Summary

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Summary

The cycles of feast and famine make managing a developer's finances quite a challenge. Once a development shop is up and running, it still must worry about getting paid on time, reining in cost overruns, and finding its next project. Getting started is even tougher: a start-up developer usually needs a small team of people prepared to work for free long enough to build an impressive set of pitch materials and then be able to feed themselves until a development advance arrives.

Developers have a few main financing options, ranging from friends and family to bootstrapping off of development milestones, to angel or professional investors. Each option has advantages and disadvantages that need to be weighed in light of the developer's unique situation.

If all goes well over the course of a developer's business, it may seek to sell the company, most likely to a publisher. A developer will need to assess the financial health of the acquiror and the terms of the acquisition, not just the price.

Most developers experience some brush with financial danger over the life of the company. These dangers are somewhat predictable and a developer can take measures to insulate itself, such as making all budgets and schedules scalable to guard against overruns and maintaining a healthy cash reserve. Perhaps the most important part of financial management is keeping a current, accurate picture of the company's health; the temptation can be great to ignore warning signs and concentrate on the game production. Problems addressed early on have more options: publisher or investor assistance, creditor workouts, and so forth.

If the company is forced to close down, a developer may or may not have the option of winding its affairs up on its own or electing Chapter 7 liquidation. Both scenarios have advantages and disadvantages, though many find Chapter 7 attractive because it allows the company's owners and managers to move on immediately and let a bankruptcy trustee take care of the clean-up. Treat your employees and creditors (including publishers) fairly ; this is still a small industry, and you will be remembered for how you closed down as much as for how you operated.

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