Monday, August 19

It's The Cash That Is Gonna Kill You

When running a business there's two things you need to keep a close eye on: profit and cash. Profit is the money you make when you sell something, either before (gross profit) or after (net profit) taking account of overheads. Because we're doing Eurydice Games in our spare time and not drawing salaries from it, our overheads are very low, so despite a low gross profit (small print runs have few economies of scale) we have very good net profits. We're making money and this is, in it's current form, a viable business.

Cashflow is the money going into or out of the business and is what kills most companies apparently - including Reiver Games, my first games publishing company. Cashflow isn't as closely related to profit as you might think. For example, our cashflow was very positive in December (when Kickstarter released the funds) but has been negative since - we've bought a laser-cutter, all the raw materials for the print run and then being paying for postage and packaging materials every time we post a copy. Every time we sell (ship) a copy we make a small profit but our cash decreases.

At the beginning, just after the Kickstarter, we needed to make a decision about how many copies to make. We needed to make at least enough copies to fulfill the Kickstarter rewards, but we could make more. The more we made the better the profit per copy, thanks to economies of scale, but the worse the hit on cash flow as the total cost for the raw materials would be higher.

At that point we didn’t know exact shipping costs, how much Royal Mail would increase their prices in April and how much we would be spending on tape, bubble wrap, etc. I had to make an educated guess.

My guess was poor! Even with a number of post-Kickstarter deluxe upgrades and a decent number of Zombology sales during the year, money has run out. We’ll rebuild it as we fulfill pre-orders (which haven’t paid yet so will boost profit and cash simultaneously) and when Kickstarter releases the funds from the second Kickstarter, if we’re successful. But for now we have almost nothing in the bank (<£10!), so to support the second Kickstarter, Paul and I will need to lend the company some more money.

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