Start a video game company by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your video game company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
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 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.
Who 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.
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.
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.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Video Game Company Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your video game company is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
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.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
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.
STEP 5: 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.
STEP 6: 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.
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.
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.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: 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.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
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.
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.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Video Game Company In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
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.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
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 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 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.
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Take the Next Step
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.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
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 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.