Thread by @lackingceremony

Would fellow tabletop roleplaying game designers find it helpful if I wrote a thread about the basics of managing your finances as a sole proprietor?

I'm thinking about things like: personal budgeting, bookkeeping, forecasting, planning for taxes, and inventory management?

Cool, it seems like there's some interest.

I'm going to approach this thread in terms of things I wished I had understood better, when I was a young designer just getting started with publishing games.

Let's dive in!

I want to open by acknowledging that we live in a world of class violence, unequal wealth distribution, and unequal access to financial tools and knowledge.

Every recommendation comes with an invisible "...if you have the security and privilege to do so" rider attached.

I got started publishing as a young, able-bodied person with no dependents. And I managed myself as if that would be true forever.

I thought capitalism was stupid (it is), and so for years didn't register and report on my business properly.

Both these things bit me on the ass.

Here's a lesson I learned: if you have any aspiration of making money by publishing games, learn basic bookkeeping skills and implement them from day one.

Watch some youtube videos on how double entry accounting works. Find some free bookkeeping software/tools.

Start from $0.

I use Wave Accounting, which is a robust, browser-based bookkeeping app that is entirely free to use. They make their money off payroll administration. As long as you don't have employees, its free to use!

They have some tutorials and helpful forums.

waveapps.com

If you're already printing books and making sales, but haven't started keeping track of the money coming in and out of your business, don't fret! I put this stuff off for years out of dread, but managed to tackle it eventually.

Its just easier the sooner you do it!

Most people who publish roleplaying games are known as a sole proprietor. I'm a sole proprietor! My business is just mine.

I'm writing on the assumption that you'll be a sole proprietor.

I highly recommend registering your business and opening up a separate bank account for it.

Me? I have a business savings account. I chose that because it has no service fees, and I didn't need a debit card. More recently, I also picked up a business credit card.

If you're not sure what's best for you, find a trustworthy credit union or small bank and ask someone nice.

So, that's the first bundle of advice: register your business, open a bank account for it, and start bookkeeping from the get-go. Everything that comes later is easier if you do this.

Simple, right?

The next bundle of advice sounds even simpler: know how much things cost.

I know so many people who have been bitten on the ass by launching a Kickstarter, raising a bunch of money to release a game, and then being crestfallen later when they realized that they under-estimated shipping and actually lost money.

Know your costs. Actually do the math.

Shipping costs are a huge expense! Sometimes it costs more to ship a game than it does to produce it.

I live in Canada. Canada Post has an online shipping cost calculator. I can plug in my book's dimensions and weight, and plug in a destination, and it'll show me the price.

If you're launching a project, it's really important to estimate your costs. That doesn't mean "take a guess."

That means call up three different printers, tell them your book specs, and ask them for estimates. Ask them how long they're good for.

Calculate shipping costs. Etc.

If you're selling a game (whether digital or print) through a marketplace or online platform, learn how much their cut is. Is it 30¢+2.9%? 10%? 30%? Is that inclusive of credit card processing fees, or in addition to them? Is there also a monthly fee?

Know your costs.

I've probably repeated the phrase "know your costs" enough times, yea?

Once you know your costs, factor them into how you operate your business and price your products!

If you want to sell to retailers, make sure you're pricing things to still turn a profit when sold at 50%.

The third bundle of advice: anticipate your future expenses and set that money aside.

You know what sucks? A game you depend on running out of stock when you can't afford to reprint it.

Know what else sucks? Doing your income taxes and realizing you owe big $$$ you don't have.

A personal example:

At the end of every month, I pay myself a flat amount. $3,400 CAD.

My business account has $30,000 sitting in it. You know how much is actually free to play around with? lol none. That covers my projected taxes to date & upcoming print runs. Isn't that wild?

If you are self-employed, I strongly urge you to learn how taxes work in your jurisdiction and plan accordingly. If you search "[country] tax calculator" you can probably find a handy tool to help you with this.

For example, here's one for Canada: simpletax.ca/calculator

Do you live in a country with marginal tax rates? If you do, learn what a marginal tax rate is and how it works.

Basically: once you make past a certain amount of money, every dollar after that gets taxed at the new rate.

investopedia.com/terms/m/margin….

You'll probably have a few other taxes to manage, beyond income tax.

Most jurisdictions have sales tax to collect/remit!

In Canada, a self-employed person also pays employment insurance. It's a fixed percentage of income up to a limit, effectively capping at $856.36 annually.

Taxes were terrifying to me for years! And my brain got foggy whenever I tried to think about them.

But I promise, if you are proactive and plan ahead, it will become clearer with time and you will feel empowered.

Ask for help if you need to! Hire an accountant if you want to!

If you are proactive and plan ahead, then come the new year you can be all: "I approximated my taxes throughout the year and set aside the money to pay them. My books and inventory records are up to date. My receipts are filed. I just need to plug in these numbers and hit send."

If you make and sell physical products, you'll need to track your inventory.

For tax purposes, you'll likely need to know the total dollar value of your inventory at start and end of year.

And you'll want to know how much stock you've got left + reprint costs.

Spreadsheets! 📊

As mentioned earlier, I use Wave Accounting for my bookkeeping. It lets me track my overall inventory dollar value per title. But it doesn't do actual unit inventory.

I use a Google Sheets spreadsheet for that. I'll show you mine so you can see an example of how it works.

There are some weird little things with mine. The hardcover and softcover unit price on some titles is identical, because the printer I use for them doesn't actually list them as separate line items on the invoices, and so I just ran with it.

But hopefully you get the idea?

I use a periodic inventory system, rather than a perpetual one. (I don't update that spreadsheet every single time a book sells. I do a stock count at certain intervals and then update it. I make sure to get a stock count right at end of year.)

Research. Do what works for you.

I'm not a financial expert (ha!). I'm just sharing what I've learned to date. These are things to figure out for yourself.

To recap so far: register your business, open a bank account, do bookkeeping, know your present and future costs, plan accordingly, track inventory.

Let's put all of that in motion, okay? Roleplaying time!

You launched a successful kickstarter! It raised $60,000. You know that between Kickstarter and payment processing fees, you'll pay 8-10%. That leaves $54,000. You used KS sales to gauge how big a print run to do.

You consider the quotes you've received for different print run sizes, overall interest in the game, and the risk of carrying dead stock.

You decide that you'll print triple the number of books that have already sold. That comes to $10,000. You anticipate $800 for freight.

You commission the remainder of your art and pay your editor. Maybe that's $1,200 for this particular project.

You've got backers from around the world! You anticipated a shipping bill of $12,000. Add a $2200 buffer to cover bounced packages and increased rates.

$27,800 left!

You've been tracking your income across the year and do your honest best to anticipate what tax rate you'll be paying on this income. You cautiously overestimate (in all things), and set aside 26%.

That leaves you with, what, something like $20,572 cash money! 💸

If life is generous and bountiful, you may end up selling through the entire print run at some point! Maybe a year or two from now?

Are you starting to set aside money for that re-print now? If not, what metric will you use to decide when it's time to start setting money aside?

You decide you won't start saving for another print run until two thirds of this run has sold. So far, only one third of it has sold. You're breezy!

What are you going to do with that $20,572? Are you going to invest any of it back into the business? A new tablet? Printer ink?

Maybe you invest in a few purchases, and set aside some so that next time you launch a project, you're in a position to commission more art assets in advance.

You've got $18,000 that's all yours to spend! How often do you do a kickstarter of this magnitude? Every 12 months?

You'll have ongoing sales, and you have some other gigs and projects lined up, but the question is: how much should you stretch that $18,000 across the next 12 months? How much should you set aside for unforeseen situations?

How many dollars do you draw from the account monthly?

If you've been a person with no money, and suddenly you become a person with some money, it is super confusing.

When the Monsterhearts 2 kickstarter put a gigantic sum of money in my bank account, I totally mismanaged it because I hadn't developed the ability to forecast yet.

Practicing all these skills while you're still slinging home-stitched zines out of your backpack or little pdfs might seem silly. But it is smart and hell, because a lot of the skills scale up. And it's better to learn these skills when you're dealing with $60 flows than $60,000.

If this feels like a lot of talking points, don't worry. It all comes together into one synergistic web eventually.

I've talked about how you handle money when it's "in the business," but with a sole proprietorship the membrane between "in the business" and "personal" is thin.

Which brings us to the next bundle of advice: start keeping a personal budget and tracking your spending.

Self-employed or freelance life can be really amorphous. Knowing what your money is doing is important for anyone, but that goes double for people in our shoes.

I hate capitalism. I know I already said that earlier; it just bears repeating.

But here's the deal: I might hate how money works in our society, but I know that financial stability only comes through financial literacy and awareness. Tangible skills everyone deserves to access.

So, I'm going to share a few resources to help make sense of what budgeting is, how to do it well, and how doing it well can change your life.

Ditching avocado toast won't conjure up a down payment, we all know that, but using money strategically does have a meaningful impact.

You Need A Budget is a browser-based app. But they also have a specific approach.

Read about their approach over here.

Consider: sign up for the free trial of the app, get the hang of it, then decide if you wanna pay to keep going or cancel & do it diy.

youneedabudget.com/the-four-rules/

Vicki Robin co-authored a book called Your Money Or Your Life. It offers a different approach than You Need A Budget. The book was, surprisingly, really engrossing?

She was interviewed on the Bad With Money podcast last year, and it's a good listen.

stitcher.com/podcast/stitch…

The other money-related podcast I sometimes listen to is Millennial Money.

I don't always vibe. Some guests are entitled jerks. But sometimes I learn valuable skills.

The host, Shannah Game, talks a lot about "money mindsets" and how they influence us.

mmoneypodcast.com

As self-employed creatives, our income can fluctuate wildly.

Bookkeeping and forecasting helps you manage that on the business side. Budgeting helps you manage that on the personal side.

Over time, you gain more control over your money mindset, and can make empowered choices.

One strategy that I feel really grateful to be able to employ at this point in my career is paying myself a flat amount every month. The stability and predictability feels amazing.

I recommend it as a long-term goal!

(My personal draw is $3,400/mo CAD at this point, years in.)

It took me a long time to get to a place of financial stability in this career. I'm in year fourteen. Along the way, I've definitely had precarious times.

The final advice: don't quit your day job until the income has been redundant for a while and you've built a cushion.

Some designers don't have another income stream. Some designers are disabled or otherwise unable to pursue additional work beyond design. Fair enough! You figure out how that bit of advice applies or doesn't apply to your situation and your life.

When I say "don't quit your day job until the income has been redundant for a while and you've built a cushion" what I mean is:

It sucks to put yourself in a situation where you have to constantly churn out new releases and can never take breaks or focus on longer-term projects.

My happiest design years weren't ones where I was in a sanctuary of invention. They were ones where I was working cafe jobs, and leaving the house every day, and juggling priorities, but always creating time to design because I loved it.

Midnight has come and gone. I think that's everything I have to share. To recap:

Register your business. Open a bank account. Do bookkeeping.

Know your present and future costs. Plan and forecast accordingly. Track inventory.

Keep a budget. Hone your money mindset over time.

Let me know if this was helpful, or if you've got any questions about any of the stuff I said here!

This response thread is a great look at what it means to know your costs and factor them into how you operate your business. @JenKatWrites details a thorough process for mapping out print run costs and potential returns, in order to inform print choices.

https://twitter.com/JenKatWrites/status/1281925988503425024

A potential pitfall for publishers is running a Kickstarter that brings in lots of money in one year, but doesn't actually incur expenses until the next year, and thus gets hit hard by taxes.

@DanTheCPA talks about how this can be managed for US folks.

https://twitter.com/DanTheCPA/status/1281916813635473408

That situation happened to me with Monsterhearts! Got a big KS payout in late November, didn't pay any of the expenses until the next year. Got floored by taxes.

There are different strategies for avoiding this situation! It's one I'd advise seeking professional wisdom on.

Me? I just resolved to never again run a Kickstarter that would stretch so awkwardly across two tax years. If I run a kickstarter in Year X, I'm going to make sure my roadmap includes paying the bulk of related expenses well within the bounds of Year X.

Keeping it simple!