Hello all! I'm in the planning stages of going independant and I have a couple of financing related questions.

My first question is concerns the balance between paying off debt with building a nestegg. Ideally I'd like to have zero debt, but that would mean delaying going indie for a while. Alternatively, I could use the nestegg to pay the bills long enough to get a couple of products out the door. What's better, lowering the burn rate by paying off some of the debt, or lengthing the incubation period?

I realize this is a difficult question to answer. I'm really just hoping people can contribute thoughts and experiences on the topic.

Also, I hear a lot about financing startups with credit cards. The security of having a couple credit cards around for emergency situations seems like a good idea, but, does it conflict with the "burn the ships" concept?

I'm working a variaty of ways to reduce my burn rate, including refinancing and elimination of nonessentials. Any secret tricks for reducing your burn rate?

Thanks for any replies!

burnrate

The road I took, and the road I suggest to others, is that if you're really serious about doing it, prove it to yourself before you take a big risk like negative cash flow or spending the nest egg.

I worked on my first game, Rocknor's Bad Day (Published last Thursday by Dexterity Whooohooo! ;) ) in my spare time. It took me about a year to do, and during that time I had a lot of setbacks that could have sidetracked me. But I stuck with it. I wanted to prove to my self I could do it before I took the risk.

And when I say prove it, I mean EVERY step. I knew I could design a game. I knew I could program it. But I wasn't sure if I could bug-bash to someone else's satisfaction. Compatibility testing scared me. And I wasn't sure if mentally I was up to sticking with one design, one project, all the way through without getting sick or sidetracked. At the end I knew I could do it all from start to finish, without no doubts.

It was a really good test, and it was no-risk. I didn't have to spend anything, other than my own time. And now I have a game out, making me money, and with no debt to my name.


~Hanford

Sounds reasonable, but I think this way could be the major reason for many to fail. It's definitely great to eliminate the risk, but from the other hand it takes too much time. The latter can be a rough trial. Should admit that things happen rather individually, but from the time I've committed myself to going as indie every day on my regular job is a suffering. Every our is a pain of loosing the precious time doing some senseless work. And those short moments of spare time I feel myself happy doing the things I like, doing them my own way. That being said, I can add that I've found myself being much more productive while concentrating on one thing entirely. Furthermore, taking a weekly retrospective I see that my progress in the indie field is so small (10 hours per week in the best case) that I want to cry out loudly how much I hate all this. That is why I am going to take Plan B instead of Plan A (this one was "minimal-risk, maximum time"). My Plan B is to "burn the ships", I know it will help me much. But that's personal, indeed.

Going back to the topic. I think there's no much space for any tricks or secrets. In order to create a game you need some time (and quite large chunk of it). In order to have this time you need money to back you up for the development period. And don't forget the time the game will need to start making money if any (and don't think it will blindly, i.e. you should have a plan for retreat).

So we have a plenty of time to back up with some supplies. Where to get the latter? When I was taking my decisions I've came out with several possible ways. I do not consider having regular job (I've tried this first and it's definitely not for me) or having enough money to go without external income for year or two. Having some supplies that are enough to keep you going for some time is quite real. That is why I'm still taking my regular job (this is the last month, though ;)). The question now is whether the time covered by these supplies will be enough to create and market the game. Tough question, taking things seriously I wouldn't bet on the best outcome. So I'm prepared to fail. That is I admit the possibility of coming to the point when I'm out of money, the game isn't done or isn't making even the minimum amount of money. I plan my turn in this case being looking for some consulting job or getting back to regular job hours for awhile. Once I get the next supplies party I'm planning to quit the job again. These time considering all the mistakes I would made during the previous iteration. Perhaps many iterations are possible. While not being a very quick way to get into the business this is certainly better than having a regular job (my point of view). First, it's because I will have 6 months or so of sole development. And even in case of initial failure I will have something done and indicating my progress. Second my estimation is that I will complete the game much faster than doing it in spare time after regular job hours.

Another way I considered and plan to go now is to substitute game development with something that will take less time, less risk and will bring some money in quicker. Taking a quick analysis I've found that I could try developing a shareware product. Furthermore, I've decided to focus on a screensaver. The main reason for this is that screensavers usually have short trial period. 7-15 days are usually OK. Comparing to other classes of shareware products it's rather small estimation period. That is chances are that money will come quicker. Another plus is that the screensaver can be rather simple and requiring no more than a month of development. Finally, I will be working as indie and making some money already. Even if this process will require several iterations jumping back to regular job and off, it will definitely be converging much quicker. At some point I should have some minimum amount of money coming and steady. And I think it won't get too much time to happen. Proper self-organization and planning should allow me to use this bare minimum to fund development of the game.

If you aren't willing to take the risks you can try the second approach while still having the regular job. Think it's possible, but I can go no more with it.

That's an impossible question for someone else to answer. It depends upon a lot of things like age, family, what you already have going on in life, your aversity to risk, etc.

Myself, I have chosen the "keep myself out of debt" route. I already have a wife, a nice house, and a pair of new cars. The thought of losing all of that (yes, possibly even your spouse....remember that financial problems are one of the leading causes of divorce) at this point is more than I could deal with. On top of that, I personally am not a good risk taker. I'm not personally averse to risk so to speak, but it seems like every time I do take a risk it always turns out to be the wrong one. I always seem to do a lot better and be more successful when I do things cautiously rather than jumping fully in. As much as I have at risk, the safe route is better for me personally.

Likewise, if you are 50 years old, dipping into your savings or taking on a lot of debt may not be right for you either. On the other hand, if you are young, don't really have much to your name, don't have any serious financial obligations, and don't have any specific objectives for the next 5 years of your life that would require financial stability, then taking on debt may be the right decision for you.

"from the time I've committed myself to going as indie every day on my regular job is a suffering. Every our is a pain of loosing the precious time doing some senseless work. And those short moments of spare time I feel myself happy doing the things I like, doing them my own way."

My God! I've never heard the pain of keeping a day job while pursuing the indie dream so aptly described. It's good to see I'm not the only one who feels like that :)

Like LordKronos said: How you go about this is up to you. Only you can make that decision.

My recommendation, though, is to keep your full-time job and concentrate on building up non-job (i.e., "indie") income streams.

And don't rely on debt to fund your development. That's a nasty trap to find yourself in. Even if the game never sells, that debt will have to be repaid, and will be burden for years afterward.

Make do on focusing your indie efforts in the 10-20 hours per week you have available now. And if that doesn' t sound like much to you, compare it to your regular job, you'll probably see you're only productive there about 20-25 hours a week (the rest of the 40-50 hours being lost to meetings and other administrative overhead).

Best of luck.

As LordKronos points out, there are no simple answers to your questions; it largely depends on your personal situation. In my case, I decided to go full time with my game development, foregoing paid employment. I came to this decision after many discussions with my wife, a hard, honest look at my finances, and devising a plan which considers both the possibility of success as well as failure. I would not have started if I had any high interest debt (I've got some student loans, but that's it) and I will not use my credit cards to keep my project afloat. The interest from credit cards will eat you alive (this comes from painful personal experience).

I thought about working full time and doing the game in my free time, but I know myself well enough to realize that it would never get done: the last thing I'd want to do at the end of a day of programming apps is do more of the same in the few hours between the kids' bedtime and mine.

As for reducing burn rate, the first thing you have to do is figure out where your money is going. I use Microsoft Money to keep track of every dime I spend, so I know exactly where my money goes. This helps immensely when trying to figure out what you can live without. Since going indie, I've cut my monthly expenses in half, largely through eliminating stuff I didn't really need (eg., cell phone, more than one ISP, eating out a lot, etc) but also by finding cheaper insurance (both auto and health) and making fewer visits to the ATM for "discretionary" cash.

Just how you go indie depends on your goals. An approach that I recommend is to replace your full-time job with some consulting work first. There are lots of small businesses out there that need web sites, and they're willing to pay $1000-5000 each. By billing at $75-100 per hour, you can sustain a decent standard of living without having to work so many hours. If you start doing this on the side (10-20 hours per week), you can then quit your day job, and combine going indie with consulting work. The consulting work doesn't take much time, but it generates a high hourly rate.

Finding clients who need web sites is fairly easy to do through word of mouth, and you can even require that each new client give you two new leads. My wife used this approach while building her own business. If she had a shortfall of cash, she'd just do more consulting work to make up the difference. Over time she gradually replaces her consulting income with passive income from her business. She's done web sites for chiropractors, doctors, restaurants, attorneys, etc. There are lots of professionals who make a high hourly rate and would love their own web site, so a few thousand dollars isn't too significant to them.

An easy way to start getting clients is to do a web site for free for someone who's a hub (i.e. someone like a doctor, lawyer, or accountant that will know a lot of other potential clients). It may only take you 5-10 hours to do the first site... say 5 pages total. Then make a condition of the deal that the client refers you 5-10 other potential clients. In no time at all you'll have a thriving consulting practice, and this income can fuel your indie business w/o stealing as much time as a full-time job would require.

Making web sites is generally easy work, and it coincides with building web design skills you'll need as an indie anyway. Plus you can work from home and set your own hours. And if you end up with more clients than you want, you can always refer them to someone else for a referral fee. My wife setup a relationship with a larger web development firm, such that she can offload clients to them if she doesn't want the jobs. Once you get a few good clients, they'll usually come back to you whenever they need updates to their web site.

It can indeed take years to build a sustainable income as an indie if you can only start out part time, so transitioning to consulting income first can speed up the process while keeping the risk to a minimum. You can then take all the time you need to build your indie sales while maintaining a relatively secure backup income.

I did it the exact same way Steve suggests. I did small shockwave games for a multimedia company. It really got me through the 1st six months :)

Thanks for all of your responses! Just hearing the variety thoughts has really help clarify my plans.

hanford: Congratulations on your game! I haven't played it yet, but it looks very cool. I know I can complete a game because that's what I'm doing for a living now. I should also mention that this is the reason I want to quit my current job before starting my first project. To avoid any conflict of interest, or perception of.

bstone: Seems like we are in the same boat. I say "burn it" ;) Use 6-12 months completing a couple projects, and potentially find other work while waiting for the revenue to spin up.

LordKronos: I actually had the word 'impossible' in there but changed it to 'difficult' because I figured someone would say it wasn't impossible! Hehe. I am fairly young, single, have more equity than debt, and am not adverse to risking some of my possessions to get what I want. Also, I do have specific objectives for the next five years, going indie full time ;)

DavidRM: I'm not planning on going into more debt. What are your thoughts on just having a couple credit cards for emergency purposes? Is it just too tempting?

krechen: Thanks for the tips. I just checked today and my bank support downloading my account into money. Getting a grip on my budget is my #1 priority right now.

Steve: Great suggestion, as always! I'm tempted to try and get some small contracts doing commercial game development. Does this fly in the face of "burn the ships"? Should my contract/consulting work be totally outside the realm of game development?

Mike Boeh: Looks like you answered my last question ;) Great work on Best Friends! The UI is so tight it took me a while to realize you had a nag screen! Even though it shows up all the time, it feels like part of the game interface, very nonintrusive. I'm pretty bad at the game though. When I play with the keys I always want to turn with left and right, as opposed to moving left and right, so I play with the mouse.

Again, thanks for all the comments. The've been very helpful!

burnrate

By "burn the ships," I mean after you've arrived at your harbor and stopped sailing on them. You don't want to burn them while you're still on board. :)

"Burning the ships" means that you've committed to your goals 100%. There is something almost magical that happens once you're fully committed and can't turn back. When you seal off all your escape routes, you'll be more focused because all your energy is directed forward.

Some people make such committed decisions that just mentally burning the ships is enough for them. Others find that without committing themselves more deeply, they're too likely to give up and turn back when things get hard (as they inevitably do). A good question to ask is what would have to happen for you to give up... because if you've burned the ships, you'll never seriously ask that question of yourself.