To make the most of your business goals and for legal purposes it is important to understand the different types of businesses you can be registered as. Depending on the nature of your software company and the game you will be designing you might consider the following 5:
Sole Proprietorship
Partnerships
Corporation
Nonprofit
Cooperative
A sole proprietorship is the simplest of business types and therefore also the most popular. It is a business that’s owned by just one person where there isn’t any legal or financial distinction between the business and the business owner.
The Positives
Minimal forms and legal procedures to declare this type of business
Low start-up costs
Greatest freedom from regulation
Owner in direct control of decision making
Tax advantages to owner
All profits to owner
The Negatives
Unlimited liability: owner is fully accountable for all of the profits, liabilities and legal issues that the business may encounter
Limited access to specific licenses and other documents
Difficult to raise capital
No continuity if anything happens to the owner
A partnership is appropriate if your business is owned by two or more people. In a general partnership all members share the management of the business and each is personally liable for all the debts and obligations of the business. A limited partnership, or LP, is an off-shoot version of a general partnership, and is the most common for those looking for investment.
With an LP, there are two sets of partners:
3 General partners: usually involved in the everyday business decisions, and have personal liability.
Limited partners: typically investors. Not liable for debts and don’t partake in regular business management.
In either type of partnership, you will be required to:
register your business with your state and establish an official business name.
obtain a business license, along with any other documentation that your state office can help you with
register your business for tax
The Positives
Additional sources of investment capital
Low start-up costs
Possible tax advantages
Limited regulation
Broader management base
The Negatives
More legal documentation required
Unlimited liability: general partners are fully accountable
Lack of continuity because business is attached to owners
Divided authority
Hard to find suitable partners
Possibility for conflict between partners
A corporation, is a fully independent business (when public) that’s made up of multiple shareholders who are provided with stock in a new business. The corporation is a legal entity that is separate from its owners, the shareholders. Most common is what’s known as a “C Corporation,” and if you currently work for a company with multiple employees, that’s likely the business structure they’re using. Most likely, if you’re starting off as a smaller business, particularly one that only operates online, declaring yourself as a corporation wouldn’t be appropriate. But if you truly are a corporation, you’ll need to file very specific documents with the state, followed by obtaining the appropriate business licenses and permits.
The Positives
Limited liability: owners are not accountable for the business, it a separate legal entity
Ownership is transferable and therefore the business has continuity
Possible tax advantages
Easier to raise capital
The Negatives
Closely regulated
Most expensive to set up
Extensive record keeping necessary
Double taxation of profits (eg. corporate tax and personal income tax)
Potential conflict between shareholders and executives
As the name suggests, this is an organization that’s not seeking a financial profit, but promotes educational or charitable purposes. Money earned must be kept by the organization to pay for its expenses. There are several types of nonprofits available, many of which can receive “tax exempt” status. This process requires filing paperwork, including an application, with the government for them to recognize you as a nonprofit organization.
This is a business that’s fully owned and operated for the benefit of the members of the organization that use its services. Cooperatives sell shares to cooperative “members,” who then have a say in the operations and direction of the cooperative itself and whatever is earned by the cooperative is then distributed among the members themselves. The main difference in the process of becoming a cooperative, as opposed to the other types of businesses listed, is that your organization must create bylaws, have a membership application and have a board of directors with a charter member meeting.
Some basic questions to help you define your business type:
How many people are in your software company?
Do you plan to hire people in the future?
Is your game for profit or does it a have a purely social objective?
Do you feel comfortable accepting full responsibility for the success or failure of the game?
All businesses have aims or objectives. It can be useful to be clear about what these are from the beginning. They will help determine the type of business you create and structure its growth and development. In a real life situation knowing these aims and objectives will help you do the following: find partners, create a budget, apply for funding and outside investment.
A short term objective, probably for small business just starting out, or when a new firm enters the market or at a time of crisis
Example: Pay yourself a salary
This could be for the owners and shareholders or it could also be to increase the financial resources of your company for future expansion
Example: Save profits to invest in future game improvements
Ensure that the users of your product or service are happy with what you are providing. This can create loyalty and lead to a more successful product in the future
Example: Increase user membership
This is often done in order to allow a company to grow and therefore increase profits and influence in the market. Increasing market share can be achieved through advertising, researching target markets, analysing competition, then strategically placing, pricing and promoting the company’s product or service.
This could be for future expansion or to improve your product and services. This might be achieved by: expanding and improving resources eg. office space, computer equipment; or making sure staff are happy; or employing more skilled staff.
Example: Add a new feature every 6 months
Since the company you are creating will have a positive social impact it is worth also thinking about objectives that are not only concerned with profit and growth:
Placing resources into research and development to create a new product, or into offering a better service. Innovation also helps a business stay ahead of the competition.
Example: Conduct a customer survey and respond to results
You might choose objectives which are based on how one should treat the environment or animals.
Example: Source your materials locally to reduce carbon footprint
This could be about ensuring the well being of less fortunate people or groups without access to a particular service.
Example: Develop initiatives to create a broad and diverse user base
TODO: Provide a real world example
The most effective business objectives meet the following criteria:
S - Specific - objectives are aimed at what the business does, e.g. a hotel might have an objective of filling 60% of its beds a night during October, an objective specific to that business.
M - Measurable - the business can put a value to the objective, e.g. €10,000 in sales in the next half year of trading.
A - Agreed - by all those concerned in trying to achieve the objective.
R - Realistic - the objective should be challenging, but it should also be able to be achieved by the resources available.
T- Time - specific They have a time limit of when the objective should be achieved, e.g. by the end of the year.
Remember business objectives can change over time. For example:
Survival in the first year may lead to an objective of increasing profit in the second year.
The competitive environment might change, with the launch of new products from competitors.
Technology might change product designs, so sales and production targets might need to change.
What is your aim?
Where will this business go in the future, what are its goals. It is a statement of purpose.
What are your objectives?
These are stated, measurable targets of how to achieve business aims.
What is your mission statement?
This sets out the business vision and values that enables employees, managers, customers and even suppliers to understand the underlying basis for the actions of the business.
A business environment is the combination of internal and external factors that influence a company’s operating situation. The business environment can include factors such as: clients and suppliers; its competition and owners; improvements in technology; laws and government activities; and market, social and economic trends.
While the internal environment is usually under the control of the business and will include: objectives, policies, production methods, organisational structure etc. The external environment includes all those factors which exist outside and aren’t in direct control of the business. These include: customers, suppliers, competitors, the public, and trends.
You will need to research the online gaming industry in order to understand the external environment you are working in and design your business accordingly so it will succeed. You might consider some of the following factors which were taken from market research done in 2017:
Mobile Gaming
“Mobile games currently hold the largest segment of the industry’s revenue. By the end of 2017, they are expected to have generated $46B, which makes up 42% of the global market for game products. For comparison, console games will make up 31%, and PC/Desktop games only 27%.”
Virtual Reality
“Virtual Reality is another promising stream of revenue, with analysts predicting a growth of 104% from 2016 to 2017. In fact, by the year 2020, the annual worldwide revenue for VR is expected to reach $28B, which is 6 times more than what it’s expected to be this year. Granted, only about $4.5B will come from actual VR games, but that’s still more than 20 times what gamers spent by the end of 2016.”
If you’re interested, read more here: https://plarium.com/en/mmo-games/trends-online-gaming-2017/
Some starter questions to help you understand your business environment:
Who is your target audience? What kind of games are they playing? What devices do they have access to?
What kind of games are successful software companies making?
What resources do you have to create your game and will they limit you?
How will you distribute your game, will there be limitations?
Systems theory is a broad and abstract way of understanding how interrelated and interdependent parts work together as a whole. It can be applied to a wide range of disciplines including business studies. In particular, we will be focusing on information systems and how we can most effectively organise information to ensure the smooth running of a business.
The two videos below will introduce you to the systems theory and how it can be applied to organisations:
Introduction to systems theory:
Systems theory in organisations:
Businesses tend to have several information systems. For most businesses, there are a variety of requirements for information for successful running:
Senior managers need information to help with their business planning
Middle management need more detailed information to help them monitor and control business activities
Employees with operational roles need information to help them carry out their duties
It may be that as a sole proprietor that you take on all these roles but you will still need to think about how you record and monitor the different areas of your business.
TPS serve people in the operational level of an organization. These might be: billing systems to send invoices to customers, systems to calculate the weekly and monthly payroll and tax payments or task management systems.
The development of a game or piece of software, especially a large one, can require the work of multiple departments and multiple projects over a long period of time. For a lot of software companies a core part of the day-to-day operation will be an Agile Project Management system to manage tasks and keep on top of projects. This approach to task management can be useful also to small businesses. Many other systems that manage day-to-day administration (for example of human resources or financial accounting) will be managed by digital web apps that work together. These are especially useful to small businesses that don’t have many resources or capital.
KMS exist to help businesses create and share information. They are typically used in businesses where employees create new knowledge and expertise, which can then be shared by other people in the organisation to create further commercial opportunities. KMS are built around systems which allow efficient categorisation and distribution of knowledge.
In the process of creating a game, you might have ideas that need to be maintained and shared. These might be contained in word processing documents, spreadsheets, PowerPoint presentations, internet pages, etc and shared using group collaboration software like Google Drive. More specifically, code development can be a messy business, especially if you’re collaborating. In order to make sure everyone has the latest versions and file structure you will use a version control system (GitHub).
These are primarily concerned with internal sources of information and serve the management level of the organization. MIS usually take data from the transaction processing systems (see above) and summarise it into a series of management reports. MIS reports tend to be used by middle management and operational supervisors.
*For example, budget and project (programming/design) reports might be created to keep track of the development of your game. *
Designed to help senior management make strategic decisions. An ESS gathers, analyses and summarises the key internal and external information to get the overview of the entire organization’s performance.
For a small startup software company, this might involve pinpointing key measurable areas of your business, analysing them every 3-6 months, and adapting your business objectives accordingly.
Some questions to make you think about how you will organise your business:
How will you organise and share your ideas?
What tools will you use to develop your game?
What combination of webapps will you use to manage your projects? Do they work well together?
How will you manage your time and keep to deadlines?
Where will you keep track of your finances?
Information technology (IT) is all about storing, manipulating, distributing and processing information. Over the past 15 years it has transformed businesses with innovative technological tools and replaced conventional modes of business. In addition to the increased output and efficiency, IT has introduced new concepts such as e-commerce.
Online gaming would not be as sophisticated or as popular without the constant advancements taking place in IT. The following are some key ways in which IT has transformed business:
Online and offline technological applications (eg. word processing, spreadsheets, cloud computing) have increased the productivity of businesses and eliminated the time consuming process of manual document management.
IT can be used for monitoring areas of the company that are not utilizing resources efficiently. For instance, automated digital reports on employee time management, task completion and customer engagement analytics can quickly inform and support strategic decision making.
For many companies, email is the principal means of communication. Over the years, a number of other communications tools have also evolved, allowing staff to communicate using live chat systems, online meeting tools and video-conferencing systems (Slack, Skype, etc).
Businesses can maximize their commercial advantage by making the right use of IT channels and tools. Social media, digital distribution methods and personal computing devices have changed the way that customers engage with products and services. Customer Relationship Management (CRM) systems capture every interaction a company has with a customer, so that a more enriching experience is possible.
E-commerce is the is buying and selling services and goods over the Internet. With the worldwide rise of personal computing devices, it has grown exponentially. Online operations reduce the time and personnel required for business processes and many services are now distributed and used exclusively online.
E-commerce is especially relevant to the online gaming industry which could be described as an e-commerce platform. Online games are sold, distributed and used by customers online. The internet already offers many different models for this kind of business and as it keeps developing there will inevitably be more. Here are a couple to think about:
Membership (monthly payment) based games
Unlimited access games (one-off payment)
In-app purchase games
Free games (financed by advertising)
Data
Data is raw, unorganized facts that need to be processed. Data can be something simple and seemingly random and useless until it is organized.
Information
When data is processed, organized, structured or presented in a given context so as to make it useful, it is called Information.
Decision-making is the most important task of managers in an organization. Therefore, to enable managers to make good quality decisions, it is very important to provide them with the right kind of information. Information management systems are therefore very important. In the context of a new business it is especially important as it helps in responding to your business environment and making sure your business survives and develops.
We looked at systems that inform decision making in the Information Systems section. As we saw in the previous section, most modern organizations use IT systems for information management. Many of these computer based information management systems will be called Management Information Systems (MIS) and help managers take informed decisions. Though computer based technology is not necessary, it helps to provide timely and accurate information in a competitive environment.
Using the information provided by the above systems, decisions can be divided into the following stages:
Identification and structuring of problem/opportunity (Empathise)
Putting the problem opportunity in context (Define)
Generation of alternatives (Ideation)
Choice of best alternatives (Prototyping)
Each of these steps will involve analyzing information and might even involve gathering more.
As personal computing becomes more accessible, popular and even necessary for day-to-day living and working, the amount of personal and sensitive information we store online is increasing. As a result, it is also vulnerable to the flaws of our information technology systems.
Data integrity can be compromised in a number of ways:
Human errors when data is entered
Errors that occur when data is transmitted from one computer to another
Software bugs or viruses
Hardware malfunctions, such as disk crashes
Natural disasters, such as fires and floods
Physical theft
Internal/employee sabotage
Industrial/Political espionage
Malicious code/hacking
Governments and international organisation are increasingly recognising the importance of data protection and are developing legal frameworks. You too must make the protection of your users’ data (especially passwords and payment information) a priority.
Systems Theory, as applied to organizational management, puts forth the premise that all organizations are systems, and all systems are part of larger systems. How a subsystem fits the needs of the larger system ultimately determines if that subsystem prospers or is left to wither on the vine.
It’s this concept that the adept leader can use to get a more “holistic” view of his organization. Understanding how the company relates to the larger system in which it exists and operates, and then how the company’s internal systems contribute or detract from that larger relationship can provide a more relevant analysis.
Revisit the following two videos from the Systems theory section for more information on this subject:
Introduction to systems theory:
Systems theory in organisations:
All coders should have a limited understanding of data science as even if you are not a data scientist you may be involved in gathering and storing the data.
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