Category: Marketing/Business

Oh, hey! MarkTaw.com updated! Why Most Businesses Fail (A Theoretical Model) was an interesting article analyzing the reasons for the high failure rate of new businesses.

Business owners can find that income fails to cover expenses. New owners might not realize that profits come many years down the road, and I believe most of them are in the high percentage of first-year failures. For those owners that do appreciate how difficult it can be to meet expenses and start saving, it is possible that the expenses accumulate much too quickly compared to revenues. Mark suggests that there are only three options: reduce expenses, increase income, or quit your business. Reducing expenses might results in less debt, but it is still debt. Increasing your income is obviously important, but it can be frustrating when your margins are terrible. Quitting the business adds another notch to the statistics about failed businesses. What he says about each is insightful about the thought processes new business owners need.

He ends the article with 12 tips for people who still want to go through the trials of starting and running their own businesses. #8 and #9 go well together. #8 says to try multiple things. Get multiple streams of income. Don’t depend on one product or service. You need a backup in case one aspect of your business fails.

#9, however, says that you need to start somewhere. You can’t always jump into multiple endeavors. Start somewhere, take action, and get something out there. You need to make one product before you make your second. If I had stuck with my deadlines for game development, Oracle’s Eye development would have slowed down incredibly, and if you have been reading for the past month, you know I can’t afford to lose the few hours I do get to work on it. According to my old deadlines list, I am supposed to have a prototype for IGF 2007 by the end of March. I am also thinking about topics for a book or newspaper article series. I haven’t finished my first game yet, and there is a temptation to work on a different project to give myself a break. I need to ignore everything else and focus on my game project. I need to take as much action as I can to finish it.

Otherwise, I’m just another wannabe game developer who couldn’t finish what he started. So long as I am making progress, no one can say that I didn’t finish. I just haven’t crossed the finish line yet. I’ve been floundering because there were a handful of finish lines, which caused me to lose my focus. Once I made the conscious choice to concentrate on one goal and ignore the rest, it was easier to breathe. Taking action was a choice between doing something productive or not doing something productive, which is a lot easier than trying to decide which of a handful of productive actions to take.

In So…Did You Read It?, David “RM” Michael asks a few questions. Did anyone read State of the Industry: Casual Games in the latest Game Developer magazine, and if so, could you provide a summary?

Sure! James Gwertzman, director of business development at PopCap says that he expects the casual game market to grow very rapidly. Some research predicts that downloadable games will have $1.7 billion in revenue by 2009 compared to $241 million in 2005. It talks about how PopCap works. It talks about PlayFirst, the supposed-first publisher for casual games. Budgets for casual games have apparently gone from $50,000 to $150,000 due to high quality games raising standards. Then there was talk about how important portals are since they have such a high volume of potential customers. Microsoft’s MSN Games and XBox Live Arcade also are supposed to usher in diversity in casual games.

Nothing, however, about going it alone. Nothing about being an indie. Just Big Money going after big money. Not that there is anything wrong with big money, of course. I think that it is good news that casual games are shown to be more than a passing fad. I just think that it would be terrible if it became a subset of hit-driven, big-production, mainstream game development.

The second question was about the relevancy of Game Developer magazine. I don’t have enough information to be able to try to answer that question, but I will say that I think I get more quality information from blogs and websites, and such information comes to me much quicker.

David “RM” Michael of Joe Indie wrote about a free Ebook available from Bruce Judson in Free EBook about Starting a Solo Business

I’m a bit disappointed that it isn’t available in an easily-downloadable PDF, but you can read Go It Alone! The Secret to Building a Successful Business on Your Own in standard HTML format. With chapter titles like “Principles of Success”, “When to Quit Your Day Job”, and “Conclusion: Fear is the Enemy”, it seems like a great read.

How to Be a Demo God by Guy Kawasaki gives 11 tips to entrepreneurs looking for venture capital at Demo.

While I don’t plan on being involved in Demo in the near future, I was wondering how his points can apply to a shareware game demo. Some of them don’t seem to fit at all, such as “do it alone” instead of with a partner. Then again, making sure you demo runs on its own instead of requiring the existence of exotic-third party applications might be something that would be desired.

So how can they apply? I’ll try to answer, but feel free to chime in with your own thoughts. I don’t have the personal experience of putting together shareware demos myself, so what follows is what I’ve gleaned off of the various shareware marketing and sales articles and posts out there.

1. Create something worth demoing. It’s generally understood that your game better be able to stand up on its own. Not all good games sell well, but all bad games definitely don’t sell or sell for long. The demo is supposed to be a small part of that awesomeness that is your game. If you are showing a small part of junk, your customers will know. Don’t begrudge this fact; it’s how shareware is supposed to work. The way to compete is to make a good quality product.
2. Do it alone. I suppose if I stretch I could say that your game shouldn’t require your players to install five different third-party libraries that aren’t included with the demo. Maybe another interpretation is that getting onto a shareware compilation is also bad; being one of the “best 100 Windows games”, for instance, you’ll get lost in the crowd. If someone tries your game demo and likes it enough to pay for the full version, how likely is that person to say, “But let me check the rest of the games to see if I like something better”?
3. Bring two of everything. Some people lose sales because the demo couldn’t run on certain computers. If DirectX support is not available, OpenGL might work better. Message boxes might pop up and disappear before a person can read them, so use a log file to store the error messages. Having a Windows version AND a Mac OS X version might double your possible sales.
4. Get organized in advance. Your game’s demo is part of the marketing of your game. Don’t just take the full version and cut out a bunch of features and throw it out there. Really think about what would make it a good demo. How does it fit into the rest of your marketing plan?
5. Reduce the factors you can’t control. If your demo requires the Internet to function, it should say so. Otherwise, don’t assume an always-on connection because it might not be there. What resolution do you need? Don’t assume that your customers will have a 1920×1200 resolution monitor. If you do need certain factors to be there, you should state so in your system requirements. Those should be easy to find on your website, I think.
6. Get to it. Do we really need to learn who you are or what libraries you used as soon as I start the demo? Show me the game! I don’t know if showing Buy buttons is a bad thing that early in the demo, but I would imagine that until the person plays the game, having a BUY NOW splash screen before getting to the main menu would be more of an annoyance than anything.
7. “Do the last thing first.” I read that Daikatana is actually a decent game, and I’ll be playing it this year to learn for myself. I also read that with all the hype surrounding it, people were turned off by the first couple of levels. They were apparently boring. I think it will probably be fine to say, “The full version features even more weapons!” but the demo should at least feature some awesome weapons too. If you have a puzzle game, I think putting only easy puzzles in the demo is a problem as well.
8. Then show the “how.” I’m not sure how to apply what Kawasaki was saying to the game demo, although I suppose a tutorial would be one way. IGF finalist Flashbang Studios’ Glow Worms is a good example of a game that had a nice tutorial to show you how to play. On the other hand, I know that Darwinia, as great a game as it is, was hard to get into at first. I didn’t know how to get the game to recognize my mouse gestures because I didn’t know I was supposed to be on a specific screen to do them.
9. Cut the jargon. Your customers want to play the game, not reconfigure their computers. While drivers need to be updated and libraries need to be installed, don’t expect your customers to hunt for files or do anything out of the ordinary.
10. Don’t take any questions until the end. I’m not sure if this one applies at all. If your customer has a question, answer it! Also, record it and resolve to fix your demo so that those questions are addressed before they ask. Make it so you don’t have to worry about being asked questions until the end.
11. End with an exclamation point. Your demo should start awesome and it should end awesome. Don’t fizzle out or people will think that with the exception of that first part, which they’ve already played, the entire game is boring.

I suppose there is a challenge applying these tips to shareware games. You can’t depend on the player making it all the way through the demo, so you can’t easily define the “end” of it for that potential customer. Perhaps it shows that there is a flaw in your game demo? Should your demo be so good that people play through it completely, or is it possible to be better even if the person only plays a portion of it? If the person stops part of the way through, will they simply uninstall and forget it or will they actually drop you a line to tell you why? With a shareware demo, your captive audience isn’t forced to sit and watch for six minutes. Your demo better be spectacular and make the potential customer want to see more.

Last week I finished reading Before You Quit Your Job: 10 Real-Life Lessons Every Entrepreneur Should Know About Building a Multi-Million Dollar Business by Robert T. Kiyosaki. It is part of the Rich Dad, Poor Dad series of books. I actually finished listening to the audiobook Rich Dad, Poor Dad before reading this book.

The point of Rich Dad, Poor Dad is that there is a big difference between being poor and being rich, and it isn’t directly related to money. There is a big difference between being poor and being broke. It’s a mindset. A rich person will ask empowering questions, such as “How can I afford that?”, while a poor person would simply conclude “I can’t afford that.” Being broke is a temporary financial state. You can still be rich when you’re broke. You just have to think they way rich people do. Essentially, think and grow rich, or don’t think and be poor.

Before You Quit Your Job is a great book that talks about what it takes to be an entrepreneur. Somewhere else, I got the idea that being self-employed and being an entrepreneur are separate and distinct. The idea was that even if you are running your own business, if it is something that someone else has already done before, then you have just created yourself a job. An entrepreneur creates something new.

Kiyosaki drilled the idea even further. Basically, you can are an employee, or you are an entrepreneur. Almost everyone is encouraged to go to school, get good grades, and get a good job with benefits. My own mother is still telling me that I need a good job for the benefits. When I was younger, my father would tell me that I needed to go to school to get good grades in order to eventually become the CEO or other high level officer in a company of my own. It sounded great, if vague, and I always had the vague idea that while I could become an employee, I would eventually run my own business.

I learned this past year that my father must not have really put much belief in it himself. A month after I announced that I would be running my own shareware video game business full-time, and therefore would need my family to support me until I was profitable, my sister informed me that he would talk to her about how I needed to “shape up” and “get a job”. Ouch. It’s not something you want to hear that far into it. Since I couldn’t rely on the support I was asking, I decided that full-time employment was the way to go. I’ll support myself, and then I will be the one to decide to support my business.

Anyway, the book is geared towards entrepreneurs looking to make a multi-million dollar business and employ hundreds of people. Entrepreneurs create a business, working on the business before it even exists, and then once their job is done, they get out of the way to let the business run on its own. My own plans for my business didn’t take into account the idea that it didn’t need me. I knew about the importance of setting up good systems; the idea of earning money while I sleep was a nice one to have.

At first I thought I wouldn’t get much value out of the book. I wanted to be in charge. I wanted to stay small. While earning millions of dollars is certainly possible, I didn’t think I needed to partner or hire with hundreds of people to get there. My plan wasn’t to create a business for someone else to buy, nor was it for giving other people creative control.

Still, the book helped to clarify what I was thinking. The main focus in the book was in helping people move from being employees (whether self-employed or not) to entrepreneurs; much of the content was useful only to those people. Still, even though I wanted to be self-employed, I found a lot of helpful information that overlapped. Some of the things that rich dad seemed to refer to negatively might actually be positives for someone who isn’t trying to be the kind of entrepreneur he was thinking of. Some of it gave me pause and made me think, “Oh, that’s me he is talking about. I’ll fix that.”

Reading through the 10 lessons and the stories that went with them, I was able to see that I still had some thinking to do. I know that there are some important tasks to handle in order to ensure that my business won’t fail immediately or sink under its own success. There are still some mindset changes to make.

Thomas Warfield reposted a 2004 article called Why Pyrogon Failed. You can read the original postmortem by Brian Hook as well.

Warfield boiled it down to failures in marketing and long-term planning. It is interesting that the About Us page makes it sound like the company is supposed to be independent, but the postmortem makes it sound like it was really supposed be a way to procure funding for a more mainstream company. In any case, it sounded like the mindset of the main people didn’t make the needed change to go from mainstream game developers to independent game developers and publishers.

When you work for a company, you have one job, and you do that job. You don’t need to worry about accounting, marketing, sales, distribution, or legal. You do your job, you get paid, and you do it again. “Safety” and “security” are the most important things to you.

When you run a company, you now have to worry about such details. Cashflow, marketing, and sales are not just meta-work. They ARE the work of the business. Product development is still important, but it is only a portion of what is needed.

Being an employee requires a certain mindset, but running a business requires another. You can hire help, but you can’t outsource marketing and sales and still expect to become successful.

If you want someone else to control your company’s destiny, you might as well be an employee. If you’re running your own business, you should want to control as much of its motion as you can. That isn’t to say that you should personally do everything, of course. It just means that you shouldn’t make business decisions that gives responsibility for your success to someone else.

Some time ago, $100 for membership in the IGDA seemed costly. I opted for the student membership at the time since it was so much cheaper. The Association of Shareware Professionals is another organization I have since joined, and at $100, it also seemed intimidating. On top of it all, there were magazine subscriptions and books to buy. I didn’t want to spend so much money that I could put towards a good couple of books!

Then I realized that I needed to change my mindset. Until then, I was looking at $100 and thinking, “That’s a lot of money.” I don’t spend $100 all at once very often. I had vague thoughts about how it could be a bad investment or that I might be throwing away $100. I realized, however, that I wanted to take my business seriously. I shouldn’t be so concerned about $100 because I should intend to make more than that easily. Heck, I made over $100 easily within a week during my regular job, so I would only be out a few hours of my time. The potential benefits sounded amazing, though. I could meet with other people doing the same thing I am doing, learn from them, and actually help dictate how the industry moves. $100 for all of that? It then sounded like a great deal.

If you aren’t satisfied with how your indie game business, or any business for that matter, is working out, you might want to double-check the mindset you’re in. Does it match your expectations? Do you have clear expectations to begin with?

I had set a deadline for myself to form an LLC by December 17th, 2005. It’s now the 20th, but I’ve finally learned presumably all of the information I needed to know. I didn’t think that starting a business should be something that requires lawyers and accountants, and so I wanted to learn what I needed to do. I figured that the government would be happy to provide such information and make it easy for anyone to know what is legally expected. While the government websites could be helpful for general information, they weren’t helpful in my particular case.

I don’t plan to partner up with anyone or hire employees; I’ll be working for and by myself. Limited Liability Companies were restricted to multiple members, but this past summer a change to the Illinois Limited Liability Act allowed single-member LLCs. A single-member LLC would be perfect for my needs, but it is hard to find information on them. LLCs are still new, and single-member LLCs even more so, and so most articles and government help are still geared towards incorporation. I ended up consulting an accountant to determine the main things I needed to worry about.

Note: I am not a lawyer. I am providing this information in the hope that it can be useful to someone, but it can’t be considered legal advice. Your mileage may vary, and so you should ask a CPA or lawyer about your own circumstances if you are not sure about anything.

To form a single-member LLC in Illinois, you need to file Articles of Organization with the Secretary of State and send along a check for $500. Once I place the filing in the mail, Once the Secretary of State files the paperwork, I have officially formed an LLC. This part I knew, but what I was concerned about was what I was obligated to do afterwards. What forms, taxes, fees, or family members am I required to provide to stay within the law?

According to the IRS, since I’m not hiring anyone or operating my business as a corporation or partnership, I don’t need an Employer ID Number. My CPA still suggested that I get one. It seems pretty easy to apply for one.

He also talked about the lack of a need to apply for an Illinois Business Tax number. I’m going to be reading more about this topic…

If you look at the list of LLC forms on the Illinois Secretary of State’s website, you’ll see one form called Domestic Limited Liability Company Annual Report. Out of all of my research, I found only one reference to the $250 yearly fee, and it didn’t even mention that the fee goes with this report.

It turns out, it does. As I understand it, the state will send me this already filled-out form. I just need to sign it, attach the $250 check, and I’m fine. The report is simple restating that I’m in charge of the company, so there is no need to submit a balance sheet or profit-and-loss statement.

The final thing to worry about: taxes. It turns out that I just need to file my 1040 along with Schedule C, and I’ll cover my Social Security and Medicare tax obligations.

Once again, in summary:

• File Articles of Organization with Secretary of State along with $500.
• Request Federal ID Number from IRS.
• Pay annual fee by submitting $250 with signed annual report.
• Submit Schedule C with 1040 when I pay my own taxes at the end of the year.

That’s it! It sounds easy…a little too easy. Of course, there is the issue of the federal tax, which is supposed to be pay-as-you-go. When you’re self-employed, you’re required to estimate your income and submit your tax obligations quarterly. David Michael wrote about his simple tax plan, which doesn’t sound too different from what a friend of mine does.

Hopefully this information helps someone. I’m also about to read “Your Limited Liability Company and You: An Operating Manual” by Anthony Mancuso. It was suggested to me by someone on the Association of Shareware Professional‘s newsgroup. If I learn anything new, I’ll try to post it here.

The best part? I feel confident enough to form the company without worrying about a huge backlash from any government agency or law. Now I can jump in and start making mistakes quicker. Faster mistakes means faster learning. B-)

[tags]business, llc[/tags]

Tom Warfield had a number of articles written years ago that I’ve never read, and he’s been updating his blog by reposting them. The latest such article is How Long Does Great Shareware Take?, which he originally published in 2003.

Now, it is generally understood that you can’t go into indie game development and expect to become rich overnight. Steve Pavlina’s article on the difference between shareware amateurs and shareware professionals notes how important it is to realize that version 1.0 isn’t the latest version of your product. You release, fix, rerelease, update, rerelease, etc. Warfield mentions that most shareware products don’t do well initially, and his Pretty Good Solitaire actually took months to sell one copy and years before it was sufficient to live off of the sales.

Last month I found a thread on the old Dexterity forums about shareware games, and there was a discussion between Pavlina and Warfield likening their business models to rotating a flywheel. It’s harder to turn at first, and it might seem like you are putting a lot more effort into it than getting rewards out of it, but eventually it gets easier and easier to turn faster and faster.

But patience is required. If you aren’t satisfied with the immediate results and try to change them, you’ll constantly change and never let anything last long enough to actually work. If I kept restarting my own game development just because it took longer than a month, I would probably have four partially finished projects instead of one, er, much-more-completed project. And I’m just starting out! I’m just now getting feedback about the game from people, some of whom haven’t had a chance to actually see it in action.

If Joel Spolsky says that great software takes 10 years, and Warfield and Pavlina have said similar things for shareware games, then it would make sense to plan for the long haul for indie game development, especially when you are flying solo and aren’t able to lean on 10 employees of varying skills and talents.