Financial Planning
Financial planning plays a critical part , it will help show you your long and short term goals, managing your financial plan is very important as you need to know how much you're spending so you don't over spend for example, many companies overspend and have high expectations of their game meaning if they don't reach their goal they will lose out and may go bankrupt. To prevent any companies from overspending they can create a budget, with budgeting there are three concepts that you will need to understand which are;
An example of bad financial management where kickstarter developers War Balloon Games, after they asked for 20 grand they reached their goal and even went further reaching up to $36,967. However they did not have a a budget plan and used and lost a lot more money than they had expected, they had spent most of their money on prize's which included printing off posters, designing shirts and then having them shipped off, after all that they were left with $22,000 and from that they had to pay for other costs such as;
Also having to pay taxes they were eventually left with only $6,000 and they had to go into their own pockets to pay for the rest of the game development.
In addition to Developers/Publishers having financial issues they are not the only ones as even Game Retailers have had their fair share of problems, an example of this is Game.
- Variable costs - These are your expenses in your company that will change over time depending on your sales they will either increase or decrease and they are also the costs of production and differ from fixed costs which will stay the same no matter the production output.
- Fixed costs - These costs unlike Variable costs do not increase or decrease depending on sales so no matter if your sales go up exponentially or decrease your costs will take no effect on your net profit, some examples of Fixed costs include rent, utilities, insurance and advertisement etc.
- Break-even point - The Break-even point is the area where you neither make money nor lose money. This is when your gross profits is equal to your fixed costs.
An example of bad financial management where kickstarter developers War Balloon Games, after they asked for 20 grand they reached their goal and even went further reaching up to $36,967. However they did not have a a budget plan and used and lost a lot more money than they had expected, they had spent most of their money on prize's which included printing off posters, designing shirts and then having them shipped off, after all that they were left with $22,000 and from that they had to pay for other costs such as;
- Music - $6,000
- Attorneys, startup fees, CPA - $4000
- Poster art - $2000
- iPads - $1000
- PAX East - $3000
- TOTAL: $16,000
Source: http://kotaku.com/5902280/what-the-hell-these-game-developers-did-with-your-kickstarter-money
Also having to pay taxes they were eventually left with only $6,000 and they had to go into their own pockets to pay for the rest of the game development.
In addition to Developers/Publishers having financial issues they are not the only ones as even Game Retailers have had their fair share of problems, an example of this is Game.
During 2012 many retailers were accused of stopping pre-orders for many games such as Soul Calibur V, Final Fantasy XIII-2 and even upcoming games such as Mass Effect 3 and Asura's Wrath were no longer available, this was most likely due to credit insurance issues during the beginning of the year which were caused by bad sales during Christmas. Because of this issue any money that was put into getting new games has been put into making new deals individually with each publisher. A quote given by a anonymous publisher says 'No credit from the agencies means no stock for the stores. It'€™s going to get worse before it gets better. You won't find a new release this Friday.' This then puts game into a financial hurdle as when they start missing out on sales due to them having no stock on the newest releases this then begins leading to further poor financial performance's and finally leading to more publishers refusing to provide stock, creating a loop that spirals down.
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