How to write a business plan for an electronic games manufacturer?
Writing a business plan for an electronic games manufacturer can be an intimidating task, especially for those just starting.
This in-depth guide is designed to help entrepreneurs like you understand how to create a comprehensive business plan so that you can approach the exercise with method and confidence.
We'll cover: why writing an electronic games manufacturer business plan is so important - both when starting up, and when running and growing the business - what information you need to include in your plan, how it should be structured, and what tools you can use to get the job done efficiently.
Let's get started!
Why write a business plan for an electronic games manufacturer?
Understanding the document's scope and goals will help you easily grasp its structure and content. Before diving into the specifics of the plan, let's take a moment to explore the key reasons why having an electronic games manufacturer business plan is so crucial.
To have a clear roadmap to grow the business
Small businesses rarely experience a constant and predictable environment. Economic cycles go up and down, while the business landscape is mutating constantly with new regulations, technologies, competitors, and consumer behaviours emerging when we least expect it.
In this dynamic context, it's essential to have a clear roadmap for your electronic games manufacturer. Otherwise, you are navigating in the dark which is dangerous given that - as a business owner - your capital is at risk.
That's why crafting a well-thought-out business plan is crucial to ensure the long-term success and sustainability of your venture.
To create an effective business plan, you'll need to take a step-by-step approach. First, you'll have to assess your current position (if you're already in business), and then identify where you'd like your electronic games manufacturer to be in the next three to five years.
Once you have a clear destination for your electronic games manufacturer, you'll focus on three key areas:
- Resources: you'll determine the human, equipment, and capital resources needed to reach your goals successfully.
- Speed: you'll establish the optimal pace at which your business needs to grow if it is to meet its objectives within the desired timeframe.
- Risks: you'll identify and address potential risks you might encounter along the way.
By going through this process regularly, you'll be able to make informed decisions about resource allocation, paving the way for the long-term success of your business.
To anticipate future cash flows
Regularly comparing your actual financial performance to the projections in the financial forecast of your electronic games manufacturer's business plan gives you the ability to monitor your business's financial health and make necessary adjustments as needed.
This practice allows you to detect potential financial issues, such as unexpected cash shortfalls before they escalate into major problems. Giving you time to find additional financing or put in place corrective measures.
Additionally, it helps you identify growth opportunities, like excess cash flow that could be allocated to launch new products and services or expand into new markets.
Staying on track with these regular comparisons enables you to make well-informed decisions about the amount of financing your business might require, or the excess cash flow you can expect to generate from your main business activities.
To secure financing
Whether you are a startup or an existing business, writing a detailed electronic games manufacturer business plan is essential when seeking financing from banks or investors.
This makes sense given what we've just seen: financiers want to ensure you have a clear roadmap and visibility on your future cash flows.
Banks will use the information included in the plan to assess your borrowing capacity (how much debt your business can support) and your ability to repay the loan before deciding whether they will extend credit to your business and on what terms.
Similarly, investors will review your plan carefully to assess if their investment can generate an attractive return on investment.
To do so, they will be looking for evidence that your electronic games manufacturer has the potential for healthy growth, profitability, and cash flow generation over time.
Now that you understand why it is important to create a business plan for an electronic games manufacturer, let's take a look at what information is needed to create one.
Information needed to create a business plan for an electronic games manufacturer
Drafting an electronic games manufacturer business plan requires research so that you can project sales, investments and cost accurately in your financial forecast, and convince the reader that there is a viable commercial opportunity to be seized.
Below, we'll focus on three critical pieces of information you should gather before starting to write your plan.
Carrying out market research for an electronic games manufacturer
Carrying out market research before writing a business plan for an electronic games manufacturer is essential to ensure that the financial projections are accurate and realistic.
Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.
In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.
Your market research may reveal that console-based gaming may be on the rise, as well as games that focus on a shared multi-player experience. Additionally, there may be an increase in demand for games that are accessible to a wider variety of age groups and gaming experiences.
This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your electronic games manufacturer.
Developing the sales and marketing plan for an electronic games manufacturer
Budgeting sales and marketing expenses is essential before creating an electronic games manufacturer business plan.
A comprehensive sales and marketing plan should provide an accurate projection of what actions need to be implemented to acquire and retain customers, how many people are needed to carry out these initiatives, and how much needs to be spent on promotions, advertising, and other aspects.
This helps ensure that the right amount of resources is allocated to these activities in order to hit the sales and growth objectives forecasted in your business plan.
The staffing and capital expenditure requirements of an electronic games manufacturer
Whether you are starting or expanding an electronic games manufacturer, it is important to have a clear plan for recruitment and capital expenditures (investment in equipment and real estate) in order to ensure the success of the business.
Both the recruitment and investment plans need to be coherent with the timing and level of growth planned in your forecast, and require appropriate funding.
The staffing costs for an electronic games manufacturer could include paying salaries to software developers, graphic designers, sound engineers, and marketing staff. Additionally, the company might need to pay for outside contractors to assist with development, testing, and marketing efforts. In terms of equipment costs, the company might need to purchase computers, gaming consoles, software licenses, and other specialized equipment. They might also need to invest in research and development tools to help create new and innovative games.
In order to create a realistic financial forecast, you will also need to consider the other operating expenses associated with running the business on a day-to-day basis (insurance, bookkeeping, etc.).
Once you have all the necessary information to create a business plan for your electronic games manufacturer, it is time to start creating your financial forecast.
What goes into your electronic games manufacturer's financial forecast?
The financial forecast of your electronic games manufacturer's business plan will enable you to assess the growth, profitability, funding requirements, and cash generation potential of your business in the coming years.
The four key outputs of a financial forecast for a electronic games manufacturer are:
- The profit and loss (P&L) statement,
- The projected balance sheet,
- The cash flow forecast,
- And the sources and uses table.
Let's look at each of these in a bit more detail.
The projected P&L statement
The projected P&L statement for an electronic games manufacturer shows how much revenue and profit your business is expected to make in the future.
A healthy electronic games manufacturer's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for a startup will look different than for an established electronic games manufacturer.
The forecasted balance sheet of your electronic games manufacturer
The projected balance sheet of your electronic games manufacturer will enable the reader of your business plan to assess the overall financial health of your business.
It shows three elements: assets, liabilities and equity:
- Assets: are productive resources owned by the business, such as equipment, cash, and accounts receivable (money owed by clients).
- Liabilities: are debts owed to creditors, lenders, and other entities, such as accounts payable (money owed to suppliers).
- Equity: includes the sums invested by the shareholders or business owners and the profits and losses accumulated by the business to date (which are called retained earnings). It is a proxy for the value of the owner's stake in the business.
Analysing your electronic games manufacturer projected balance sheet provides an understanding of your electronic games manufacturer's working capital structure, investment and financing policies.
In particular, the readers of your plan can compare the level of financial debt on the balance sheet to the equity value to measure the level of financial risk (equity doesn't need to be reimbursed, while financial debt must be repaid, making it riskier).
They can also use your balance sheet to assess your electronic games manufacturer's liquidity and solvency:
- A liquidity analysis: focuses on whether or not your business has sufficient cash and short-term assets to cover its liabilities due in the next 12 months.
- A solvency analysis: takes and longer view to assess whether or not your business has the capacity to repay its debts over the medium-term.
The cash flow forecast
A projected cash flow statement for an electronic games manufacturer is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organized by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
As we discussed earlier, cash is king and keeping an eye on future cash flows an imperative for running a successful business. Therefore, you can expect the reader of your electronic games manufacturer business plan to pay close attention to your cash flow forecast.
Also, note that it is customary to provide both yearly and monthly cash flow forecasts in a business plan - so that the reader can analyze seasonal variation and ensure the electronic games manufacturer is appropriately funded.
The initial financing plan
The initial financing plan - also called a sources and uses table - is an important tool when starting an electronic games manufacturer.
It shows where the money needed to set up the business will come from (sources) and how it will be allocated (uses).
Having this table helps understand what costs are involved in setting up the electronic games manufacturer, how the risks are distributed between the shareholders and the lenders, and what will be the starting cash position (which needs to be sufficient to sustain operations until the business breaks even).
Now that the financial forecast of an electronic games manufacturer business plan is understood, let's focus on what goes into the written part of the plan.
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The written part of an electronic games manufacturer business plan
The written part of an electronic games manufacturer business plan is composed of 7 main sections:
- The executive summary
- The presentation of the company
- The products and services
- The market analysis
- The strategy
- The operations
- The financial plan
Throughout these sections, you will seek to provide the reader with the details and context needed for them to form a view on whether or not your business plan is achievable and your forecast a realistic possibility.
Let's go through the content of each section in more detail!
1. The executive summary
The first section of your electronic games manufacturer's business plan is the executive summary which provides, as its name suggests, an enticing summary of your plan which should hook the reader and make them want to know more about your business.
When writing the executive summary, it is important to provide an overview of the business, the market, the key financials, and what you are asking from the reader.
Start with a brief introduction of the business, its name, concept, location, how long it has been in operation, and what makes it unique. Mention any services or products you plan to offer and who you sell to.
Then you should follow with an overview of the addressable market for your electronic games manufacturer, current trends, and potential growth opportunities.
You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.
Finally, you should detail any funding requirements in the ask section.
2. The presentation of the company
The second section in your electronic games manufacturer's business plan should focus on the structure and ownership, location, and management team of the company.
The structure and ownership part provides an overview of the legal structure of the business, who the owners are and how much each has invested and owns. If you are seeking financing it is important that the reader gets a clear picture of which legal entity is receiving the funds, and who controls the business.
The location part should give an overview of the premises from which the company is operating, and why that location is of particular interest (catchment area, accessibility, amenities nearby, etc.).
When describing the location of your electronic games manufacturer, you may want to emphasize the potential advantages of the area. You might mention its proximity to key transportation hubs, which could enable easy access for the materials and staff needed to run the business. You could also suggest the potential for the area to have access to a skilled workforce, as well as the potential for tax incentives. Additionally, you could explain the benefits of potential partnerships with local universities and other businesses. All of these factors could make the location an attractive choice for a third party financier.
Finally, you should introduce the management team. Explain each member's role, background, and experience.
It is also important to emphasize any past successes that the members of the management team have achieved, and how long they've been working together, as this will help potential lenders or investors understand why they should trust in their leadership.
3. The products and services section
The products and services section of your electronic games manufacturer business plan should include a detailed description of what your company sells to its customers.
For example, your electronic games manufacturer could offer a variety of game consoles and handheld devices, as well as a range of different games for each of these systems. It could also offer customer support services, such as technical support and game advice, and offer online services, such as a membership to an online gaming community. Finally, customers could have access to exclusive, limited-edition merchandise such as t-shirts, hats, and collectible items. All of these products and services would help to create a more engaging and immersive gaming experience for customers, while also providing a great way to show their loyalty and support for the company.
The reader will want to understand what makes your electronic games manufacturer unique from other businesses in this competitive market.
When drafting this section, you should be precise about the categories of products or services you sell, the clients you are targeting and the channels that you are targeting them through.
4. The market analysis
When you present your market analysis in your electronic games manufacturer business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.
The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.
Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your electronic games manufacturer, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.
Next, focus on your target market, zooming in on the specific customer segments your electronic games manufacturer aims to serve and explaining how your products and services fulfil their distinct needs.
For example, your target market might include male teenagers between the ages of 14 and 18. This segment is interested in the latest technology and trends, and likely has the disposable income to purchase gaming systems and games. They are also likely to be tech savvy and have an interest in gaming culture.
Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.
Finally, conclude your market analysis with an overview of the key regulations applicable to your electronic games manufacturer.
5. The strategy section
When you write the strategy section of your electronic games manufacturer business plan, remember to cover key elements such as your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
In the competitive edge subsection, elaborate on what makes your company stand out from competitors. This becomes especially important if you're a startup, aiming to carve a place for yourself amidst established players in the marketplace.
The pricing strategy subsection should demonstrate how you plan to maintain profitability while offering competitive prices to attract customers.
Outline your sales & marketing plan, detailing how you'll reach out to new customers and retain existing ones through loyalty programs or special offers.
For the milestones subsection, outline your company's achievements to date and your main objectives for the future, complete with specific dates to set clear expectations for progress.
Lastly, the risks and mitigants subsection should address the main risks that could affect your plan's execution. Explain the measures you've put in place to minimize these risks, assuring potential investors or lenders.
Your electronic games manufacturer could face the risk of a potential decrease in demand for their products. This could be due to a variety of factors such as a change in consumer trends or a war in the region. Additionally, your electronic games manufacturer might face the risk of a cyber attack. This could be due to a lack of security protocols in place, leaving the company vulnerable to malicious activity. It is important to keep up-to-date on the latest security measures to ensure the protection of your business.
6. The operations section
The operations of your electronic games manufacturer must be presented in detail in your business plan.
Begin by addressing your staff, specifying the main roles and your recruitment plan to support the anticipated growth. Outline the qualifications and experience needed for each role and discuss your recruitment strategies, which may involve using job boards, referrals, or headhunters.
Next, clearly state your electronic games manufacturer's operating hours, allowing the reader to gauge the adequacy of your staffing levels. Additionally, mention any considerations for varying opening times during peak seasons and your approach to handling customer queries outside regular operating hours.
The key assets and intellectual property (IP) required to run your business should also be highlighted. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, ensure they are well-documented in this section.
You might have valuable intellectual property, such as patented technology for game consoles, or copyright protection for your game software. Additionally, your key assets could include any tangible assets related to the production and distribution of your games, such as the physical components used for manufacturing games, or the software licenses needed for distribution.
Finally, provide a comprehensive list of suppliers you intend to collaborate with, along with a breakdown of their services and main commercial terms, such as price, payment terms, break clauses and contract duration. Investors often seek insight into the reasons behind your supplier choices, which may include a preference for higher-quality products or established relationships from past ventures.
7. The presentation of the financial plan
The financial plan section is where we will include the financial forecast we discussed earlier in this guide.
Now that you have a clear idea of what goes into an electronic games manufacturer business plan, let's look at some of the tools you can use to create yours efficiently.
What tool should I use to write my electronic games manufacturer's business plan?
In this section, we will be reviewing the two main options for writing an electronic games manufacturer business plan efficiently:
- Using specialized software,
- Outsourcing the drafting to the business plan writer.
Using an online business plan software for your electronic games manufacturer's business plan
Using online business planning software is the most efficient and modern way to create an electronic games manufacturer business plan.
There are several advantages to using specialized software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.
Hiring a business plan writer to write your electronic games manufacturer's business plan
Outsourcing your electronic games manufacturer business plan to a business plan writer can also be a viable option.
Business plan writers are skilled in creating error-free business plans and accurate financial forecasts. Moreover, hiring a consultant can save you valuable time, allowing you to focus on day-to-day business operations.
However, it's essential to be aware that hiring business plan writers will be expensive, as you're not only paying for their time but also the software they use and their profit margin.
Based on experience, you should budget at least £1.5k ($2.0k) excluding tax for a comprehensive business plan, and more if you require changes after initial discussions with lenders or investors.
Also, exercise caution when seeking investment. Investors prefer their funds to be directed towards business growth rather than spent on consulting fees. Therefore, the amount you spend on business plan writing services and other consulting services should be insignificant compared to the amount raised.
Keep in mind that one drawback is that you usually don't own the business plan itself; you only receive the output, while the actual document is saved in the consultant's business planning software. This can make it challenging to update the document without retaining the consultant's services.
For these reasons, carefully consider outsourcing your electronic games manufacturer business plan to a business plan writer, weighing the advantages and disadvantages of seeking outside assistance.
Why not create your electronic games manufacturer's business plan using Word or Excel?
I must advise against using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write your electronic games manufacturer business plan. Let me explain why.
Firstly, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is highly technical and requires a strong grasp of accounting principles and financial modelling skills. It is, therefore, unlikely that anyone will fully trust your numbers unless you have both a degree in finance and accounting and significant financial modelling experience, like us at The Business Plan Shop.
Secondly, relying on spreadsheets is inefficient. While it may have been the only option in the past, technology has advanced significantly, and software can now perform these tasks much faster and with greater accuracy. With the rise of AI, software can even help us detect mistakes in forecasts and analyze the numbers for better decision-making.
And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Moreover, software makes it easier to compare actuals versus forecasts and maintain up-to-date forecasts to keep visibility on future cash flows, as we discussed earlier in this guide. This task is cumbersome when using spreadsheets.
Now, let's talk about the written part of your electronic games manufacturer business plan. While it may be less error-prone, using software can bring tremendous gains in productivity. Word processors, for example, lack instructions and examples for each part of your business plan. They also won't automatically update your numbers when changes occur in your forecast, and they don't handle formatting for you.
Overall, while Word or Excel may seem viable for some entrepreneurs to create a business plan, it's by far becoming an antiquated way of doing things.
- Using business plan software is a modern and cost-effective way of writing and maintaining business plans.
- A business plan is not a one-shot exercise as maintaining it current is the only way to keep visibility on your future cash flows.
- A business plan has 2 main parts: a financial forecast outlining the funding requirements of your electronic games manufacturer and the expected growth, profits and cash flows for the next 3 to 5 years; and a written part which gives the reader the information needed to decide if they believe the forecast is achievable.
We hope that this in-depth guide met your expectations and that you now have a clear understanding of how to write your electronic games manufacturer business plan. Do not hesitate to contact our friendly team if you have questions additional questions we haven't addressed here.
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- Top mistakes to avoid in your business plan
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