Category: Marketing/Business

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.

I somehow came down with something yesterday. I woke up, my throat was sore, I got to work, spent the entire day feeling slightly warm, then got really warm and felt terrible on the train ride home.

I ate some dinner, drank some water, and went to bed. So much for Development Night.

Of course, I was so sick that I couldn’t just fall asleep. I needed to sleep, but I guess my breathing was weird. My heart was beating pretty fast for being stationary. Eventually I did fall asleep, but now I’m wide awake, it’s 10:45PM, and while I’m feeling a bit better, I feel like crap for not being able to sleep AGAIN.

Oddly enough, while I was waiting to go to sleep, shivering in bed because I was so warm and my room is above a garage, I kept having delusions about how my game business was going to work. I imagined what it would be like to have a FAQ that talks about my company. I imagined that GBGames was a lousy name and that I was working on a new one. I imagined talking about how much more trust my business model put in the customer compared to say Sony or Valve: “No DRM here!” I imagined talking to other developers, and I was actually a role model for a number of them. I was a serious competitor to a lot of businesses as well.

I had a number of other images, and I am upset because I would have loved to write all of them down, but every time I became conscious of them, I would immediately forget. It was like I was dreaming, realized it, woke up because I had to breathe (stupid stuffy nose), and forget the important points.

I hate being sick, but I really got excited thinking about the near future. I smiled despite the crappy way I felt. I actually dreamed about the success I was going to have.

Now to make an action plan to make it into a reality.

I’m writing this still feeling a bit sick, so hopefully it isn’t too rambly. I’m just awake enough that I can’t lie in bed anymore, sick enough that I can’t do too much, and my back still hurts enough that I can’t sit up and read a book.

I finally managed to talk to a CPA about incorporating GBGames. I had done a bit of research, but it seems odd that there wasn’t a simple bullet list of items to look at regarding incorporation. I mean, if the government knows what I need to do, why can’t I find a simple list? File articles of incorporation, send in a check, send a form to the IRS, and then…what? I found that I would need a Federal Tax ID, which I could request, but I also learned that there are certain responsibilities such as recording minutes for meetings and paying for the privilege of filing annual reports. I also didn’t realize that even though I don’t plan on hiring anyone, I would be considered an employee of the corporation. The descriptions of the employment laws that I’ve been ignoring up until now will need to be looked over in more detail. I’m sure there is one or two things I’m leaving out, but suffice it to say that it would cost me money and time to maintain the corporation.

And so the CPA suggested that a corporation would be too much effort and cost for very little gain. I had originally decided not to go for a Limited Liability Company, but he advised that while it cost more up front, the maintence of the company would be a lot simpler in this form.

I am planning on running this business part-time initially with no outside investment. I don’t want to hire employees, although I will contract out certain work. I also don’t believe I’ll be able to make any income for some time (I’ll need a game to sell first), and even then I won’t be able to live off of it for maybe a year or four. For now, an LLC sounds a bit more appealing. I can always form an S Corporation later, specifically when I start looking at much more serious income and/or start running it full-time.

I’ve read through the SCORE information on writing a business plan, but now I need to start making one.

Unfortunately, I’ve found that the resources provided by SCORE were very general. Parts of it were not relevant to an online software company, let alone to an indie game development company. Also, most indie game companies are privately owned; there isn’t a lot of publicly available information on them. For the most part, actual developers don’t feel comfortable giving out real stats and numbers, and some would argue that the information is worthless anyway. So now what?

I did what any good technical-minded person would do: I searched online for information. I found this post from the Dexterity archives on Indie Gamer. It’s cool because it has the words of Steve Pavlina along with Thomas Warfield. They liken indie game development to turning a flywheel: the more you work at it, the easier it becomes to stick with it. Both were making a few hundred dollars per month at first, but when they are working consistently at it, the sales just keep increasing. It isn’t a get rich quick method, and I never thought it would be, but it is good to know how long it took to make significant and regular sales. Pavlina also touches on the need to stop thinking like a hobbyist if you expect to actually make money from the business. Definitely good advice, especially since I catch myself thinking too small sometimes. While it does provide some information, it doesn’t delve too deeply in what it takes to create a business plan.

I also thought to check out Steve Pavlina’s articles on Dexterity. I credit those articles and the Dexterity forums with the inspiration that got me thinking about starting up my own game company, and I like to read through them every few months. To Plan or Not to Plan is especially relevant. When I first read it, I thought it was good, but I am seeing it in a new light now. “Failing to plan is planning to fail” was a nice saying a year ago, but I now see how effectively it reiterates the importance of planning for my business. The article also goes into what should be covered, such as sales, cashflow, product development, marketing, and customer service among other items. There’s more to it, but suffice it to say that I’ve found the first solid resource on forming an indie game development company in this article.

The article mentions that the business plan should be two to five pages long, which goes with my feeling that it shouldn’t be a monstrous, formal document. I should be able to write a rough outline and draft within the week. Well, I should be able to dedicate an afternoon or two to the task, but I’ll need to schedule the time when I can.

EDIT: Thanks to Troy Hepfner on the ASP newsgroups, I remembered that I own the book Game Development Business and Legal Guide and that I would probably do well to pull it off the shelf, dust it off, and read it now that it applies to my situation a lot better.

For some time I’ve been reading the words of naysayers who believe that the golden age of indie game development has passed and that there is too much competition. When you were the only one around, it was “easy” to make a living from your games. Now there is too much competition and it is hard to get your name out there. Blah blah blah.

Seth Godin wrote about the proximity effect. It basically describes how most products actually sell well when they are part of a category. Books sell next to other books. Fish sells next to other fish. No one is complaining about how there is too much competition in a bookstore because it is exactly where the sales occur.

Steve Pavlina’s article on how to create successful shareware games mentioned the idea of selling the sizzle instead of the steak. The difference between your freely available demo and your full version is what you are selling. Don’t tell me that I’ll get the five levels from the demo. I already have them. Tell me about the 100 levels I’ll get if I pay for the game. Of course, if you go to a higher altitude and compare your offerings with your competitors, what are you selling now? You may offer 105 levels, but if the other game can run on an operating system of the player’s choice, will it matter?

At a bar, you don’t have to sell vodka. You should have to sell why your vodka tells a better story than the other guy’s vodka.

You should be concerned about how your potential customers will perceive the benefits of paying for the full version, but you should also think about how paying for your full version compares to paying for someone else’s full version. Why should I buy Flatspace 2 when I could buy Gish or Tribal Trouble? Why should I pay for Darwinia when I could pay for Geneforge 3? Why Alien Flux instead of any of the above?

Of course, no one wants to get into a silly cold war by claiming to have one more feature than the competition. Mainstream game developers and publishers already do so when they make a sequel to a game that has more graphics, more sound, more controller buttons, more more more more more…

Still, there is more to worry about than how your game competes with itself. Indie game portals may make it easier to get an audience, and obviously competition is a concern, but you basically have to convince the potential customer that your game is well worth the money AND worth more than an offering from another developer.

I’ve had a chance to read through some of the materials I’ve received from my visit to SCORE. For the most part, I know about the different things involved in running a business, but I’ve never dealt with the details. I haven’t asked the hard questions.

For example, “What business am I in?” How I answer this question will pretty much dictate how I run my business, so I can’t just blow it off. Perhaps while I write my business plan, I’ll change or refine the answer. Still, it is a very good question that I’ve never answered. I will need to describe my business in terms of how it works, how I plan on making it profitable, and should also identify clear goals. I already know why I want to be in business, but I will need to clarify the how and what.

Since marketing is an important aspect of any business, it deserves its own section of the business plan. It’s tough, but I’ll need to be able to identify who my customers are. “Gamers” isn’t good enough, but am I going to be targetting casual game players? Interstitial gamers? Hardcore gamers bored of the mainstream offerings? How about people who would otherwise be hardcore game players but can’t overcome their fear of a complicated interface? Whose life do I want to change? What’s my pricing strategy? Is the market for my kind of games growing?

It will be a lot easier to direct and control my own business if I have an idea of the resources I’ll have to use. I can’t make good decisions if I am not sure how much money I’ll have to work with from one month to the next. I’ll need to specify a startup budget as well as an operating budget.

Who is my competition? And not just other indie game developers, either. What other products and services are competing with me? People don’t watch television as much, but it still poses an alternative if I don’t make my offerings compelling enough. For that matter, people might prefer using instant messenger clients and talking with their friends rather than play my game. Identifying the competition allows me to try to enhance my own offerings.

I’ve never addressed these questions in detail, but I can already see how doing so will go a long way towards improving my chances of succeding.