever they may be. It also forces you to tie together any ideas swimming around in your head, so they do not get lost. Writing out your business model also gives you a something to refer back to when you have a new idea to see if it is relevant to your current model and what would need to change if you want to implement the new idea..
Once common misconception about a business plan is that once it is set in stone, that it should never change. This is somewhat of a half-truth, in reality business plans change all the time due to changes in technology, the economy, a new competitor, or just a radical new idea that would improve your business model. The true purpose of a plan is to keep you focused and on track with your business model and any change to the plan should be well thought out.
2) You will need one if you ever want funding
Some of you may have grand ideas that will require a massive infusion of capital (that is, you need lots of money to get your product to market). If this is the case you will eventually be shopping around for some form of financing whether it be in the form of a bank loan, a strategic partnership with a larger company (e.g. a publisher), an angel investor, or a venture capitalist. Any of these investors will require a business plan. If you wait to put a plan together until after an investor asks for one, you will loose credit in its eyes and it may cost you. Having a plan ready to present to an investor, shows that you have thought your business through, aren't just some hack looking for free money, and, ultimately, will put you in a better position to negotiate the terms of the investment.
3) It gets you thinking about things that you might not think about until its too late.
President Eisenhower once said, "In preparing for battle I have always found that plans are useless, but planning is indispensable." By putting your business model onto paper, it forces you to plan and think about the future. A business plan contains forward looking budgets and financial information; thus, you will be able to gauge how many units you will need to sell and at what price you should sell them at to make a profit. Also, a business plan's budget will force you to plan how to eventually pay for things such as legal expenses, marketing and distribution costs, office space, insurance, any other expenses you may not need right now but will be required in the near future.
What goes in a business plan?
This is a question which will get you ten different responses if you ask ten different people. You can search Google and it can point you to dozens of sites specifically created to tell you specifially what goes into a plan and how it should be organized. My personal experience is that a good business plan will contain at least the following:
While a business plan may take time, if you ever wish to develop more than one game in your career or build your tiny outfit into a full fledged studio, you will eventually need to bang out a business plan. And, the best time to do this is when you're just starting out (believe me, you won't have the time to do it later). Besides, there are numerous advantages to having a business plan:
1) You have something in writing.
By putting your business model into writing, it will give you a solid and well defined plan to your end goals, whatever they may be. It also forces you to tie together any ideas swimming around in your head, so they do not get lost. Writing out your business model also gives you a something to refer back to when you have a new idea to see if it is relevant to your current model and what would need to change if you want to implement the new idea..
Once common misconception about a business plan is that once it is set in stone, that it should never change. This is somewhat of a half-truth, in reality business plans change all the time due to changes in technology, the economy, a new competitor, or just a radical new idea that would improve your business model. The true purpose of a plan is to keep you focused and on track with your business model and any change to the plan should be well thought out.
2) You will need one if you ever want funding
Some of you may have grand ideas that will require a massive infusion of capital (that is, you need lots of money to get your product to market). If this is the case you will eventually be shopping around for some form of financing whether it be in the form of a bank loan, a strategic partnership with a larger company (e.g. a publisher), an angel investor, or a venture capitalist. Any of these investors will require a business plan. If you wait to put a plan together until after an investor asks for one, you will loose credit in its eyes and it may cost you. Having a plan ready to present to an investor, shows that you have thought your business through, aren't just some hack looking for free money, and, ultimately, will put you in a better position to negotiate the terms of the investment.
3) It gets you thinking about things that you might not think about until its too late.
President Eisenhower once said, "In preparing for battle I have always found that plans are useless, but planning is indispensable." By putting your business model onto paper, it forces you to plan and think about the future. A business plan contains forward looking budgets and financial information; thus, you will be able to gauge how many units you will need to sell and at what price you should sell them at to make a profit. Also, a business plan's budget will force you to plan how to eventually pay for things such as legal expenses, marketing and distribution costs, office space, insurance, any other expenses you may not need right now but will be required in the near future.
What goes in a business plan?
This is a question which will get you ten different responses if you ask ten different people. You can search Google and it can point you to dozens of sites specifically created to tell you specifially what goes into a plan and how it should be organized. My personal experience is that a good business plan will contain at least the following:
1) Executive Summary.
This is a one or two page summary of all the sections in your business plan. This should be short and sweet; think of it as the teaser for the rest of the plan. Typically someone will read this first before they decide to read on. If they don't like what they read or if there is not enough information to understand your business model, they probably won't read any further.
2) Market Descriptions.
2) Market Descriptions.
This section covers your understanding of the Market as a whole. Basically it is there to show that you've done your homework. It also will describe where your business fits into the market, any competitors you may have (A helpful hint: if you don't think you have any competitors, you need to think harder and broader), and why and how your business will be in a better position than your competitor's. This might seem simple, but it actually requires the most research than any other section if it is done right.
3)Description of the Business.
3)Description of the Business.
This section is the meat of the plan will describe your business operations and business history in detail. It will cover how you plan to monetize your product (i.e make money off of your games), including your preferred payment structure and method of distribution. It will also discuss your business' projected goals in the short and long terms. Some of these goals should include possible exit strategies if your business goes south or does very well. Some possible exit strategies could be merging into another business, taking the company public, or selling the company and/or its assets. Normally, this section will also cover your product description. But, because you will be developing numerous products, this may be more general than in typical business plans. The best thing to do here is describe what is already in the pipeline and the type of games and niche you see the business developing in the future.
4) Financial Statements.
4) Financial Statements.
This section will contain the business's expected revenue stream (be realistic), budget, pro forma balance sheet, income statement, and cash flow analysis. While most of these may seem like big mumbo-jumbo terms to you, they are important numbers that describe the financial health of your business. Like instructions on writing a business plan, a quick search on Google can lead you to great instructions on how to form these documents. (All I have to say is Excel will become your best friend.) If you are an early stage company, most of these figures will be pretty simple or you will not have enough information to put them together. But take the time to learn how to write and understand these documents now; it will definitely help you in the future. And, if you become fluent in financial-ese, you will gain more respect from those you do business with.
5) The Core Team.
5) The Core Team.
This may be the most important part of your business plan. The ultimate value of your business is in your team; the people making and marketing your products. So in your business plan you need to discuss who are the key members of your team. Include a bio for each key member which discusses their relevant experience. And, if possible, state if any of the members have collaborated in the past and what projects they worked on.
Conclusion: A Guide to the Big Picture.
As you can see, putting a business plan together can be a lot of work. However, once it is together, it is very rewarding. You will be able to see the "big picture". It will be easier to make decisions because you have a better understanding and guide to what you need to do to succeed.
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