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Entrepreneurial advice
#1
SpecialKO
SpecialKO
Hey folks,
Some friends of mine and I are going to be starting our own game company. There's really never been a better time for a bootstrap game company to make a go at it, and between all of us, we have programmers, artists, marketers, and business managers, so we think we have the skill sets and possibly enough disparate experience.
None of us have really started a business before, though, and while we have all the literature, have taken requisite courses (one of us is an MBA, and I am getting a Master's in Graphic Communications Management), some real-world advice would be really appreciated from some of the older crew around here who have been there and done that.
Thanks mucho in advance!
-TeKeo
Some friends of mine and I are going to be starting our own game company. There's really never been a better time for a bootstrap game company to make a go at it, and between all of us, we have programmers, artists, marketers, and business managers, so we think we have the skill sets and possibly enough disparate experience.
None of us have really started a business before, though, and while we have all the literature, have taken requisite courses (one of us is an MBA, and I am getting a Master's in Graphic Communications Management), some real-world advice would be really appreciated from some of the older crew around here who have been there and done that.
Thanks mucho in advance!
-TeKeo
#2
Kitty Sinatra
Kitty Sinatra
Based on an acquaintance's experience, I have to say this: Make damn sure your business partners will pull their weight before you agree to anything.
#3
AshburnerX
AshburnerX
This is the best advice you can give to someone looking for partners.Based on an acquaintance's experience, I have to say this: Make damn sure your business partners will pull their weight before you agree to anything.
#4
SpecialKO
This one is actually on my mind regularly.
SpecialKO
This is the best advice you can give to someone looking for partners.[/QUOTE]Based on an acquaintance's experience, I have to say this: Make damn sure your business partners will pull their weight before you agree to anything.
This one is actually on my mind regularly.
#5
figmentPez
figmentPez
I don't have any business experience myself, but I've been a spectator to my mom's small business. One thing I think any business needs to succeed is a balance between business minded people and creative types. Not only that, but a trust between the two. You need creative to drive trying new things, and a solid business sense to know what has a chance at working, and what can't at the moment. My mom is a creative type and didn't have anyone good at business to lean on. More than just leaving her financials unorganized, a lot of her good ideas never went anywhere because she didn't know how to turn a concept into an actual service/product. Hiring an accountant helped make sure she didn't get into trouble for unpaid taxes or something, but just getting someone to handle the numbers wasn't all that she needed. It sounds like you've already got some people from both group, what you need now is to develop the relationship between co-workers so you can voice ideas and concerns.
Some other bits:
- Don't be afraid to charge what your product is worth. People won't value your work if you don't. (This coming from a guy who thinks games are generally overpriced these days.) This applies to consumer prices, and to what you charge other companies for your work.
- Keep control of your ideas (characters, worlds, art, etc.) I'm stealing this from what I've heard advised for webcomics (on the Webcomics Weekly podcast) but it seems a lesson that applies to all creative industries. Don't sell off rights just because you think you have to to get a publishing/distribution deal. If you put your time and yourself into your game, you want it to be yours after all that work.
- Have clear goals, not just for what product you want to make, but for how you want to do business in general. My mom could never decide if her business was aimed at other professionals in her field, or at amateurs looking for basic knowledge, or what. Know what you want to do, who you're doing it for, how you want to look doing it, etc. Make sure people you hire know your goals for the company, and are willing to work towards them.
Some other bits:
- Don't be afraid to charge what your product is worth. People won't value your work if you don't. (This coming from a guy who thinks games are generally overpriced these days.) This applies to consumer prices, and to what you charge other companies for your work.
- Keep control of your ideas (characters, worlds, art, etc.) I'm stealing this from what I've heard advised for webcomics (on the Webcomics Weekly podcast) but it seems a lesson that applies to all creative industries. Don't sell off rights just because you think you have to to get a publishing/distribution deal. If you put your time and yourself into your game, you want it to be yours after all that work.
- Have clear goals, not just for what product you want to make, but for how you want to do business in general. My mom could never decide if her business was aimed at other professionals in her field, or at amateurs looking for basic knowledge, or what. Know what you want to do, who you're doing it for, how you want to look doing it, etc. Make sure people you hire know your goals for the company, and are willing to work towards them.
#6
SpecialKO
SpecialKO
Thanks, FP.
I think we're headed in the right direction because your advice really mirrors a lot of the thoughts the business-oriented members (myself included) were having.
We want to stick, for now, with iPhone development because the overhead is so low (no fulfillment/invetory requirements, they provide the ecommerce platform and assume responsibility for delivery, etc) and its relatively simple to conceptualize, develop, and publish a game in short order. We have a couple concepts that are in the fleshing-out design phase that we want to have at least prototyped, if not released, by the end of the year.
I guess you could say that we're out to build a game design company more than we're married to any one particular idea, so we're fairly comfortable with the idea of testing the waters with multiple simple (yet polished) offerings instead of sinking our money and hopes into just one project and praying that it succeeds.
I think we're headed in the right direction because your advice really mirrors a lot of the thoughts the business-oriented members (myself included) were having.
We want to stick, for now, with iPhone development because the overhead is so low (no fulfillment/invetory requirements, they provide the ecommerce platform and assume responsibility for delivery, etc) and its relatively simple to conceptualize, develop, and publish a game in short order. We have a couple concepts that are in the fleshing-out design phase that we want to have at least prototyped, if not released, by the end of the year.
I guess you could say that we're out to build a game design company more than we're married to any one particular idea, so we're fairly comfortable with the idea of testing the waters with multiple simple (yet polished) offerings instead of sinking our money and hopes into just one project and praying that it succeeds.
#7
strawman
strawman
Early on decide shares, investment, and voting portions for each principle. Put it in writing. Form an LLC or better to make certain that no one is left holding the bag if someone else decides to abscond with company assets.
Creative differences will come, and soon. Many seemingly successful companies failed because of infighting. Even though the voting shares are already assigned, make sure there's a CEO to make a Final Decision should there be any contention. Even if a few people don't like the decision, forward movement can be made, and you'll find out much more quickly who is along for the ride, and who is actually there to do work and make the business successful.
Allow for pet projects. If someone is unhappy with a decision, make sure they have an outlet so they don't let their unhappiness cloud their regular work. Give them a few tasks to flesh out their alternative idea, and opportunities to show it off if they still believe it's a better route, but don't let them invest more than 10-20% of their time on it - the boat only goes forward if everyone is rowing in the same direction.
-Adam
Creative differences will come, and soon. Many seemingly successful companies failed because of infighting. Even though the voting shares are already assigned, make sure there's a CEO to make a Final Decision should there be any contention. Even if a few people don't like the decision, forward movement can be made, and you'll find out much more quickly who is along for the ride, and who is actually there to do work and make the business successful.
Allow for pet projects. If someone is unhappy with a decision, make sure they have an outlet so they don't let their unhappiness cloud their regular work. Give them a few tasks to flesh out their alternative idea, and opportunities to show it off if they still believe it's a better route, but don't let them invest more than 10-20% of their time on it - the boat only goes forward if everyone is rowing in the same direction.
-Adam
#8
Fun Size
Fun Size
Make sure to install WebSense or some other traffic checking software on your systems. Otherwise your employees will piss away their time online chatting in forums.
What?
What?
#9
SpecialKO
SpecialKO
Can you elaborate on this a little? I'm a little in the dark about how to determine shares, voting portions, and board/executive decisions, and I'm not too clear on the benefits of an LLC vs an S vs a Partnership.Early on decide shares, investment, and voting portions for each principle. Put it in writing. Form an LLC or better to make certain that no one is left holding the bag if someone else decides to abscond with company assets.
#10
strawman
Unfortunately the differences depend on the state where the business is formed.
You guys can divvy the shares up however you like, but generally everyone figures out how much they are 'investing' in the business in terms of time and/or money, and then they are split according to how much people are investing.
For business stability, I've often recommended that one person - the person with the most to gain/lose - gets 51% of the company. This way there is a clear and obvious leader/owner, and if there are problems they are the one responsible. It may not be possible for you to do that, but it prevents people from ganging up against the others and taking control. It's not hard to convince one person to sell you their shares when they become a bit disaffected, and you can take control of the company by getting one other person on your side (if there are 5 involved, for instance) the other two people will be blindsided.
You'll also want to decide, and write down, whether there is a difference between ownership and voting shares. For instance, if someone quits and sells their shares to your competitor, does the competitor get a vote on your decisions from now on?
A recent business I've helped form (not part of it, just assisting) chose to give 51% to the majority owner, 30% to another partner, and 19% to the third partner. Further, they chose that should one's shares be sold, distributed (such as through death to one's heirs) then the ownership of those shares would go, but the voting would not. Voting would only be allowed by the majority of the remaining voters (by share) so that if the majority owner died, and each of their children got 17%, then they couldn't just start voting on company decisions, or fold the company even if they worked together as a 51% block - all they could do is sell, trade, buy their shares, and petition the other two owners for voting representation. Note that only 2 of their 6 heirs is needed to override the vote of either of the original remaining owners, so making sure the voting didn't go along with the shares was important, especially in the case that the heirs might be more interested in cash than the company, and choose to sell off portions of it for meager amounts of cash.
It's complicated, so it's worth talking it over (yourself) with someone that is knowledgeable about this, and also with the MBAs of your group.
Keep in mind that the MBAs automatically work to increase their profit/gain. they don't even realize that what they are doing may be unfair, and they may not be trying to bilk or use anyone else, but they are trained to keep an eye on the (and on their) bottom line. If you aren't aware of what non-voting shares and voting shares are, dilution, etc then you may find yourself in a very unfortunate position later on - sadder, but wiser.
Wise up now, and make sure you don't get all your information from your partners. Don't treat them as thieves, of course, but be aware and wary enough to protect your own interests, because no one else will.
-Adam
strawman
Can you elaborate on this a little? I'm a little in the dark about how to determine shares, voting portions, and board/executive decisions, and I'm not too clear on the benefits of an LLC vs an S vs a Partnership.[/QUOTE]Early on decide shares, investment, and voting portions for each principle. Put it in writing. Form an LLC or better to make certain that no one is left holding the bag if someone else decides to abscond with company assets.
Unfortunately the differences depend on the state where the business is formed.
You guys can divvy the shares up however you like, but generally everyone figures out how much they are 'investing' in the business in terms of time and/or money, and then they are split according to how much people are investing.
For business stability, I've often recommended that one person - the person with the most to gain/lose - gets 51% of the company. This way there is a clear and obvious leader/owner, and if there are problems they are the one responsible. It may not be possible for you to do that, but it prevents people from ganging up against the others and taking control. It's not hard to convince one person to sell you their shares when they become a bit disaffected, and you can take control of the company by getting one other person on your side (if there are 5 involved, for instance) the other two people will be blindsided.
You'll also want to decide, and write down, whether there is a difference between ownership and voting shares. For instance, if someone quits and sells their shares to your competitor, does the competitor get a vote on your decisions from now on?
A recent business I've helped form (not part of it, just assisting) chose to give 51% to the majority owner, 30% to another partner, and 19% to the third partner. Further, they chose that should one's shares be sold, distributed (such as through death to one's heirs) then the ownership of those shares would go, but the voting would not. Voting would only be allowed by the majority of the remaining voters (by share) so that if the majority owner died, and each of their children got 17%, then they couldn't just start voting on company decisions, or fold the company even if they worked together as a 51% block - all they could do is sell, trade, buy their shares, and petition the other two owners for voting representation. Note that only 2 of their 6 heirs is needed to override the vote of either of the original remaining owners, so making sure the voting didn't go along with the shares was important, especially in the case that the heirs might be more interested in cash than the company, and choose to sell off portions of it for meager amounts of cash.
It's complicated, so it's worth talking it over (yourself) with someone that is knowledgeable about this, and also with the MBAs of your group.
Keep in mind that the MBAs automatically work to increase their profit/gain. they don't even realize that what they are doing may be unfair, and they may not be trying to bilk or use anyone else, but they are trained to keep an eye on the (and on their) bottom line. If you aren't aware of what non-voting shares and voting shares are, dilution, etc then you may find yourself in a very unfortunate position later on - sadder, but wiser.
Wise up now, and make sure you don't get all your information from your partners. Don't treat them as thieves, of course, but be aware and wary enough to protect your own interests, because no one else will.
-Adam
#11
Mr_Chaz
But also from a slightly less business point of view, and this one might be a bit more controversial, is to remember to take some risks! At some point you need to spend to be able to bring the money back in, and don't be too conservative. I'm not recommending you go all out and blow the bank, that's the sort of thinking that got us into this economic mess, but if your financial folks are stifling your development then there's a bit of a problem. So try to give yourself a bit of leeway.
And most importantly: Remember your contingency budget. Remember Murphy's law.
Mr_Chaz
Yeah I think Adam has it here. The other thing I would add is have an exit strategy. Make sure that within whatever you get on paper you have specific plans for if one of the partners wishes to leave/pull out. If this were to occur what happens to their finance, their shares, etc.Early on decide shares, investment, and voting portions for each principle. Put it in writing. Form an LLC or better to make certain that no one is left holding the bag if someone else decides to abscond with company assets.
Creative differences will come, and soon. Many seemingly successful companies failed because of infighting. Even though the voting shares are already assigned, make sure there's a CEO to make a Final Decision should there be any contention. Even if a few people don't like the decision, forward movement can be made, and you'll find out much more quickly who is along for the ride, and who is actually there to do work and make the business successful.
Allow for pet projects. If someone is unhappy with a decision, make sure they have an outlet so they don't let their unhappiness cloud their regular work. Give them a few tasks to flesh out their alternative idea, and opportunities to show it off if they still believe it's a better route, but don't let them invest more than 10-20% of their time on it - the boat only goes forward if everyone is rowing in the same direction.
-Adam
But also from a slightly less business point of view, and this one might be a bit more controversial, is to remember to take some risks! At some point you need to spend to be able to bring the money back in, and don't be too conservative. I'm not recommending you go all out and blow the bank, that's the sort of thinking that got us into this economic mess, but if your financial folks are stifling your development then there's a bit of a problem. So try to give yourself a bit of leeway.
And most importantly: Remember your contingency budget. Remember Murphy's law.
#12
Chibibar
Chibibar
having gone into business (and work in family business where I was their accountant) here are some advice.
Incorporate your business. Don't use partnership, the liability (especially with that many people) is too high. Even with LLC (limit liability corporation) have some rules for and against it (too much to explain really)
The reason for incorporation is that it is easier to divide up asset or you might need a lengthy contract. ALWAYS have contracts even among friends cause you never know what the future might bring.
Set the rules and policies in advance. Are you planing to hire anyone? even with a small business there should be rules in place that way everyone is on the same page. Don't assume anything cause everyone has their own little idea on what to do.
Have goals. What is your product? what is your project date? always have goals and deadlines. Do NOT leave it open ended. You be surprise how some project never takes off if it is open ended.
What are the investment? how much capital will be pooled into the business? GET A BUSINESS account. make sure everything is documented (and a Tax ID) what money is spend and used. Make sure everyone get a salary (if any) try to avoid "profit sharing" unless you are getting from stocks (yes, even starting company can have starting stocks) which can be sold to your partners for their investment into the company. remember DO NOT mix personal money and business money. This is a very bad idea. We learn the hard way and hope you don't.
Decide the place of business. If you are using a home, then have a contract to use that space. You don't want to get into a fight and get "booted" from your office work space. If you are signing a contract, make sure there are conditions and such (i.e. 30 day notice etc etc)
Decide who is what in the corporate structure. CEO, VP, accounting etc etc. Yes, you need to do this for a corporation. Even if y'all are deciding on the same level, make sure who may/may not have the final say. This will make difficult decisions easier.
that is all I have for now. I learn the hard way (and get into debt) due to not following these advice before (none were given to me) and I learn the hard way...
My parents were shafted in a restaurant business we got into with a family member who bailed on us with debts.
yea... even family members can screw you over, contract is everything.
(boy I sound like a pessimist)
Incorporate your business. Don't use partnership, the liability (especially with that many people) is too high. Even with LLC (limit liability corporation) have some rules for and against it (too much to explain really)
The reason for incorporation is that it is easier to divide up asset or you might need a lengthy contract. ALWAYS have contracts even among friends cause you never know what the future might bring.
Set the rules and policies in advance. Are you planing to hire anyone? even with a small business there should be rules in place that way everyone is on the same page. Don't assume anything cause everyone has their own little idea on what to do.
Have goals. What is your product? what is your project date? always have goals and deadlines. Do NOT leave it open ended. You be surprise how some project never takes off if it is open ended.
What are the investment? how much capital will be pooled into the business? GET A BUSINESS account. make sure everything is documented (and a Tax ID) what money is spend and used. Make sure everyone get a salary (if any) try to avoid "profit sharing" unless you are getting from stocks (yes, even starting company can have starting stocks) which can be sold to your partners for their investment into the company. remember DO NOT mix personal money and business money. This is a very bad idea. We learn the hard way and hope you don't.
Decide the place of business. If you are using a home, then have a contract to use that space. You don't want to get into a fight and get "booted" from your office work space. If you are signing a contract, make sure there are conditions and such (i.e. 30 day notice etc etc)
Decide who is what in the corporate structure. CEO, VP, accounting etc etc. Yes, you need to do this for a corporation. Even if y'all are deciding on the same level, make sure who may/may not have the final say. This will make difficult decisions easier.
that is all I have for now. I learn the hard way (and get into debt) due to not following these advice before (none were given to me) and I learn the hard way...
My parents were shafted in a restaurant business we got into with a family member who bailed on us with debts.
yea... even family members can screw you over, contract is everything.
(boy I sound like a pessimist)
#13
SpecialKO
I'm aware that means that I'll need fairly comprehensive intellectual property clauses written into everything, but I have an IP lawyer on tap that I intend to use for that, because I would need that anyway.
Once we have operational processes in place, which is going to take some learning by doing, then we can move on to riskier projects.
SpecialKO
I actually want to encourage pet projects, insofar as game design ideas that the company is capable of developing, in return for some greater share of profits from that title, provided that the person with the idea is willing to flesh out the game design document, do the research, and make the case to the head honcho (me) on his or her own time.Allow for pet projects. If someone is unhappy with a decision, make sure they have an outlet so they don't let their unhappiness cloud their regular work. Give them a few tasks to flesh out their alternative idea, and opportunities to show it off if they still believe it's a better route, but don't let them invest more than 10-20% of their time on it - the boat only goes forward if everyone is rowing in the same direction.
I'm aware that means that I'll need fairly comprehensive intellectual property clauses written into everything, but I have an IP lawyer on tap that I intend to use for that, because I would need that anyway.
This is one of the major reasons we're beginning with iPhone projects. There's the least amount of financial risk and an enormous built-in market with fairly elastic spending behavior. If we really can't get anything to work, then we're out time and not that much money. We won't be looking for a convenient desert to bury unsold inventory in.Yeah I think Adam has it here. The other thing I would add is have an exit strategy. Make sure that within whatever you get on paper you have specific plans for if one of the partners wishes to leave/pull out. If this were to occur what happens to their finance, their shares, etc.
Once we have operational processes in place, which is going to take some learning by doing, then we can move on to riskier projects.
#14
Olorin
Olorin
Great that you're starting small, because that would have been my big advice. I've seen lots of game design groups fall apart because they were trying to make a big impressive game as their first title. Small projects are much easier to stay focussed on, especially when you're all still learning things about game development and working as a team.
Iphone seems like a great place to start, so good luck!
Iphone seems like a great place to start, so good luck!
#15
lafftaff
lafftaff
If your company becomes big make sure there's someone to take care of the little things. Paying bills, answering phones, customer service. I have no idea if your business will entail any of that really. I just say it because I work for a small business & was hired b/c those little things started to overwhelm them. It was hard enough keeping track of they day-to-day things that the bigger things (like how to make the business better or grow) got pushed aside.