Monday, May 28, 2012

The Frugal Indie

Today I want to talk a bit about cost-cutting tips for indies.

One of the major advantages indie game developers have over traditional studios is our reduced overhead costs. When working at a studio, each employee costs more than their salary. This cost includes not only salary, bonus, and taxes, but also a portion of the total cost of the company's insurance, office space, security, and a range of support staff including HR, IT, reception, accounting, management, and many others. An oft-quoted figure is that employees cost roughly double their salary in "fully loaded cost", or FLC.

For indies, that overhead is much lower: often zero. My salary pays for my office (home rent), taxes, insurance, and support staff (I am my own accounting, HR, management, and desktop support). As a result, my work as an indie can be as low as half the cost of an equivalent amount of work at a studio.

Why is that important? That low FLC is part of the reason I became an indie. Operating cheaply means I can try game design ideas that I find interesting even if they are risky, since I need to earn less revenue to stay fully funded. That means I can stay afloat with fewer copies sold, lower price, longer development time, or any combination of the three. And the cheaper I operate, the more I can play with development timeline, game design risk, and pricing/distribution models.

Tips for Operating Cheaply

So what are some of these tips?

Before I get into the list, there's one thing I'd recommend doing first. A long time ago, I spoke about indie development and money. One of the most important things an indie can do is to understand their costs. If you don't know where your money is going, you can't plan effectively. In fact, it's arguably impossible to cut costs if you don't already know what you're spending. How else would you know whether a cost-cutting measure works, if you don't have a baseline against which to compare? Having a clear financial picture is an essential first step to cutting costs of operation.

Once those costs are understood, you can begin to examine where you're spending money each month. What costs are necessary, and which can be reduced or eliminated? Everyone will have different priorities and needs, so I can't prescribe a one-size-fits-all recommendation. However, I can share some of the tricks I've used, and perhaps inspire others to think of ways that fit their financial situation.

Okay. Without further adieu, the list of cost-cutting tricks:


  • Reduce debt - If you have debt, aim to reduce it. Not all situations allow for this, but if you can, minimize or eliminate your debt. Interest on debt is a cost, and it's money you could be putting towards other things.

    There are exceptions, of course. One's mortgage is a huge debt, but is one of necessity for many. It'd also be impossible to reduce quickly. That's fine. It's the frivolous debt that should be viewed with prejudice. Things like credit card interest on designer sunglasses, or a vacation and bar tab in Cabo San Lucas. Those are luxury purchases, and the interest on their debt is part of their cost. If you're reading an article about cost-cutting for indies (and you are!), you probably can't afford this interest (nor the sunglasses and vacation themselves).
  • Lower Your Rent/Mortgage - Only rent or buy what you need and can afford. You can save money on housing if you're willing to make some changes. Here are some ideas:
    • The Boonies - You can often find some really great deals if you're willing to leave major urban centers. As indies, we have less of a need to be right in the action of a major city, since we can do most of our work from any place with a broadband connection. Living even a short distance away from a city can save hundreds of dollars per month in rent. It's not for everyone, particularly if you have a family with school or job needs, or lack transportation. However, giving up the downtown apartment is a surefire way to save some serious cash.
    • Downsize Your Life - Smaller places are cheaper than bigger places, all other things being equal. That's not only true of rent, but also maintenance costs, such as heating, cleaning, furnishing, lighting, etc. Find ways to live in as small a space as you're comfortable doing. In our case, moving cross-country twice in as many years forced us to donate and/or sell a huge amount of crap we had accumulated over our lives. We probably removed almost half of our belongings in the process, allowing us to fit into smaller apartments, and to avoid renting costly self-storage facilities. (It also saved on moving transportation costs!)
  • Cook More, Eat Out Less - For a while when I was employed, I ate lunch at restaurants every workday. With each meal costing between $6-15, that means I was spending almost $2500 per year on workday lunches alone. By making my own lunch, I was able to eat for about $3-5 per day. That's a savings of over $30 per week, adding up to over $1700 per year, just from home-cooking my lunches (assuming 235 workdays per year).

    Plus, cooking one's own food can often be healthier. This depends a lot on the person and the cuisine, but it's not hard to imagine how saving a trip to the doctor's office or ER saves you money.
  • Transportation - Do you drive? Do you need to? Owning and operating a vehicle is a huge cost. Between the purchase of the vehicle, fuel, maintenance, parking, and insurance, vehicles represent a major outflow of money. Seriously consider how much vehicle you need, or even if you need one at all.

    Rochelle and I decided to sell one of our cars, and the savings has been tremendous. Since I work from home, we really only need one car anyway (we live 34km from her school). Hers was better on fuel, and cheaper to maintain and insure, so we sold mine. This has saved us several thousand dollars per year.

    If you're lucky enough to live near public transportation (we don't), consider using that instead. It's cheaper, plus, some places allow you to deduct public transit costs from your taxes. More savings!
  • Haircuts - How much do you spend on haircuts each year? I've lived in a wide range of places, and I think the cheapest haircut I've paid for was $10, plus tip. That was a tiny shop in the subway tunnels under 8th Ave in Manhattan. Most salons will charge at least $15-20 plus tip for a men's cut.

    Want a cheaper cut? Do it yourself. I spent $30 on an electric razor with an assortment of guard lengths, and I just buzz-cut my hair every month. Haircuts are free now. Saves us $150-200 per year. Other alternatives? Don't cut your hair. Or go to a haircutting school and let the students practice on you.
  • Shaving - Shaving cartridges can be pricey. At one time, a 10 cartridge refill was costing me $20. When I took a step back and thought about it, that was pretty ridiculous. Rochelle's dad gave me his old butterfly safety razor, and I now use double-edge razors: $3-5 for a pack of 10 razors. They last longer too.
  • Change Your Shopping Behavior - Spend less time browsing in stores. Don't tempt yourself by looking at things you don't need. Just go in, get what you need, and leave. You can't be tempted to impulse buy something you don't know about. Which reminds me:
  • Don't Impulse Buy - Don't buy anything you didn't already research and plan on buying. If you see something you need, great. Make note of it, go home, and start researching it. Compare it with competitors. Read reviews. Price it out at a few local stores and online. Sleep on it. Do you still need it after all that, or do you just want it? If it's a necessity, go to the store with the best value, armed with your research, and make an informed purchase. If it's not, put it on your wishlist for when you have money to waste on something.
  • Grocery Pricing - Groceries are a monumental cost, often second only to rent/mortgage. It's easy to underestimate how much money one spends on food each month. Ever checked the weekly circulars grocery stores put out? If you're willing to visit two or more stores, or adjust your buying schedule to work with sales, you can save a ton of money on your grocery bill. We're talking 20-30% savings. Potentially hundreds of dollars per month, depending on how many mouths to feed. It's worth it.
  • Beer - If you're like me, you enjoy a frosty beverage from time to time. Also if you're like me, you can enjoy it on the back porch, living room, or yard just as much as in a bar. Maybe more. So do so. On average, a bottle of beer in a bar is roughly 200-400% of the equivalent you take home from the store. Better yet, invite some indie friends over to drink and talk shop. Now your beer is both cheaper and enriching your business.
  • Kill Your Phone - Technology has made reaching out to others phenomenally easy. Email, Twitter, Facebook, Skype, and a host of other services make keeping in touch an easy and free prospect. Unfortunately, phone carriers are trying to hide that fact as much as possible, and charge you accordingly.

    Ditch them. As much as humanly possible, dissociate yourself from the racket that is voice carriers. We don't have a landline. For outgoing calls, we use Google Voice through our computers. Calls to anywhere in North America are free, at least in 2012. Compare that to $25+ per month for a local phone plan w/voice mail, plus per-minute fees to call long distance.

    Unfortunately, we cannot receive calls via Google Voice. So we invested in 2 prepaid cellphones. This way, we have a phone number people can reach, and we can coordinate with each other when Rochelle is in town and I'm at home. We bought text-friendly handsets for $60 apiece, and $100 worth of prepaid minutes on each (in our region, $100 prepaid refills have the longest expiration period: 12 months). Provided we don't overuse our minutes, that works out to $13.33 per month per phone the first year, and $8.33 per month per phone every year after. Still cheaper than a single local phone plan through Telus.
  • No Cable TV - How much do you spend on cable TV each month? $30? $50? More? Assuming you have a TV package that costs, let's say, $40/month, that works out to almost $500 per year. Is it worth it? What percentage of the programming would you say you actually view?

    Try an experiment. Hook up your computer (you're an indie dev, you have a computer) to your TV. Or if you prefer, just use your computer normally. Try ignoring cable TV for a month, and instead rely on internet programming. I mean legit internet programming (pirated TV and torrents are a whole other discussion). You might be surprised at what you can find online, free, and legally.
    • Most major networks have current full episodes online, free for you to watch. ABC, CTV, NBC, you name it.
    • TED.com has a seemingly endless series of inspiring and interesting talks on a wide range of topics.
    • Watch the Daily Show each weekday, as long as you're ok with a 24-hour delay. Even in Canada.
    • YouTube now has full movies online. Free.
    • Catch a course at MIT.
    • And none of this even scratches the surface of paid subscription and on-demand services like Netflix and YouTube.
    • So why are you paying the cable company for video content? Especially if a huge portion of it is commercials and crap programming? With the money you save in your first cable-free year, you could buy a dedicated computer for your TV setup, and have spent the year watching what you want, not what cable TV execs want you to watch.
  • Recycle - Got a bottle depot near your town? We do, and we live in the mountains. It's 30 minutes away, but we drop bottles off there once a month on one of our weekly grocery runs. A month-worth of household recycled bottle deposits comes to about $5. All you have to do is keep them someplace, and when it comes time to drop them off, sort the bottles and cans. There's a reason you see folks raiding garbage bags on the sidewalks for bottles and cans.
  • BBQ - As soon as it's above freezing in Canada, it's BBQ season. While that may sound crazy to our southern neighbors, it can also be a great way to save money. 15 minutes heating a small BBQ or hibachi is way cheaper than an equivalent 15 minutes heating a full oven. Especially an electric oven.
Is that all? Definitely not. One could save even more, from trimming vacation costs, to choosing the right banking plans. And none of this really explores the topic of business expenses (website hosting, incorporation fees, accounting fees, etc.)

Think of it this way: every single service you pay for has been carefully engineered to gouge as much money out of you as possible without turning your stomach in disgust. Teams of marketing and engineering experts have been trained on this problem for decades (centuries in some businesses). So every single thing you spend money on is worth at least a cursory examination on your part for an opportunity for cost-cutting somewhere. Some are low-hanging fruit (like those I list above), others are a tougher nut to crack.

Whatever the case, chances are, you have room to save money. And money saved means you can operate cheaper, which translates into more freedom for you to make what you want and do what you love.

Got some tips of your own? Feel free to add them in the comments! I'm always up for learning a new trick, and maybe it'll save readers some money, including me!

7 comments:

  1. Another good shaving savings option is Dollar Shave Club. http://www.dollarshaveclub.com

    ReplyDelete
  2. Huh, interesting. The price per blade looks cheaper than at a store, depending on the S&H charges. I hardly use blades fast enough, though. Looks good for daily shavers!

    ReplyDelete
  3. Most of the stuff I can get behind as a lifestyle choice, but are we spending more time penny pinching and losing out on opportunity?

    There's a wee bit of argument going on for whether a startup found (close enough to indie) should be valuing their time at $1000-2000/hr.

    http://blog.asmartbear.com/value-time.html

    You're probably in a different situation since you've already got something shipped.

    ReplyDelete
  4. Good point. It's always smart to take a step back and look at the whole picture. Spending hours pinching pennies is not a productive way to make money, when those hours could be earning dollars.

    In my case, the above penny-pinching probably amounts to hours of effort, but buys me months of additional development time. Switching to home-cooked lunches saved me $1700, for less than an hour's worth of investigation.

    What's more, those are "right now" dollars, slowing the rate of burn on my savings. Much better than "maybe future" dollars. $1000/hr realized in 2013 doesn't pay my rent in 2012 :)

    ReplyDelete
  5. Not paying for cable was one of the better things I did. If you live in a major centre, you likely get HD over the air now anyway. But I have watched some pretty low-res sporting events on some pretty annoying sites.

    There's an argument to be made for living in a place where you don't need a car as well, which goes a bit against the living in the boonies argument. I pay $72/month on a metro pass (when I'm not in Africa), and I was pretty close to that in gas alone when I had my RX-8.

    And to help with the consumerist urges, I recommend "The Century of the Self", also free. http://topdocumentaryfilms.com/the-century-of-the-self/

    ReplyDelete
  6. On an unrelated note, anybody want to buy an RX-8? :)

    ReplyDelete
  7. Cool! Rochelle and I are always in the market for a thought-provoking documentary.

    And yes, lack of need for a car can offset the cost of living in a city. Cars are a huge money sink, any way you look at them. Weighing those options is a bit complex, though.

    In our case, living in the boonies probably doesn't save us the cost of owning a car. However, it's one of the cheapest places we found, while one of the most well-appointed. I'm not sure we'd have given up the car even if we found this place, at this price, in Nelson. Seattle, maybe, but Nelson's a bit cramped not to be able to escape readily :)

    ReplyDelete