Psychochild's Blog

A developer's musings on game development and writing.

18 September, 2006

Practical business advice: Partners
Filed under: — Psychochild @ 7:45 PM

One of the biggest problems in game development is that everyone thinks they’re special. Yes, other companies have done something and failed, but obviously this new team is smart enough to avoid those problems. Not that they have a solid plan, of course, but the gods will descend from the heavens and bless their company/project and they will avoid all those dumb things other people did before them. So you get all these small-scale online game development studios that fall into the same traps the experienced people warned them about years ago. Yes, launch is the real beginning of the hard work. No, you can’t build a hard-core PvP game that leaves people crying and expect to have mass-market success. No, the publisher isn’t going to cut you a better deal because you’re so innovative and doing something that no one has done before. Yes, someone actually has done it before and failed so quickly you never heard about it.

This affects also affects basic issues like company formation and your business partners. You and a bunch of your friends are all eager to make the ultimate game. You have a grand idea, a bunch of programming expertise, and big dreams. Unfortunately, your company could get smothered in the cradle (or gunned down when slightly older) if you aren’t careful about forming your company. So, here’s a bit of practical advice I’ve gleaned over the years after the break.

Note that not all this stuff has happened to me directly, but it’s usually happened close enough that I’ve learned the lesson.

1. Realize that people change.

Let’s start with the depressing advice. People change. That means your best friend today could turn into a backstabbing asshole down the line when he figures he can get more money than you by doing something that just happens to kill your friendship. It may seem a bit dark to assume that everyone is out to get you, but let’s be honest: this is the reason why we have contracts. Most of the time contracts are followed without a hitch because both parties want to contribute. But, every once in a while, something changes. It might not be as profitable to follow the contract, or someone may decide they just don’t want to do business with you anymore.

Most people don’t really think about this because it also brings up the painful reality that this means you’ll lose a friend. Unfortunately, that’s how business sometimes goes. But, it’s better to lose the friend when you’re just starting out than when you’re at the top of your game and millions of dollars are at stake.

2. Sign agreements up front.

Make sure you have agreements in place for everything related to the business. Shareholder’s agreements, founder’s agreements, etc. Make sure everything is covered. You do not want someone leaving the company to effectively kill the company. You also don’t want people to give away their part of the company to someone you don’t know or trust. Make sure everything is spelled out in detail. Hope you don’t have to use these agreements, but make sure they’re in place. Most business lawyers have templates of these agreements at hand, so it will not cost you much at all to get them in place.

3. Establish leadership early and absolutely.

This is one of the last few bits of advice I resisted. I’ve heard people say that you want to give a slight bit of authority to one person in order to resolve disputes. Never divide the company 50/50, always to 51/49. Well, these people are right.

The problem is that people get into the industry because they are creative, and they have strong ideas. So, even if you agree to the general concepts, sometimes the details can be a sticking point. Who do you license to? Who do you accept money from? Having one person able to make authoritative decisions helps this out significantly.

What if the 51% partner starts making decisions by fiat? Get out of the company. Take whatever you can get your hands on legally and run. But here’s the secret: if the company were 50/50, this fiat would instead be a long, drawn out argument over the issues that would leave both people angry and hurt. Making things 50/50 often just means you get more passive-aggressive behavior rather than actual compromises.

But, if you give the 51% to someone responsible (that would usually be the person least drunk while signing the papers), you should have a company that can make decisions. And, give that person a chance to prove themselves, even if his or her decision seems a bit wacky. Sometimes the wacky business decisions are the ones that pay out the best for a small game development company.

4. Remember that you’re running a business.

Playing games is fun. Making games is a lot of work, but often rewarding. But, never forget you’re running a business. A bankrupt company can’t continue to make groundbreaking games.

This means you’ll have to make hard decisions. Maybe you’ll have to launch the game before it’s 100% ready because money is running out. Or, maybe you’ll have to shut down the company if money runs out and you don’t want to ship the game early. Maybe you might have to change your business plan if Plan A isn’t bringing in enough cash. Maybe you will have to make some compromises you didn’t want to make originally. These are the hard decisions companies have to make, and that rant websites rail against. But, it’s part of running a business. And, without the business your wonderful game ideas go nowhere. Or, worse, get held up by the IRS (or other local tax agency) while they do an audit.

5. Anticipate failure.

Yet again, we get depressing. But, realize that odds are against you: Most small businesses fail in the U.S. Most game companies never release a successful product. Expect to fall on your face. Yet, you need to be ready to dust yourself off and get back on track. A company that manages to be even marginally profitable is a rare sight to behold.

What do you do after you fail? Start another company. Learn from your previous mistakes. Take the opportunity to learn from others, too. And, if you manage to run a company that doesn’t go bankrupt within a year or two, you are significantly ahead of the curve. But, don’t expect that to come easy.

Anyway, now that I’ve depressed you, go start your own business. Remember, making games is fun!







7 Comments »

  1. These are a very good pieces of advice, and your tips really help me to remind myself in my current situation. Thanks.

    Comment by Juuso - Game Producer — 18 September, 2006 @ 10:31 PM

  2. I’d like to add, from personal experience, make sure you really know the people you’re working with. Especially that one that is “in charge.” Being on the sweat side of a company with someone that can’t keep the bills paid on time(that you thought would) ends up in a bad situation.

    Comment by Joseph Monk — 19 September, 2006 @ 12:44 AM

  3. In reference to Joseph’s comment – get an accountant. You might not be thinking about this but taxes will hit you and hurt you. You need to avoid the ones you can legally dodge and exploit the ones that can prove useful to you.

    This is not your area of expertise – you’re a programmer or artist, not an accountant.

    Get an accountant. It will save you money.

    Comment by Cael — 19 September, 2006 @ 2:03 AM

  4. I’ll echo Cael’s sentiments and add: get a lawyer, too. The lawyer protects you from everyone except the IRS. The accountant helps protect you from the IRS. These are two parts where you really don’t want to skimp completely. Note that if you seem like a decent person, you may be able to find a lawyer or accountant willing to do work at bargain rates, in expectation that once you hit the big time you’ll come to them on a regular basis.

    This advice is a bit outside the scope of my original article, but it’s solid stuff nonetheless.

    Comment by Psychochild — 19 September, 2006 @ 2:59 AM

  5. Yeah, in my case lawyers are easy to come by, mother happens to be one with many family friends in all areas of the law. Every document I get is sent via my mother to the appropriate lawyer who is happy to check it over and offer advice free of charge.

    My problem was more on the side of me = sweat partner = financing. I put sweat, but the financing didn’t come through making the sweat worth far less. Oh well, live and learn, pick up the pieces and see what can be done.

    Comment by Joseph Monk — 19 September, 2006 @ 5:48 AM

  6. I edited the title of the post to specify that I was talking about partners. I’ll probably post other bits of practical advice in other areas later.

    BTW, if you enjoy these types of posts, make sure to use those funny buttons under the blog entry itself. Share this on sites like Digg to get other people interested. The gods know we need more people smart about business before leaping into it with both feet.

    Comment by Psychochild — 19 September, 2006 @ 2:54 PM

  7. Practical business advice: Money…

    In my last entry, I talked about practical business advice dealing with business partners. Some people started to bring up issues of money, so I figured I should talk a bit about that.
    Keep in mind that a lot of business planning is pretty grim by nat…

    Trackback by Psychochild's Blog — 20 September, 2006 @ 4:29 PM

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