All Profitable Solo Devs Must Learn This Equation
How to properly budget for your indie game
Welcome back to this week’s lesson from Solo Gamedev School!
When developing your game with the intent of turning a profit, you’ll want to properly budget your time and money.
Most solo devs are hobbyists and never bother learning this skill, thinking that if they just keep working on their game long enough, it will always be worth it.
But when you’re trying to run a game business, there’s nothing more disappointing than spending months or even years on a project, only to realize you spent more money than you made.
I’ve faced this problem myself, and after years of research I was able to put together an equation that helps you balance your indie game’s budget.
The Equation
Simply put, it’s expenses < income.
But what does that look like for game developers?
$100 + E + (W * CAC) < (CLV * 0.7) * (W * 0.1)
Look scary? Here, I’ll break it down for you:
$100 — the Steam fee required to put your game on Steam’s storefront.
E — the expenses for your game, such as outsourcing artwork, coding, etc.
W — the amount of wishlists your game has on Steam.
CAC — customer acquisition cost, or the cost to acquire a wishlist
CLV — customer lifetime value, or how much money your customers will pay you (usually the full price of your game, but could be more with microtransactions)
Since you’re the game developer, you get to decide the price of your game.
The amount of wishlists is a number that we can never truly anticipate knowing.
All game developers are constantly trying to maximize the number of wishlists for their game, so a lower number in the equation is a more conservative estimate.
By contrast, all game developers are constantly trying to minimize their expenses, which can be done by simply reducing the scope of your game.
As for CAC, most games use organic marketing, so there’s no need to pay for ads.
But you may choose to pay streamers to showcase your game, in which case you’ll need to estimate how many customers you’ll get from those situations.
So what can we do with this equation?
We want to solve for the expenses, so that we know how much we can afford to spend on the game and whether or not we’ve gone over budget and need to scope down.
Example
Let’s take a look at a few simple examples.
Assume we spent $2,500 on ads to earn 5,000 wishlists, selling the game at $18.
($2,500 / 5,000 = $0.50, which is our CAC.)
$100 + E + (5000 * $0.50) < ($18 * 0.7) * (5000 * 0.1)
Note that we multiply CLV by 0.7 because Steam takes 30% of our revenue, and we multiply W by 0.1 because on average, 10% of wishlists convert into sales on day one.
Some people speculate that as much as 50% of wishlists convert in the first week, but this isn’t always true and we can’t rely on it being true, so we’re playing it safe for now.
E + $100 + $2500 < $12 * 500
E + $2600 < $6000
E < $3400
Thus, we can’t afford to spend more than $3400 on the development of our game.
Remember, our total budget is actually $6,000.
We’re spending $2500 on marketing, $100 on the Steam fee, and $3400 on the game.
If $3400 sounds low, we can cut the $2500 ad spending to get a $5900 budget, but it may be hard (or impossible) to get the wishlists so high without paying the streamers.
We’re also making the bold assumption that we can produce a game worth $18 on a budget of $3400, and we haven’t even factored in time costs yet.
Have you ever heard the saying “time = money?”
As solo developers, we tend to do almost everything ourselves, and that’s time that could’ve been spent getting paid to do work at a “normal” job.
If we put in 40 hours of work per 5-day work-week, that means 4 weeks of work would cost 160 hours.
Assuming we spent nothing on outsourcing and did everything ourselves, that would mean we “paid” ourselves around $20 per hour (160 * $20 = $3200).
However, if it takes us two months to build, market, and release the game, then we’ve only earned $10 per hour.
Spending four months with the same number of wishlists results in a mere $5 per hour.
You can probably see where I’m going with this…
How is it possible for a solo dev to earn a reasonable living with these numbers?!?
The harsh truth is that for most devs, it simply isn’t possible.
Unless you go into your game development with a solid strategy of how you plan to acquire those massive amounts of wishlists, you’re essentially playing the lottery.
My conclusion is that you’re more likely to succeed by releasing smaller games if at all possible, since you’re spending less time working on each game.
As the months go by, your potential profit exponentially decreases, and as years go by, you basically need a miracle to break even.
However, although you can try to reduce scope as much as you can, only so much can be taken away before you’re left with a game that’s not worth the price-tag.
Instead, the smartest alternative is to supplement your sources of income so that you are getting paid while you develop the game, rather than waiting until the end.
Some common ways of earning supplementary income:
Monetize a YouTube channel or Patreon membership
Add microtransactions or DLC for recurring revenue
Release your game in Early Access
Raise money via Kickstarter or NFT sales
We’ll go into these in more detail in future posts.
All of this might sound very discouraging, but also keep in mind that your goal is to build up a collection of games that your growing audience will continue to buy.
As you build multiple games, you’ll re-capture the same audience, and over time it will get easier to achieve higher wishlist numbers — as long as you keep creating content.
It starts out the hardest at the beginning, but your efforts compound over time.
That’s all for today. I hope this helps you keep your scope small and become profitable.
If you found this helpful, please consider sharing with indie devs who may need it.