Draft Business Plan

Istvan: Disclaimer: - I'm going to pretend for a moment that I know how to set one of these up. Not true ATM, but I'll be doing some research in the next week to learn what the professional format should really look like, figuring I am the guy most likely to have the time.

Research Note 2/25/02: link to some [SBA materials] I'm now poring over. Gov't schlep did a lousy job formatting the HTML, but hey.

It seems to me that we'd want to set up separate business plan documents for each of several products we're considering - or at least considerably different subsections thereof. The Plan for a business based upon marketing the RRDBAPI product would be a bit different from one based upon producing an online entertainment.

Objectives

1. To create a viable small software development business.
2. To bring to market one or more software products, potentially including a profitable massively-multiplayer online game.

Business Description

Description of the Business

Software development group

Legalities

e.g. "Limited Liability Partnership governed by Michigan law"

Type of Business

Product/Service

Location

"Main office" may equal home of the chief officer of the partnership. "Site location" may be ofices of the hosting service.

Profit/Growth Opportunities

Profit from RRDBAPI if not open source

Profit from online game if not open source (revenue from box or license sales + monthly user charges - company expenses)

Marketing Plan and Competition

Several sales models may be applicable.

• direct sales via download and customer purchase of security keys may be viable, with the risk of security hacks releasing unregulated product. Download distribution is a no-brainer for Open-Source.
• shrink-wrap sales, with the adherent issues of obtaining a publisher (if necessary) for distribution
• license sales with support contracts, in which team members install the software at the customer site (not feasible for game)

Market Factors

Istvan: I'm less in touch with the rest of the software market, though everyone is aware that conventional wisdom claims "tech is in an economic slump". Note that I've read at least two independent articles in the last four months pointing out that a slump is a very good time to set up a small business (hypothesis #1: loans are cheap because interest rates are low. hypothesis # 2: the "bad economy" performs a Darwinian function on those who might set up a small business - those that get set up during an economic slump are those with will and a good plan, usually keys to long-term success. Ergo the small business started during a slump does well, statistically speaking). I have a better idea what's going on in the MMOG area: there are a good 200 projects in full swing. Everyone thinks they can "write a better EverQuest". Many are cookie-cutter genre-jumpers (e.g. EverQuest in space). Several are backed by Big Capital, and have a very big franchise - 'Star Wars: Galaxies', for example, will be huge, due to its name and because Lucasarts is funding significant art and development talent. The landscape of the market will dramatically change in the next two years, as some of the crap gets washed out, many efforts fail due to lack of will on the part of participants or parent company, lack of original ideas, or lack of funding.

Fundamentally, any MMOG game design in this market must do one of two things: (1) the design must incorporate something very original, or (2) the design must be an excellent synthesis of desirable elements proven attractive in other games. Item (1) is important for garnering attention. Item (2) is important for pleasing customers (and I could go on and on - and I will someplace else - about how the market really needs a bit of #2: everything out there has at least one good design idea in it, but they all need to be in the same game).

Commentary:

DWM I don't think that the tech slump is particularly relevant, if we develop a game. I think that puts us solidly in the entertainment market. If anything, the technology we need to implement our product should be cheaper now. :) BTW, keep in mind that if we're not seeking external funding, we don't need a very polished business plan; just whatever it takes to give ourselves some assurance that we're working towards something feasible and potentially profitable.

Operating Procedures

List of Principals / Mgmt Team / Personnel

Business Insurance

Financial Data

Budgets

Start-up Budget

(random garage list for now)

• server hosting: $100-500 setup, $200-400 monthly therafter
• other connectivity fees?
• software purchase costs
  • source maintenance s/w
  • development tools
  • any non-public OS
• misc hardware and cabling for "garage server" plan
• misc legal and filing fees

Operating Budget

(random garage list)

• server hosting $200-400 monthly

• other connectivity fees?

• misc annual fees to gov't

• costs associated with tax or other statements (eventual game or s/w company - brainstorming)

• multiple servers - with industrial-grade hosting or colocation for a game

• large bandwidth costs (very large, for a game)

• manpower overhead: dev team

• manpower overhead: QA team

• manpower overhead: CSR team

• manpower overhead: admin team

• minimal office lease

• supplies and admin budget

• software and OS license budget

List of capital equipment

• server and hardware (with specs), if owned rather than leased
• lease terms, if server is leased

Pro-forma projections

Cash Flow

• source of operating revenues

1. software sales
2. customer accounts (for game only) ~ US$12/user/month (as a point of comparison, on 5/20/02 the successful MMORPG Dark Age of Camelot was reported by developer Mythic to have over 200,000 subscribers. Base subscription price is US$12.95/month)

• expenses Note: once a corporation or partnership exists, that entity operates independently of the principals, meaning even if it's just six people pooling money together to support a server the group operates, technically the six principals are paying the partnership, which might be exchanging stock to them in return for the operating cash.

Income and Breakeven Analysis