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  #1  
Old 07-02-2013, 04:40 AM
CharredDirt CharredDirt is offline
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Location: Bangkok, Thailand
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Default Need veteran business advice. Help please!

I'm looking for advice on a new contract I picked up.

Quick Background:
My Company, Hydraulic Games is a small startup iOS game studio in Thailand. 70% of the time, we do graphics and game reskins for other companies. 30% internal product development. I'm an artist, I have two other artists and a part time programmer.

I recently was contacted by a nice guy from India who's doing reskins of his own game code for customers. He has a nice steady supply of work. Because he's outsourcing to me, I have to charge about 60% of my normal rate. That makes my profit margins pretty thin but at the same time, I value the constant work. Sometimes my employees are idle and that's not good. At the same time, I'm worried that overloading my small staff with cheap work could backfire in the long run. Less time for new customers and internal projects.

What would you guys do? Any wisdom you would like to impart on me would be greatly received.
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  #2  
Old 07-02-2013, 07:14 AM
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nvx nvx is offline
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Location: UK
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As long as you prioritize the projects correctly, there shouldn't be any problems?

Because you are offering your client in India a chunky discount, you should give higher priority to your projects or work from new clients, meaning no disrespect or loss of trust to your friend in India, just a means of doing good business.

I am not a veteran, nor the best person to give you advice regarding your specific circumstances.
But if nobody else will reply to you then perhaps my opinion may be worth more than the usual 2cents

Good luck
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  #3  
Old 07-02-2013, 09:12 AM
CharredDirt CharredDirt is offline
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Quote:
Originally Posted by nvx View Post
As long as you prioritize the projects correctly, there shouldn't be any problems?

Because you are offering your client in India a chunky discount, you should give higher priority to your projects or work from new clients, meaning no disrespect or loss of trust to your friend in India, just a means of doing good business.

I am not a veteran, nor the best person to give you advice regarding your specific circumstances.
But if nobody else will reply to you then perhaps my opinion may be worth more than the usual 2cents

Good luck
Hey, I appreciate you taking time to comment. My head is telling me that this makes sense on paper but my gut doesn't like it for some reason. It's open ended work so I suppose I can try it out for a bit and stop if it's too much. The guy wants me to turn out a full game every week minimum. I'm not sure how much I can delay for the sake of other clients.

My other issue, is I had my employee paint a really good parallax 3 layered background for him the other day. It was super cheap because i'm trying to build a relationship. His client had something else in mind and I had to spend another 3 hours repainting parts of it. The corrections I had to make completely wiped out any profit in the project. When you're dealing with very low margins, any bumps in the project can kill your profits.
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  #4  
Old 07-02-2013, 11:30 AM
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Blackharon Blackharon is offline
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Quote:
Originally Posted by CharredDirt View Post
Hey, I appreciate you taking time to comment. My head is telling me that this makes sense on paper but my gut doesn't like it for some reason. It's open ended work so I suppose I can try it out for a bit and stop if it's too much. The guy wants me to turn out a full game every week minimum. I'm not sure how much I can delay for the sake of other clients.

My other issue, is I had my employee paint a really good parallax 3 layered background for him the other day. It was super cheap because i'm trying to build a relationship. His client had something else in mind and I had to spend another 3 hours repainting parts of it. The corrections I had to make completely wiped out any profit in the project. When you're dealing with very low margins, any bumps in the project can kill your profits.
Ideally you'd charge a separate charge for edits based on taste/opinion. With margins as low as you're describing you can't afford not to.
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  #5  
Old 07-03-2013, 08:00 PM
Sheinfell Sheinfell is offline
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I am not a game developer, but piping in anyways
With a 40% discount, your Indian friend should
a) commit longtime beforehand (2-3 years)
and, like Blackharon and nvx said
b) expect lower priority for his stuff
c) pay extra for extra work

And you should nail all that down in a waterproof contract.
Things like "can you change this" can kill you if you do it for free all the time.
Ideally, with his money you could hire someone to do his work, and still make a bit of profit; leaving your core team free for your own work.

I don't want to disclose much here (PM if you want some more info), but with my company you get nothing for free. You pay a yearly maintenance fee, which serves to cover our expenses.

And a question: Why do you have to charge only 60%? Is the work he gives you really worth such a huge discount? From what I've seen, I'd give you 10-30%, depening on the exact circumstances; which would involve longterm commit and sometimes even payment well in advance.
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  #6  
Old 07-04-2013, 01:38 AM
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PikPok PikPok is offline
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Quote:
Originally Posted by CharredDirt View Post
That makes my profit margins pretty thin but at the same time, I value the constant work.
This seems to be the key part of your post. If you are making hardly any profit on the work this individual is providing you, then where is the value in the constant work?

If all constant low value work is doing is helping you tread water and not move the company forward, then it is not work you should be doing. Indeed, it is potentially dangerous to do such work because if the rug gets pulled out from under you and it is cut off or a payment doesn't come through, then your business is potentially at risk.

You should be trying to trade out clients with low profit margins for clients with higher profit margins, if on average they are going to help you generate more total profits over time which will create a safety net and a warchest from which you can invest in more original IP.

Never burn bridges though, because you never know when you might need to go back to a old client fishing for work if you find yourself in a bind.
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  #7  
Old 07-07-2013, 10:25 AM
CharredDirt CharredDirt is offline
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You guys bring up some good points that echo my concerns about maxing my staff out with cheap labor.

I do think that If I move forward with this, I need an agreement that's in my best interest. At my normal rate, I always stand behind my work and make sure the customer is happy. I can afford to do that.

This is the first time that I'm dealing with a middleman. Normally, I'm able to avoid loads of corrections normally by having customers approve sketches and proofs at different stages. The middleman really slows this down or makes it impossible.

This is very good info to chew on. The last time I ignored my gut instinct, it blew up in my face. Maybe this is worth rethinking about.


Sheinfell, at 60%, I'm still profitable as long as I have my employees doing the work. At least on paper, In real life, things often don't work out as optimally as I'd like. I could really use the steady contract work. It's all the same game so I'm sure once we get used to doing them, we should be able to crank them out. If we get faster, we get more profitable since it's per project not per hour. That's the other thing I'm considering. I've got ads up, hopefully I'll land some better work.
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  #8  
Old 07-07-2013, 10:34 AM
Sheinfell Sheinfell is offline
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Yeah, that is the problem with getting paid per project. That can really backfire if your client comes around with "can't you just..." all the time.
Which is why all good project contracts I saw had very specific clauses about that, to avoid "work creep" without getting paid for it.

Whatever way it turns out, wish you best of luck, and that you make the right decisions.
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  #9  
Old 07-08-2013, 05:33 AM
CharredDirt CharredDirt is offline
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Just curious, do you have any idea how such a clause would go?
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  #10  
Old 07-08-2013, 12:38 PM
Sheinfell Sheinfell is offline
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Quote:
Originally Posted by CharredDirt View Post
Just curious, do you have any idea how such a clause would go?
Not in detail. And I have no idea how to phrase things in proper Legalese, you will need a specialised lawyer for that; a normal one won't do for anything more than the most basic stuff (e.g. im Germany you have several different kinds of contracts, each with its own specialties and potential pitfalls).

In general, you have a scope document, and anything that goes beyond that (maybe after some specified leeway, to keep good customer relations) they need to pay extra for.
Do you have any experience in project management, e.g. on how to create scope documents/contracts?
At least one contract I saw (big one, admitted) had several pages dealing with what was specifically covered (as clarifications to, say, points 14 to 186 of the scope part), and what was outside scope and needed to be paid extra.

Your earlier example
"created a good parallax 3 layered background for him the other day. It was super cheap because i'm trying to build a relationship. His client had something else in mind and I had to spend another 3 hours repainting parts of it."

immediately makes me ask:
"What is in the scope/contract"?

If they specified that, and then changed their mind: tough luck, cough up more money. Then it is up to you if you want to give them leeway or not.
However, if the scope only said "we want a cool-looking background" and then you just did what you thought is right: bad times for you, as you have to rely on their goodwill to pay you more for the extra work.

Last edited by Sheinfell; 07-08-2013 at 01:54 PM..
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