Revenue share models (often shortened to rev-share and synonymous with profit sharing models) are a way for businesses and startups to pay the members of their teams. In this article we’ll explore what exactly is a rev-share model and how one might be used with collaborative game development on a small budget.
What is a revenue and profit sharing model?
Imagine you have a business or a startup with no product. You decide that you and a team are going to build it together. Rather than make them your employees you decide to treat them as investors. The benefit of this is that you no longer have to take out a loan or find finance to pay employees, and better yet, you can get in as many team members as you need. Because they’re considered investors, however, their remuneration comes once the business starts making a profit and for their investment (for instance, of time) they get a proportional share of the profit, normally operating profit. This is essentially a rev-share or profit sharing agreement. There are many takes on such models, but the crux of it is that you treat the people who contribute to your product as investors and thus give them a representative share of the profits.
Contributors receive a share of the profits proportionate to, and in return for their time investment
How to create a collaborative game development environment
With this in mind, you might be wondering how it’s possible to turn a rev-share model into a viable model for developing a game. Well, wonder no more! Here are some points to get you going.
1) Find the right platform for you
The first thing to do is figure out how you’re going to organise the structure of what is essentially a business. This can become a little tricky if you’re going to rev-share. Many rev-share agreements are informal and tough to enforce, so you’re best going to a specific platform such as Crowdsourcer.io to formalise the profit sharing model.
If you want to go down the route of splitting equity with contributors, legally, then perhaps look into registering a partnership agreement with your country’s company register. If you decide to do this make sure you’re doing thorough background checks on anyone who you haven’t met and interviewed in person.
2) Get contributors and game devs
Next up is to get the right people into your project. Not everyone is going to be up for investing their time for a share of the profits, life can often be too busy for that. Therefore, it can take some time to find people who are both willing to invest their time and believe in your project, but being a part of the right communities can make a massive difference in speeding up this process. For starters, have a look at GameDev.net and TigSource.com, get involved with their communities and see if you can’t get a bite or two. If you want more info on what type of developers you’ll need, see this article.
3) Paying collaborators equitably with a profit share model
At last, we come to the crux of it. As with all employees or investors, eventually, they’re required to be paid. If you’re doing an informal rev-share model or are working with people spread out all over the world this can not only be a nuisance but introduce some trust issues. That’s why it’s so important to find the right platform and method for formalising your rev-share agreement. Crowdsourcer.io, for instance, makes life easy by automatically routing sales proportionately to all contributors in a project without anyone having to chase people up or request bank account information. However, if you’ve not gone down this route, it may be necessary to request bank information from all the collaborators and distribute their share of the profit manually.
Lastly, if you’ve not formalised the model, i.e. you’re not using a platform that does all the work for you, one of the most important things to do is make all earnings completely transparent to your contributors, so come payday they can tot up the numbers themselves, helping to avoid any disputes. A good way of doing this is to invite contributors into your merchant accounts with any retailers (e.g. Steam), and if possible invite them in as accountants – granting them access only to sales figures whilst preventing them from editing/removing the uploaded binary or store pages.
And with that, I hope we’ve made the concepts of rev-share models more digestible and given you an idea of how you might practically implement them to develop a game. Until next time, folks!