This morning a young man contacted me to get advice about starting his own game development studio. As is usually the case when I listen to requests like this, the man knew nothing about game development and nothing about running a business. What he had was an Idea, which is better than some people who just like the idea of having their own game studio but don’t even know what kind of game they would like to make.

To get the conversation going, the first question I ask people looking for my advice is, “Do you want to make a game, or do you want to make a business?” That’s an important distinction because most games are not successful. You have to may have to make several games before you have any hopes of making a profit. So, unless you are just making a game to scratch an item off your bucket list, you need to plan for the long haul and come up with a plan that will sustain you until you have a legitimate business going.

The first step in setting up a company is to do some research to find out how the game industry works, especially if you haven’t worked in it before. Visit the game industry website Gamasutra every day to read stories on the success and failure of other companies, follow movers and shakers on social media, visit retail and online stores to learn about sales and distribution, and attend industry-related meetings, conferences, and trade shows.

Next, you need to come up with a plan. A business plan. One way to get started is to follow this commonly used template for a business model.

Customer Segments

Who are your customers and what are they looking for in a game?  If you say you are making your game “for everyone”, then you don’t understand your customers, because game players are not a homogenous group.  Typical demographics used to target players for a particular game include age, gender, favorite genre, skill level, preferred play session length and income level (which may be a constraint on how much they can afford to pay for your game).

Value Proposition

How will you satisfy your customer’s entertainment needs with your particular game?  Players play games for many different reasons: to be challenged, to chill out for a while, to participate in a story, to learn new things, for excitement, for mental stimulation.  Once you determine how your game provides entertainment, then you need to figure out what will make your game special.  There are thousands of games on the market place, so what makes your game sufficiently compelling and different that people will want to play yours?

Key Resources

What resources are required to maintain your business model?  In the game industry, your key resources are you development team — the designers, programmers, artists and audio specialists who are making the game. Unless you are using your first game as a training exercise for them, you will need to find experienced developers.  You should also hire a lawyer to establish your studio as a legitimate business and to provide legal advice on contracts.  It is also a good idea to hire an accountant or business consultant to manage your financials.  If your studio is more than a few people, you may also need an office manager and/or a human resources professional.  Then there’s marketing and sales to consider.  Once your game is a few months away from its launch date, marketing can easily take up 25% or more of your time — do you want to handle that yourself, or at least hire a marketing consultant?

Key Activities

What activities are required to build the business?  For this, you need to bring your development and marketing staff together to figure out all the steps required to make and market your game.  Get them into a room and spend a few days hammering out an initial task list and schedule.  Rely on their expertise for telling you what the key activities are, although you can set priorities, goals and deadlines (that your staff agrees are doable).

Cost Structure

What are the costs for developing and marketing your game?  The main costs of developing a game are the salaries of your game developers (you were planning to pay them, weren’t you?), but there’s also equipment, furniture, supplies, office rental, electricity, telephone, internet, legal fees, insurance, and all the million other things involved in running any business.  You should also set aside a budget for marketing your game.

Channels

How will you find your customers and promote your game to them?   Channels for promoting your game include advertising, public relations (press releases, reviews, publicity stunts), and social media (Facebook, Twitter, YouTube, etc.) Then, how will you deliver the game to them — through a retail store, via mail order, or via digital distribution?

Strategic Partners

What partners are needed to maintain your business model?  Distribution is the area where most game studios need to find a business partner.  If you are planning to distribute your game through retail stores, then you are going to have to enter into a distribution relationship with an established publisher like Electronic Arts or Sony Computer Entertainment.  In addition to distribution, publishers can provide you with marketing assistance, the benefit of their experience in developing other games, and perhaps most importantly, financing of your development costs.  However, there is a price for that: they will also take a significant portion of the sales revenues as well as exercise creative control over the game.

Customer Relations

How will you attract, convert and retain customers?  A marketing and public relations strategy can attract players, and a well-crafted value proposition can convert them to paying customers, but maintaining their loyalty involves community management and technical support programs that shows you are paying attention to them and responding to any problems they are experiencing.

Revenue Stream

How many potential paying customers are there, and how will you earn revenue from them?  Many games are a single purchase, but some have a monthly subscription, sell virtual goods, or host paid advertising.  As part of your initial research, you should look at how your competitors are making money from their game and how large their customer base appears to be.

That’s the beginning of a plan, but a plan needs funding if it’s going to become a reality.  So, how are you going to fund your business?  Do you have a relationship with any angel investors or venture capitalists, have you secured a bank loan, are your reinvesting profits from another of your businesses, or is your Great Aunt Edna willing to give you your inheritance early?  Because unless you have some money to actually pay people to turn  your idea into a product, that’s all the advice I’m going to give you for today!