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What are the common mistakes or oversights made when starting a new game studio?

Please only one mistake or oversight per answer and if you can explain why it is an issue and what one should do to avoid falling into the mistake or recover if they've already made it.

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up vote 13 down vote accepted

Success is defined as your equity in your studio is greater than the amount which you could have earned working for someone else's studio.

By and large, it is the same as any industry. An individual that has much technical knowledge in a field is able to make very smart technical decisions because they have much experience doing it. At the same time, they lack experience making smart business decisions because they generally lack experience in business management.

Making smart business decisions affects success way way more than making smart technical decisions.

The oversight or common mistake is to not employ an experienced business manager early on in the enterprise or somehow mitigate this shortcoming within the enterprise.

The moral: Find a good business manager and pay them more than anybody else in the enterprise. Sounds counter intuitive but the better manager you have, the sooner your enterprise hits critical mass where your studio achieves success.

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My #1 mistake- going into business not only with a friend, but also with the spouse of said friend. Thought it would be a good idea; the spouse had "business" experience, friend and I had complementary skills.

This friend admitted to me one day that in any disagreement that I would always lose because the friend would always side with the spouse.

I didn't last much longer in that business arrangement. That business didn't last much longer than me, and the marriage wasn't to last much longer yet.

Fun times in the world of "business".

Our #2 mistake: expecting to get anything useful without paying for it. Nobody wants promises of profits or shares of company or any of that. People want cash.

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Unfortunately I can upvote this only once! Partnership is the biggest pitfall in any business. It's extremely hard to do it right. There are too many traps in those kind of deals. – Keyframe Aug 30 '10 at 23:47
Nothing ruins friendships quicker than money... – Michael Stum Oct 11 '11 at 15:20

I started a game studio a few years back. We were all engineers and artists. We didn't have a "business guy" - someone that was more interested in making a business that writing code or drawing pictures. If you want to make an awesome game, I'd suggest getting a job at an existing game company if that's possible. If your cup of tea is making a business please email me I'd love to start a company!

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If you don't have it consult people who do. Most mistakes can be avoided by a little bit of experience.

The various business, technical, design and management aspects are too numerous to explain.

There are many good books on business consult those and don't be tied to game specific resources.

Also check in your area, consult local council or businesses as there may be support programs in the area for SME (Small Medium Enterprise). They often provide funding, services or advice.

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Money. Someone has to be paying attention to this at all times or you're screwed. This is a full time job, it takes a lot of time and energy to drum up.

A second thing is someone to handle the books, hr, etc. This can be outsourced, but it takes time and it is just a little silly when your server architect is firing up Quickbooks to make sure you don't get audited.

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Always, always spend that little bit extra on consulting a lawyer. Build up a good relationship with your lawyer if you can. I've never taken anyone to court but it's amazing how often running a tiny studio throws minor legal issues your way. How to handle trademark infringements, publishing contracts, hiring contractors... people will screw you if you give them the chance when there's money involved.

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To nuance what Steve H said, you need a tech savvy manager.

In this industry, you need someone who is able to quickly grasp what can be achieved and when, what are the limits of you tech/skill pool, etc. Someone with a production experience is invaluable.

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I have never started my own studio or business so take this with a grain of salt. That said I do a great deal of reading and research on the subject so I thought I'd share something. My advice would be to:

Identify your core assumptions, create tests to test the most risky ones first, repeat

In practice this may mean validating your

  • Who the players are
  • Who the customers are (i.e. advertisers for a Flash game, the players for a traditional game)
  • That the customers are interested in buying what you're selling
  • The cost to acquire a customer

An example experiment might be:

  1. Create an advertisement
  2. Create a landing page with additional copy and a prototype screenshot
  3. Show your ad to the target audience on Facebook
  4. Measure click through on ad, click through on "Download Trial" or "Buy Now" button

All of this can be done for a couple hundred dollars and can help answer some of the above questions. (Method is known as dry testing.)

If you want more information or to read a more formal framework for thinking about experiment driven processes take a look at:

  1. Steve Blank author of Customer Development
  2. Eric Ries leading figure for Lean Development
  3. The Entrepreneur's Guide to Customer Development a "cheatsheet" to some of the ideas from the two guys above
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