Our Mobile Game Development Financial Model Structure covers all the essential aspects you need to consider when starting or scaling a Mobile Game Development business. By following this structure, you can better understand your revenue streams, costs, and assets, helping you optimize profitability and strategically plan for growth.
The Mobile Game Development financial model structure
Starting a mobile game development business is an exciting venture; however, it requires meticulous financial planning to ensure success. This financial model guides you through the typical revenues, direct costs, employees, expenses, and assets you need to consider—whether you’re launching a new business or expanding an existing one. Understanding this structure can also pave the way for identifying new and profitable revenue streams. The Mobile Game Development financial model structure is essential for any game development startup.
Revenues
The revenue streams of a mobile game development business are quite diverse and can be outlined in several ways. Common streams include:
- In-App Purchases : Revenue is calculated by multiplying the number of users by the average purchase per user.
- Advertising Revenue : This involves the average revenue per ad view multiplied by total views.
- Subscription Fees : Derived from users paying a regular fee for premium features; calculate this by multiplying total subscribers by the subscription fee.
- Game Sales : Revenue from selling the game directly, determined by sales volume times the price per game.
- Licensing : Calculated based on agreements with other companies to use your game or technology, multiplied by the licensing fee.
- Merchandising : Revenue from selling branded merchandise, calculated by units sold times the price per item.
- Esports and Competitive Gaming : Revenue from events and sponsorships, calculated by sponsorship fees and ticket sales.
- DLCs (Downloadable Content) : Calculated by multiplying the number of downloads by the cost per download.
However, it is essential to keep in mind the complexities involved in each stream, as they can significantly impact overall profitability.
Cost of goods sold
Each revenue stream incurs corresponding costs, and they vary significantly. For instance:
- In-App Purchases : Costs include payment processing fees and platform fees.
- Advertising Revenue : Associated costs might include user acquisition expenses and ad platform nominal fees.
- Subscription Fees : Costs include payment processing and platform maintenance.
- Game Sales : Manufacturing costs (for physical copies) and distribution costs must be considered.
- Licensing : Royalty payments to licensors, if applicable, represent another expense.
- Merchandising : Production and distribution costs are essential but often overlooked.
- Esports and Competitive Gaming : Venue hire, equipment costs, and staff costs contribute to overall expenses.
- DLCs : Development and distribution costs are crucial although sometimes underestimated.
Employees
Essential employees include:
- Game Developers : Responsible for coding and debugging games.
- Graphic Designers : Create game art and visuals.
- Project Managers : Coordinate development tasks and manage timelines.
- Marketing Specialists : Develop and implement marketing strategies.
- Customer Support : Assist users with game-related queries.
- Testers/QA Engineers : Ensure the game working is bug-free and user-friendly.
- Financial Officers : Manage budgeting and financial operations.
Operating expenses
Typical operating expenses include:
- Software Licenses : Costs for game development platforms and tools.
- Office Rent : If using a physical location.
- Utilities : Electricity, water, internet, etc.
- Equipment Depreciation : Expense of using machines and PCs over time.
- Salaries : Remuneration for employees.
- Marketing and Advertising : Costs to promote your game(s).
- Legal and Consultancy : Fees for external professional advisory services.
- Insurance : Coverage for business operations and personnel.
- Travel Expenses : Costs for attending conferences and events.
- Software Maintenance : Regular updates and bug fixes.
Assets
Key assets for a Mobile Game Development business include:
- Computers and Servers : Essential for development and testing.
- Software : Game development tools and licenses.
- Intellectual Property : Games, patents, and trademarks.
- Office Furniture and Equipment : Desks, chairs, and conferencing tools.
However, this infrastructure is crucial, although it requires continual investment to stay competitive. Because of this, one must prioritize resources effectively.
Funding Options
Typical funding options include:
- Venture Capital : Investments from firms interested in high-growth potential play a significant role in the financial landscape.
- Angel Investors : Individuals who provide capital often seek equity in exchange for their support.
- Bank Loans : Offer financing from financial institutions, which typically come with specific terms and interest rates.
- Crowdfunding : Involves raising small amounts of money from a large number of supporters; this method has gained popularity in recent years.
- Government Grants : Funds from government bodies aim to support technological innovations.
Driver-based financial model for Mobile Game Development
A driver-based financial model for mobile game development, which is essential, hinges on operating KPIs (key performance indicators) that are relevant to the industry. Examples of these operating KPIs are as follows:
- Daily Active Users (DAU) : Represent the total number of users engaging with the game daily.
- Monthly Active Users (MAU) : Indicate the number of unique users interacting over the last 30 days.
- Average Revenue Per User (ARPU) : Reflects the revenue generated from each user on average.
- User Acquisition Cost (UAC) : The total expense incurred to acquire a new user.
- Retention Rate : Denotes the percentage of users who continue playing the game over a specified period.
- Churn Rate : This refers to the percentage of users who cease playing your game over a designated period.
- Conversion Rate : The percentage of users that make a purchase or subscribe can be crucial.
- Download Rate : Number of times your game has been downloaded within a specific timeframe is significant.
Driver-based financial planning involves identifying key activities (drivers) which have the greatest impact on your business outcomes and constructing your financial plans based on those activities. It enables you to forge connections between the financial results and the resources needed to attain those outcomes, such as people, marketing budgets, equipment, etc. If you want to know more about driver-based financial planning and why it is the right way to plan, see the founder of Modeliks explaining it in the video below.
The financial plan output
The objective of the financial forecast outputs should enable you, and your management, board, or investors to quickly grasp how your Mobile Game Development enterprise will perform in the future. You can achieve comfort because the plan is well thought out, realistic, and attainable. Additionally, you must understand what investment is necessary to implement this plan and what the anticipated return on that investment will be. To achieve these goals, here is a one-page template designed to effectively present your financial plan.
Apart from this one-page summary of your plan, you will need the three projected financial statements; these are essential for a comprehensive overview:
- Profit and Loss
- Balance Sheet
- Cash Flow Statement
Mobile Game Development financial model summary
A professional Mobile Game Development financial model will help you think through your business. It will identify the resources you need to achieve your targets, set goals, measure performance, raise funding, and make confident decisions to manage and grow your business. Although this is essential, many overlook it because they underestimate its importance.
If you need help with your financial plan, try Modeliks , a financial planning solution for SMEs and startups or contact us at contact@modeliks.com and we can help.
Author:
Blagoja Hamamdjiev
, Founder and CEO of
Modeliks
, Entrepreneur, and business planning expert.
In the last 20 years, he helped everything from startups to multi-billion-dollar conglomerates plan, manage, fundraise, and grow.