I'm writing up a business plan and I was just wondering what does an indie need to make to break even? The whole part of being an indie is to have a low overhead, but how low is low? I need to do a break even sales analysis and I was wondering what are your fixed expences every month? Here's what I have so far.

Website hosting
File Hosting
Game Server
some kind of storefront/credit card processing service

Keep in mind this is what I think will be need for a multiplayer online game project.

Are you skipping the cost of development on purpose, and just looking at monthly overhead?

I assume that everyone working on this is donating their time for a portion of the return on the profits - so that comes from the profit rather than expenses. Otherwise, you are going to have to figure in customer support costs & marketing efforts. Who's going to manage answering emails, finding & fixing bugs, helping customers install the latest drivers, and assemble all the surveys, update the website, etc.?

As was mentioned in the post above, don't neglect development costs. Those may be one-time costs rather than monthly, but you'll still need to deduct those off the top. Things like registering your website, your development tools, and anything work-for-hire or licensed resources you had to purchase factor in.

I have 3 team members that are in working for a % of the net profits. I already have website hosting for $15 a month but its being payed by an familily member untill my company starts making money, then I just resume the payments. I will be licensing an engine for $150 so development time is at a minimum and totally focused on the game itself rather then the graphics engine. As far as registering the copyrights go I already have money set asied for that as well. Development will be done in our spare time, which for most of my team is practically all day. :D As far as getting a UBI number/registering my company with the state and trademarking the logo and company name.. Done. I have already set up a DBA or ( Doing Business As ) Bank account for my company and now am ready to go into development once all contracts have been signed and sent back.

So as you can see I'm pretty much covered as far as development costs go. My question is what expences will I incur while waiting for my game to sell? ( ie website host, game server host, ect..) Keep in mind that our game will be an online multiplayer game and will require us to outsource a server. And also what expences will I incur as a result of a sale? ( ie.. online processing fee ) I was hoping to get a detailed run down of what im getting into so that I can make a detailed plan, hence improving my chances of success. :)

Siebharinn: Yes I am.

Don't forget pizza budget :D

You will probably end up spending quite a bit more money on food than you would normally because of late night coding and the resulting attraction of fast food.

If you really want to do this right you have to look at opportunity cost, not physical cost.

15 dollars here and 150 dollars there is nothing, it may as well be zero.

Take into account however working 40 hours a week for 6 months - 2 years (the typical development times) and even at a fairly low wage job you are looking at the opportunity cost of 10,000 - 40,000 dollars. Thats what it costs to produce the game per PERSON involved (because I assume that anyone making a video game is capable of getting a 20k a year job... call me crazy).

Then the next highest cost you will probably incur, if you chose to go that route, is marketing expenses, like advertising. That varies based on company policy and availible funds.

Now if you want to produce a RETAIL game without being backed by a publisher you had better give a heads up on 100,000 dollars or so in shelf fees. Speaking of which, does anyone have any actual number on shelf fees?

Sincerely,
Joseph Lieberman

Your list of costs doesn't include anything at all for advertising and promotion. You might want to include things like press release fees, download site submissions (either a service or software), mailing list fees etc...

Look, all this talk about factoring in time spent etc isn't really helpful. That's a given - of course you spend a lot of time on your game, of course you hope to see it pay off... but we're talking about the actual, real costs of selling your game, assuming you have a game to sell. Money that will actually disappear from your bank account, not imaginary money that simply never showed up.

So, for your typical indie just starting out, how much can you expect to spend on webhosting? How much should you be spending on advertising? How many sales do you need to make in order to avoid actually forking out real money every month? That is the point.

Somebody must be able to give some rough ballpark figures instead of all these cagey answers.

Originally posted by Anthony Flack
So, for your typical indie just starting out, how much can you expect to spend on webhosting? How much should you be spending on advertising? How many sales do you need to make in order to avoid actually forking out real money every month? That is the point.
Somebody must be able to give some rough ballpark figures instead of all these cagey answers.
The thing is that these costs are neglible. You can have web hosting for less than $10 a month, Ecommerce fees will typicaly be deducted from your profit, and you don't need to spend any money on marketing at all. For all practical purposes, the monthly costs (apart from paychecks, office rent, phone bills, etc.) are zero.

A common rule of thumb is that most companies need about $6000-$10000 per month per employee in sales. This is in the long run, to make the business viable. In the short run you can manage on less, but then you are essentially subsidizing your company with other resources (you have to look at opportunity cost like Terin pointed out). I think these figures are pretty correct even for indepenent games, there is still a big difference between the low and high margins.

I think advertising is all about return on investment. If you can advertise for $20 and it generates you $40 of profit then it is worth it. Otherwise you are probably wasting money. Maybe building a brand could be worth it, but if you want to do that give your game away for free. Lots more people would see it then.

Webhosting costs from $5 - $50 - $500 a month for heaps of bandwidth. Say a 5MB game, with a million downloads, that is only 5000 gigs. Which you should more than make up for in profits of your game sold, even at 0.01% conversion. Not that many people will get one million downloads though :)

There are billing services which cost you nothing up front. Note that usually you do not get any money off them straight away, they keep it for a month.

If you use all/mostly free software(not warez) all you need is a computer, and OS for each platform you want to release on. Allthough you really only need one computer. Also it is possible to make windows programs just using linux(but quite hard to test of course).

Advertising can cost from nothing to lots. You can pay per impression, per click, per month, or per sale. There are also ghetto ways to advertise. I think the best way to approach it is to try things out on a scale where you can afford to lose everything you put into it. Once you find a way which converts well for your game, then stick with it. However the more you risk, the more you can make back. I am planning to selectively spend up to $300 over the first couple of months after I release my game, depending on how well the different methods work out. You could certainly do it for free though.

Of course at every point you can spend money on things, like buying 3d modeling software, compilers, artwork, music, a 2d/3d engine etc. Each can save you time, or help you make a better product.

Not including salary, and office space, your costs can be pretty low indeed.

If I can get 100,000 downloads over one year I should be able to survive(8333 downloads a month). Assuming my conversion ratio hovers around 0.7% or more. I am expecting not to get that though, especially over the first few months.

Of course, I'm still a wannabe so eat this text with a bucket of salt covered pencil shavings.

Have fun!
http://www.holepit.com/

I disagree with a lot of what's being said here. The first problem is that your question is too vague. What does an indie need to cover his expenses? The answer is... that depends. If you're at all serious about your business you have some kind of business plan or goal that you want to attain. You have a clear idea of how you will attain that goal.

For too many indies, many of whom drop by the wayside, their plan boils down to this. I'll make a game, put it on some sites, get some cheap webhosting and a reseller for the credit card stuff sit back and hope its a hit and I can make my rent payments. Well that has a certain cost associated with it. Easy to calculate. While that may work in a few minority cases it's like rolling dice.

So what's the alternative? The alternative is to have an idea of what you want to do. For isntance you might say this. I will make a puzzle game and advertise it heavily on the following 3 sites (download.com, tucows, and adrenaline vault) in the hopes of making 3000 sales in 3 months. In that 3 months I will make a level add-on for my game and sell it to my 3000 customers. I expect 30% will buy the add on for x$. So my business plan is...

1) Spend 40,000$ USD on advertising for 3 months on the sites mentioned
2) Run a dedicated server on pair networks for 3 months - estimated cost 1000$
3) finance my living expenses for 3 months... estimated cost 9000$

Total cost of 3 month busines plan 50,000$
3000 sales - 46000$
900 level pack sales - 13500$

total Income : 59500 - expenses - 9500$ profit after expenses paid

Now the answer is clear : You need 50,000$

I'm not saying this is a good business plan, or that someone with a plan like this will necessarily succeed. But at least they have a plan! So how much does it cost? It costs nothing, it costs 50k, it costs 10k, it costs 15k. Depends what you want to do. Obviously the costs for someone running an online multiplayer game will vary from the costs for someone who has a publishing deal with realarcade and plans to do all their distribution through them. You just have to know what it is you want to do. Then you can set about calculating it.

- Steve

John Taylor, formerly with Konami and now with EA.com, gave a presentation called "Show Me the (Online) Money" at the Austin Game Conference in September (www.gameconference.com). He broke down production and publicity costs and expected revenue for a hypothetical MMORPG. You can get the PowerPoint slides from his presentation at the Austin Game Conference presentations page (http://www.gameconference.com/conference/presentations.html). Several other presentations on that page may also help.

Originally posted by ShaDerZ
I'm writing up a business plan and I was just wondering what does an indie need to make to break even?
Personally, I won't feel I have gotten a fair return for my time invested and associated costs unless I have a mansion in Mexico, a nice exotic sports car and a pretty submissive blonde like princec has. Why limit yourself in the justified returns to get even for the time and stress put in?

mogul ;)

It seems that for a single developer to make a living off games, you would need at least 30-50 sales per day.

30 sales @ $10 = $300 per day - marketing expenses...

30 sales sounds like some serious business to me, albiet it doesn't have to be from 1 game.

Short term, I could get by with one sale per day for one game. 1x30x£10=£300 a month.

Long term I would be looking to expand that to probably 1-2 sales per day for 3 games, which would bring in roughly £1000 a month - about the minimum I would need to live comfortably.

I can't say for anyone else but for me I would need to basically save up a lot of money and get my burn rate as low as possible.

It's nice to say how many sales per day you'd need to keep yourself going, but what do you do while you're developing the game? You've still got to eat and pay rent and bills, so either you've got to have money saved up, or you have another job to keep you going.