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Pricing Methods And Employee Compensation


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#1 afliii   Members   -  Reputation: 464

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Posted 28 February 2012 - 04:47 PM

I've recently started a company, soon to be Broken Limits, LLC, and I need some guidance on how to receive and distribute our earnings properly.

I've been researching app development costs because we are hoping to land a contract doing just that. The lower end costs would have me believe I need to charge at least 6-10k to actually make some money, however, my members are all currently unpaid and not expecting much. While I could be a bad biz man and charge a lot, give a little, and keep a most, I'd like to be as fair as possible. With that, I'm the owner of the company as it is, and I'm pursing degrees in game design and business. Doesn't that make me the most valuable in some aspect?

I current have the following team structure:
Programmer for Unity with 2 years exp.
Concept Artist who does all of our graphical art which so far is 100% 2D and will be for at least the first year.
Audio engineer who is very talented (as all of these guys are) and is probably the most focused and interested member.
I'm the owner/designer/project manager. I've collected the efforts of these members and I've ensured satisfactory production within the team. They have given me as much as can be expected from full time students who are simply looking to build portfolios. I've promised them employment if the team grew into a company, which is possible within the year.

We're all 22 yrs old and we all have substantial exp. in our fields. Because of that, I figured I could do some fair percentages of what we earn. From what I understand people charge per hour for app development. What do I do to stay as ethical as possible, earn myself a nice amount for all of the work I've put into the company, and pump money into the growth of the company?

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#2 Tom Sloper   Moderators   -  Reputation: 9605

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Posted 28 February 2012 - 05:36 PM

Moving this to Business since it's not about project management but rather about business management.
-- Tom Sloper
Sloperama Productions
Making games fun and getting them done.
www.sloperama.com

Please do not PM me. My email address is easy to find, but note that I do not give private advice.

#3 Tom Sloper   Moderators   -  Reputation: 9605

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Posted 28 February 2012 - 06:04 PM

(0) I've recently started a company... I need some guidance on how to (1) receive and (2) distribute our earnings properly.
(3) I've been researching app development costs because we are hoping to land a contract doing just that.
(4) The lower end costs would have me believe I need to charge at least 6-10k to actually make some money,
(5) however, my members are all currently unpaid and not expecting much.
(6) I'm the owner of the company as it is, and I'm [pursuing] degrees in game design and business. Doesn't that make me the most valuable in some aspect?
(7) They have given me as much as can be expected from full time students who are simply looking to build portfolios.
(8) I've promised them employment if the team grew into a company, which is possible within the year.
(9) We're all 22 yrs old and we all have substantial exp. in our fields.
(10) Because of that, I figured I could do some fair percentages of what we earn.
(11) What do I do to stay as ethical as possible
(12) earn myself a nice amount for all of the work I've put into the company, and pump money into the growth of the company?


(0) A "company," you say. So you've registered your business with the local government, and your members have signed at least a collaboration agreement? http://underdevelopm...elopment-teams/
(1) Get clients. This can be tricky.
(2) Distribute according to what your collaboration agreement says, and your team members signed off on.
(3) Your team should be developing some apps. You have to have apps to show, before you can be hired to make apps.
(4) Yes, sounds about right.
(5) And have they signed a paper that says as much? You have to have a collaboration agreement.
(6) No. It means you probably need to be paid the least.
(7) That sentence... oh, that sentence. You and your team are not on the same page. They just want to build portfolios, and you want to make money. This is a train wreck waiting to happen. And in my opinion you all need to be focusing on your studies as your top priority.
(8) Well, insofar as anything is possible, sure.
(9) This must be some new usage of the word "exp." of which I had been previously unaware. http://www.igda.org/games-game-october-2006
(10) Percentages. Well. You might want to take a look at some other threads from startup owners who want to pay their people in percentages, and see what kind of replies were given.
(11) You talk forthrightly with your team members, make sure everyone's on the same page as to a shared purpose and a shared understanding of the company, its ownership, what is expected, and what to expect.
(12) I think you need to rethink all of that, write a business plan, consult some solid advisors, and make sure your teammates are all onboard with the plan.
-- Tom Sloper
Sloperama Productions
Making games fun and getting them done.
www.sloperama.com

Please do not PM me. My email address is easy to find, but note that I do not give private advice.

#4 afliii   Members   -  Reputation: 464

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Posted 28 February 2012 - 08:36 PM


(0) A "company," you say. So you've registered your business with the local government, and your members have signed at least a collaboration agreement? http://underdevelopm...pment-teams/

(1) Get clients. This can be tricky.
(2) Distribute according to what your collaboration agreement says, and your team members signed off on.

(3) Your team should be developing some apps. You have to have apps to show, before you can be hired to make apps.

(4) Yes, sounds about right.

(5) And have they signed a paper that says as much? You have to have a collaboration agreement.

(6) No. It means you probably need to be paid the least.

(7) That sentence... oh, that sentence. You and your team are not on the same page. They just want to build portfolios, and you want to make money. This is a train wreck waiting to happen. And in my opinion you all need to be focusing on your studies as your top priority.

(8) Well, insofar as anything is possible, sure.

(9) This must be some new usage of the word "exp." of which I had been previously unaware. http://www.igda.org/...ctober-2006

(10) Percentages. Well. You might want to take a look at some other threads from startup owners who want to pay their people in percentages, and see what kind of replies were given.

(11) You talk forthrightly with your team members, make sure everyone's on the same page as to a shared purpose and a shared understanding of the company, its ownership, what is expected, and what to expect.

(12) I think you need to rethink all of that, write a business plan, consult some solid advisors, and make sure your teammates are all onboard with the plan.



First of all, thank you so much for being swift, honest, thorough, accurate, and critical in your reply. More than anything, we all need good, solid constructive criticism and guidance from those who know what they’re talking about.

(0) We are in the process of forming an llc. I’m trying to rush the process so that we can immediately get work and be professional and legitimate. I have an understanding of the legalities of business and I’m prepared, as I have learned how to run a business from my running one with my father since high school.
(1) Would you have any advice on how to get clients without spending a ton of money on advertising? I can only image how tricky it is. My fathers business is suffering in that area.
(2) As planned.
(3) Agreed. We have decided to go forth with app development (aside from game projects) even if this potential job falls through.
(4) ---
(5) We have been operating for 6 months without promise of pay. I began the team with that in the larger details, and in our latest bi-weekly meeting they expressed that they did not expect this potential client to offer much compensation. They agree to take what they can, but do not demand anything other than the proper use and result from their work.
(6) How so? If I am doing all the legal legwork and making sure that the “employees” (as they will become) are doing their work, meeting deadlines, etc., maintaining company financial status to satisfactory, seeking business opportunities and clients, and generally setting up everything we do, shouldn’t I be at Minimum as equally valuable as the programmer, artist, audio engineer, etc.? Therefore, as the owner, project manager, and designer (I write the games, the characters, and I built/maintain the website) I pretty much believe that I am entitled to a bit more than my members. Unless you strongly disagree, I will use this as weight when my team discusses compensation in the next meeting.
(7) Don’t take this as defensive. Allow me to explain. We’re all in school for game design, programming, etc. I posted here on gamedev.net for those willing to join in my area, with the expectation to build games for recognition and portfolio building and so on. We did not have expectation to make any money, but things have evolved. I decided to add business to my majors and focus more on our team as a business rather than a study. They are 100% on board with the changes and I have informed them in the past and always that they should focus first on their education and second on what we do. If we get paid work, I have made sure to agree on a specific amount of time spent per week, between the client and our members. Also, I have a 3.59 GPA, I’m working full time, married for 4 years, with two kids no older than 2. I’m very serious about my studies and the integrity of this team, and I’m even more serious about being there for my family. This train is going to stay on track as long as I’m in good health. Thanks for being honest though! Seriously.
(8) ---
(9) Yea, I realize the perception of experience is pretty much variable. I suppose I’m referring to the level we are on. We are experienced beginners. Does that sound more honest?
(10) Right. I should. I’m having trouble deciding how to compensate the guys.
(11) I’ve written a non-disclosure agreement draft, which they agree with fully, I talk about every detail of every action of the team, with the team, and I make sure to have them express their feelings towards each subject, when we meet every other week.
(12) One of my “Next 2-3 Weeks To Do List” topics is to write a business plan rough draft and get it to the team. We make sure to agree on everything. My business courses have given me enough to at least do a solid draft. From there I know I must seek professional advice.

Thank you for you reply. The websites you have referred me to are also huge helpers!

-Allen

#5 Hodgman   Moderators   -  Reputation: 29569

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Posted 28 February 2012 - 08:48 PM

If I am doing all the legal legwork and making sure that the “employees” (as they will become) are doing their work, meeting deadlines, etc., maintaining company financial status to satisfactory, seeking business opportunities and clients, and generally setting up everything we do, shouldn’t I be at Minimum as equally valuable as the programmer, artist, audio engineer, etc.? Therefore, as the owner, project manager, and designer (I write the games, the characters, and I built/maintain the website) I pretty much believe that I am entitled to a bit more than my members. Unless you strongly disagree, I will use this as weight when my team discusses compensation in the next meeting.

So without you, they won't complete and won't sell their work.
Without the programmer, you have no game.
Without the artist, you can't see your game.
Without the audio engineer, you can't hear your game.

Sounds like you're all equally important. So I'd guess you all should get 25% equity in the company and be partners, OR, you keep the company and give them all 25% revenue share in the project, OR, the company (you) keep all the revenue and you simply hire your 3 staff on a regular wage/salary or a fixed contract.
Or a mixture of the above -- e.g. maybe you and your artist would like to be long term-partners, so you give them some equity, the programmer wants a revenue share (royalties) and the audio-guy just wants a lump-sum for their time -- put the options on the table and have a talk with them, over a few days so they can really mull it over.

If you feel like you're doing more than 25% of the work though, go ahead and tell your team that. Open and transparent discussion is really the only way to settle these kinds of money issues without resentment creeping into your organisation.

#6 Tom Sloper   Moderators   -  Reputation: 9605

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Posted 28 February 2012 - 08:55 PM

Allen,

6. You want to motivate your people, but without paying them a salary. If your people were "employees" of a "company," law would require you to pay them a "salary" or a "wage." If the other people see you sacrificing for them, that motivates them. If they all sign on the dotted line saying "da boss get da most money and I'm fine wid dat," then okay (as long as your lawyer says it's a legal document).

9. No. Read that link.

10. The guys need to be involved in the decision. Since they are not getting a salary.

11. An NDA has nothing to do with what you need. You need an agreement between all members regarding the business, the ownership, the compensation (read that link). You don't need an NDA.
-- Tom Sloper
Sloperama Productions
Making games fun and getting them done.
www.sloperama.com

Please do not PM me. My email address is easy to find, but note that I do not give private advice.

#7 DarklyDreaming   Members   -  Reputation: 363

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Posted 29 February 2012 - 07:03 AM

The one who gets the largest bite of the cake, e.g. the largest amount of compensation, is the one who is the most financially invested in the venture -- simple as that. I can promise you that the programmer, artist, sound engineer and composer each put in their piece of the whole just as much as the next person -- but the company leader, the one who actually pays them and takes on all the risk, deserves to reap the rewards when a financial return hits -- more so than the rest, since they did not take the same risks (they were hired, employees).

If you aren't taking an larger risk than anyone else than why do you deserve a greater reward than the next man in the team? After all, none of them are getting paid nor are they hired -- thus, they are entitled to an equal share, aye? Unless you sign an agreement, this will get messy, really quickly. It doesn't matter if they expect nothing now, try telling them that when cash rolls in!

So, if you want to be "fair" and "ethical", why not hire them? That seems to be the most reasonable course of action. If not, then at the very fucking least sign a proper agreement before you release a product -- otherwise, there will be an ungodly lot of "but he said!" and "you said!" and then everyone is miserable.
"I will personally burn everything I've made to the fucking ground if I think I can catch them in the flames."
~ Gabe

"I don't mean to rush you but you are keeping two civilizations waiting!"
~ Cavil, BSG.
"If it's really important to you that other people follow your True Brace Style, it just indicates you're inexperienced. Go find something productive to do."
~ Bregma

"Well, you're not alone.

There's a club for people like that. It's called Everybody and we meet at the bar."

~ Antheus


#8 afliii   Members   -  Reputation: 464

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Posted 29 February 2012 - 07:05 AM

Allen,

6. You want to motivate your people, but without paying them a salary. If your people were "employees" of a "company," law would require you to pay them a "salary" or a "wage." If the other people see you sacrificing for them, that motivates them. If they all sign on the dotted line saying "da boss get da most money and I'm fine wid dat," then okay (as long as your lawyer says it's a legal document).

9. No. Read that link.

10. The guys need to be involved in the decision. Since they are not getting a salary.

11. An NDA has nothing to do with what you need. You need an agreement between all members regarding the business, the ownership, the compensation (read that link). You don't need an NDA.


My fathers company: He does all of the legal things, finds all of the work, makes sure the employees are on time and doing what they are supposed to, he does the work in cooperation With his employees, fronts all of the money, pays them when they Do work (my people would get paid per job as his employees do), and he doesn't share one piece of financial information with them. It is my understanding that a boss, more specifically an owner, doesn't share financial information with the people that work for them. I have and will continue to make it clear that I am the boss in this company, as it will be shortly. I've been doing this research to solidify an agreement document and I have considered most of the information in that first link. And yes, If my father tried to walk out and work all by himself he would fail miserably. The same goes for any top manager or any owner of any company. Of course employees deserve a fair wage, but if they are not the ones declaring ownership and taking on the weight of ownership, then who says they should earn more? Let me also mention, I am not just owning the business. I have done work on the team as much as any member. While I do that work, I maintain team focus and do all of the managerial work that needs to be done. I will make sure my team understands what is to be compensated. I have (WE have) discussed contractual agreement and we have planned to discuss full terms of compensation. Thank you for your guidance. It has helped my thoughts move forward. I have a better understanding of what needs to be done.

#9 afliii   Members   -  Reputation: 464

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Posted 29 February 2012 - 07:14 AM

The one who gets the largest bite of the cake, e.g. the largest amount of compensation, is the one who is the most financially invested in the venture -- simple as that. I can promise you that the programmer, artist, sound engineer and composer each put in their piece of the whole just as much as the next person -- but the company leader, the one who actually pays them and takes on all the risk, deserves to reap the rewards when a financial return hits -- more so than the rest, since they did not take the same risks (they were hired, employees).

If you aren't taking an larger risk than anyone else than why do you deserve a greater reward than the next man in the team? After all, none of them are getting paid nor are they hired -- thus, they are entitled to an equal share, aye? Unless you sign an agreement, this will get messy, really quickly. It doesn't matter if they expect nothing now, try telling them that when cash rolls in!

So, if you want to be "fair" and "ethical", why not hire them? That seems to be the most reasonable course of action. If not, then at the very fucking least sign a proper agreement before you release a product -- otherwise, there will be an ungodly lot of "but he said!" and "you said!" and then everyone is miserable.


Thank you. That's exactly what I believe. I'm going out and obtaining all the legal material, obtaining license for development, and I'm going to open up a business account, the whole ownership deal. I would have done a sole proprietorship, but I don't want my house to be at risk. I have a family and those cost a Lot! These are exact reasons why I want to hold the majority of our earnings, and why I'm pulling my hair out trying to form an llc and contract agreements. I'm going to do it like this: I'm the owner, I have absolute say in what the team does and how, but I accept the team efforts to collaborate on the projects to ensure outstanding production, and I we will agree on fair compensation. I know that without full understanding and cooperation the team will fail. Anyways, I think I've gotten all I need from posting this help topic. Thank you all. I hope you will have interest in what we are doing at Broken Limits. (soon to be Broken Limits LLC)




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