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Business Plan

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Has anyone written a business plan for the game industry for banks, venture capitalists, investment firms, etc? If so can anyone offer me some advice? I picked up some software and am researching general techniques but am wondering if anyone has been through the specifics and can help. If I sound like an idiot it's because I am at this point. Feel free to tell me to come back when I have specific questions and can at least realize how much of a newbie I am :).

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I've written a business plan before. In a broader sense i wrote two documents: a design document and a business plan. The design document encompassed the story for my game (you may or may not have a story), the gameplay features, and the technical aspects of the game. The business plan was broken into many sections. Neither is fun to write, but both are necessary to have the best grasp on your game from a technical and financial perspective.

I would recommend "Writing a Convincing Business Plan" by Dethomas and Grensing. It's a great resource for suggesting what to include in your business plan, how to gather the data, and how to present it. I had looked into having a company that specializes in writing business plans do mine, but they wanted $3400. It was probably worth that kind of money, but doing it yourself helps you understand the business side of the game industry much better.

Writing a Convincing Business Plan

regards

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Quote:
Original post by pink_daisy
It was probably worth that kind of money, but doing it yourself helps you understand the business side of the game industry much better.

Excellent advice. It is your business and your business plan. Ultimately you will need to pitch the concept to an investor. If you need help with the plan hire someone to give advice but make sure you do the plan. If an investor finds you don't know the details of your own plan they will run a mile.

Can't offer much more concrete advise as you didn't tell us what type of company you are setting up and what area of the industry you are targeting. However one thing you will probably need is market data. That is often quite expensive. You can find a list of companies that provide/sell market data at http://obscure.co.uk/directory_market.shtml

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Another thing to remember with the business plan is this: you only write it to get their money. If you can find a CREDIBLE source that says the market for a product is $7 billion and another says that it is $2 billion, go with the higher number! (not necessarily talking about the game industry here, but it should apply) The point of the business plan is to get the investors jazzed about your product. Make your plan logical and don't be afraid to bring in experienced people to help you out. Any investor with brains will want to ensure that the team is great because they're not really investing so much in the product as they are the team of people who run the company. Also, don't write a 50-100 page plan, it may start out that long, but if you can't distill it to 10-15 pages, nobody will read it or take you seriously. Make a 2-3 page executive summary and try to project your financials for 5 years (profit, revenue, cost of goods sold, staff, rent, equipment, supplies, etc).

If you go for venture capital funding you can expect them to bring in their own management team and have you working on the project under them. However, to get VC investment, you'd better make sure that you can deliver a 10x return on their investment and they'll want at least 51% of your company (if it's a startup). Also if you're asking for under $5 million you might as well not bother talking to them because their job is to take a lot of risk for a high reward. The only real advantage to the VCs is that they'll get the job done fast and you will most likely make a lot of money in the process.

If you want to keep ownership control of the company, try to find an angel investor. These guys are usually very rich people who want to give back to their community. You can probably contact them through a local university. Find investment clubs, rotary clubs, etc. to look for these people. Plan on spending a bit of money to find out who these people actually are, then make a pitch to them.

The pitch is much more important than the business plan, because most investors will make a decision about you in the first five minutes. Have a 5 minute and 20 minute speech ready at all times that describes your project. The 5 minute speech will tell them what it's about and if they like it, you will be invited to give the 20 minute version. Make sure to sell yourself and have an idea of how much revenue you will give up for $1 million, then scale from there (hint- it's about 25%)

Another way to get money is to get a small business loan. The local SBA office should guarantee it for you (they pay it back if you don't) and then you can take it to banks to get the loan. Be prepared to give them the 20 minute presentation.

Finally, your company should have a mantra. This is a short sentence that describes what your company does. For example, mine is: "large scale DNA manufacturing." Based on this, a fourth grader should understand what you do.

Good luck!

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Download and/or purchase a planning product from Palo Alto Software. I use Business Plan Pro 2005 primarily for its ease-of-use and navigability; however, its Wizard does walk users through planning with good explanations of each section, and provides example plans of a variety of businesses.

RE: mrtuti_17, the length of a business plan is dependent on the type of business, how well the plan is organized, and who will be reading it. Having an encyclopedic plan is fine for internal use, but like you said, something short and terse will be a more attractive read to stakeholders. Business plans are useful for internal organizational planning and business management and financial reporting, for interesting prospective employees, for investment purposes, etc. The purpose of a business plan isn't limited to getting prospective investors interested in the business.

Regarding financial forecasting, don't do too much. Every smart businessperson knows that financial forecasting, especially for a small startup company, is mostly assumption. For the forecasting that is done, be realistic, but like I said, doing too much is a waste of time, and if the results are unbelievable (e.g., $5m profit first year, $10m profit second year, $20m profit third year), your plan will simply be trashed. Small startup businesses can expect to lose money for the first two years of operation.

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Guest Anonymous Poster
Quote:
Original post by mrtuti_17
Another thing to remember with the business plan is this: you only write it to get their money.

Conversely, the only reason the Golden Gate's architects made a plan was to get the city's approval. Also, professional game studios only write a game design document to appease the Producer. In the same vein, professional authors start with the Table of Contents only for the Publisher.

What a bad suggestion!! It should be the document everyone involved believes in, agrees to, and adheres to. It should also evolve as the business and market conditions evolve.


There are basically 4 things investors are looking for:

1) the size of the pond you are in. It's better to try grabbing 1% of a $10B pond than 100% of a $10M pond. Upside is key.

2) sustainable competitive advantage. Do you have patents or any other sought-after IP? Do you already have strong ties with a large client? Are you more than 12 months ahead of any competitor? Do you have a process than undercuts costs of major competitors? Are you targetting market segments that your competitors cannot reach in a cost-effective way?

3) People. Investors want to see MARKET-SMART people and people COMMITED to the business plan -no matter what-.

4) an exit strategy. Are you in love with the technology or are you in to build a business? Are you afraid or have too much ego to let the control go to a more experienced manager?

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In reply to anonymous: I did say that the only reason you write it is to get their money because everybody's financials are off, everyone's operations plan is off, there is no way to have a totally accurate plan. I used that statement in conjunction with the sentence "Make your plan logical and don't be afraid to bring in experienced people to help you out." What I meant was that when we're talking about markets, you usually try to get 5% in 5 years (an average sized market) and base the financials off of that. Even if you only think you can get 1%, you don't write it because that won't excite anyone. Nobody's going to sue you if you don't capture all of the market or it wasn't as big as you said it was. When raising capital, all you want is their money, and the business plan is the best way to do that. Perhaps "the ONLY reason" is a bit strong. I retract that comment.

I do agree that the business plan should make sense and explain where you want to be in a few years, but I can't say that everyone should always adhere to it. I think that everyone should listen to the board of directors / CEO / COO. These people should have a handle on what's really going on and your business model may be total crap if a new competitor comes to town. That's why it's important to write a good business plan, where good doesn't necessarily mean totally accurate.

Perhaps when it all comes down to the line, the level of detail of the plan is proportional to the number of people in your startup and how long they've been working together. I think if you all agree on the mantra, future corrections can be made to the plan. It is a living document after all.

I do not agree with your analogy about the Architects, Writers, and Game Designers. They usually do change the content of their plans to get funding. At the end of the day, even the best plan is worthless if nobody wants to invest in it. That's why we make sacrifices to get the money, then do what we really need to do to survive.

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Guest Anonymous Poster
Quote:
Original post by mrtuti_17
When raising capital, all you want is their money, and the business plan is the best way to do that.
...
That's why we make sacrifices to get the money, then do what we really need to do to survive.

VCs will never give out money in one lump sum and let you run with it. The last thing they want to see is a company that doesn't do what they told the VC they would. VCs will give you enough to survive a few months so that you complete very specific milestones you said you were going to achieve in your plan (it's YOUR plan after all, right?). Then you get 'another round' of financing once you have successfully achieved your objectives. The process is repeated until you reach a level where other sources of financing would be necessary, or you are sold to a bigger entity, or your business dies.

Quote:
Original post by mrtuti_17
That's why it's important to write a good business plan, where good doesn't necessarily mean totally accurate.

A good plan should hilight not only the opportunities, but also the weaknesses and how to manage their associated risk. The introduction of a new competitor should never come as a surprise, btw.

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If you're interested in Palo Alto I still have some copies to give away, no warez or anything like that Palo Alto was kind enough to donate some copies for a contest that fell through...so it's still an unofficial give away to those most in need... I know that there is a great game developer business plan included that may be of use to you..

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Hi and thank you to everyone who posted in this thread. Linternet is on my team, working on this project: Sector 13
We have a sticky in the help wanted forum here, where you can read much more about the game, view some of our interviews, and read a little more about the business we are hoping to start. You can see in that thread the partnerships we've formed, the things we've accomplished, the awards we've won, and the following we have found already.
I hope this might help the discussion, as companies such as ATI and Microsoft have requested to see our business plan, which Linternet and I have been trying to get to some sort of completed form for months now. We do have a fairly complete, 100+ page design doc for the game as well as project plan, work schedule breakdowns, asset lists, working budgets, etc.
VC and Angel investors are another route we are considering, adding more pressure to us to complete this document, and do it right.
Thanks again for your help,

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