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Video game businesses design and program video games played on consoles, PCs, cell phones, and virtual reality devices. These games are purchased online and in brick-and-mortar stores. Video games often prove quite powerful in terms of connecting people, providing joy, boosting confidence, and improving hand-eye coordination.
Who is this business right for?
If you are looking for a way to entertain and provide people with an opportunity to enjoy a shared experience, starting a video game business will prove quite rewarding. Video games bring people together in-person for fun and exciting gaming experiences. They also connect people by way of online gaming experiences. It will certainly help to have a background in electrical engineering, design and/or computer science if you decide to start a video game business.
What happens during a typical day at a video game company?
Each group of specialists works on its unique portion of the game(s). Designers focus on generating aesthetically pleasing game graphics. Programmers write the game's code. Writers create the game's storylines. Testers play the game in-depth to ensure it doesn't have bugs (flaws). The video game company owner often serves as the overarching manager, delegating work and making executive decisions. Meetings are quite common to ensure each group of specialists is on the same page as the game progresses.
What is the target market?
The target market is avid gamers. Everyone from kids to middle-aged adults play video games. Millennials are especially passionate about video games. It makes sense to target these young adults as they have enough discretionary income to purchase video games on a regular basis.
How does a video game company make money?
This business makes money by creating fun and intriguing video games for video game consoles, PCs and arcades. These games are sold to the masses. There is also the possibility of generating money through merchandising, like creating statuettes, T-shirts, etc.
What is the growth potential for a video game company?
The video game industry is growing at quite the rapid pace. Video games are incredibly popular due to recent improvements in graphics, the rise of online gaming, and the arrival of virtual reality technology. Build a successful game and your company will have the potential to grow quite rapidly. The key is to make a name for your company with one hit game that builds a fan base and generates momentum toward additional titles.
What are some skills and experiences that will help you build a successful video game company?
Making video games is a complicated endeavor. It is not enough to simply enjoy video games. The best video game company entrepreneurs have a genuine interest in computer programming, electrical engineering, design, and script writing. Ideally, the business owner will have experience in each of these realms. It will also help to have a business background in which the entrepreneur has established and nurtured relationships with other professionals. The relationships you form in this business will go a long way in determining your company's success.
What are the costs involved in opening a video game company?
The business requires numerous computers, computer monitors, specialized computer software, printers, video game consoles, employees, insurance, and a facility to create the games. Plan on investing tens of thousands of dollars in the initial equipment and facility. However, if you plan on launching a video game business from your home, apartment or other space without the assistance of a staff, it is possible to create a game with a high-powered computer and specialized software. Though this approach will save plenty of money, it will prove to be a Herculean effort unless you have extensive experience making video games.
What are the steps to start a video game company?
Once you're ready to start your video game company, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your video game company is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your video game company keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a video game company?
Network with video game industry experts before launching your business. Find out the exact software and hardware necessary to make state-of-the-art video games. Ideally, you will not attempt to wear numerous "hats". Hire true professionals who have an educational and professional background in various aspects of video game creation, from designing game graphics to programming, physics, script writing and beyond.
Do not assume your first game will be a hit. Oftentimes, it takes years to develop a high-quality video game that reaches a mainstream tipping point. Stick with the business, give your team time to perfect their craft and you will eventually succeed in this competitive business. Above all, the games your company creates should be highly unique. If they are similar to other offerings, generating sales will likely prove difficult.
How to promote & market a video game company
Connect to prospective game buyers through the channels they are most frequently exposed to. Most gamers are active on the web including social media, YouTube, and game streaming sites. Advertise on these sites and services. Some video game companies have also found success advertising with TV commercials and magazine ads. The promotional method your company settles on will ultimately hinge on the type of game you are attempting to sell. Perform market research to determine the appropriate mediums to best connect with video game players who are most likely to be interested in the particular video game(s) your company creates.
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How to keep customers coming back
The best way to attract and retain customers is to create a high-quality video game that proves enjoyable for a long period of time. Plenty of video game players develop an allegiance to specific game-making companies based on their enjoyment of the company's initial games. Strive to develop a deep and meaningful connection with gamers by providing them with enjoyable content and they will become loyal customers. Also, consider offering a free download of one of your game's stages or levels to whet consumers' appetites.
How and when to build a team
A team is essential to your video game company's success. Even if you are a “jack of all trades” in the context of game-making, creating a game will prove much easier if you add specialists. Hire game designers, programmers and writers to get the company off the ground. You can add beta testers, a manager, an accountant, a marketing expert, a receptionist and other professionals as time progresses.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a video game company. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
Trademark & Copyright Protection
If you are developing a unique product, concept, brand, or design, it is prudent to protect your rights by registering for the appropriate trademarks and copyrights.
The nature of legal requirements in distance education is ever changing, especially in regards to copyright laws. Here is a frequently updated resource, which can help keep you aware of the legal requirements.
How much can you charge customers?
Video games typically cost between $19.99 and $69.99. In general, high-quality video games are sold for $49.99 to $59.99 when brand new.
What are the ongoing expenses for a video game company?
Hardware and software must be replaced and updated. Budget at least $200 to 500 per month for hardware replacements and software upgrades. Plan on spending several hundred dollars per month on utilities, office sundries, and high-speed internet. Employees who work on various parts of the game will command a salary between $40,000 and $100,000 or more per year. A manager, marketing expert and accountant will command a yearly salary of $30,000 to $60,000. A receptionist and beta testers will earn $8 to $15 per hour.
How much profit can a video game company make?
This type of business has the potential to make hundreds of millions of dollars. Video games have never been more popular. The rise of online gaming has made video games that much more appealing to the masses. The profit potential is unlimited.
How can you make your business more profitable?
Give gamers the option of purchasing in-game upgrades. As an example, Activision Blizzard has made millions through in-game upgrades without investing a considerable amount of money in developing additional games or extensive programming for existing games. It is also possible to establish agreements with console providers to secure a portion of the proceeds stemming from fees paid for online play.