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Do You Really Have To Charge 5× Your Manufacturing Cost?

The common advice in the board game industry is that the MSRP of a game must be five times its cost. Is that really true? Yes, yes it is. Here’s why.

If you have been around the publishing side of the board game industry for any time at all, you’ve probably heard that a game’s MSRP should be five times (5×) its cost. Yes, five times! I heard this when I first started, but I couldn’t really understand how that could be necessary. (“I’m not making board games to get rich or anything!”) I still hear from many Kickstarter project creators who question this multiplier, but I finally have a good enough understanding of all the numbers to explain it. Here’s how I would state the advice:

If you plan to sell your game through distribution and if you hope to sell out of your first printing and do a second one, your MSRP must be at least 5× your total landed costs.

The best way for me to communicate this is to walk you through a simple example. Imagine the following:

  • You have a complete board game designed and tested with all the artwork and graphic design finished and paid for. You are ready to print your game and sell it through distribution.
  • It will cost you $6 each to manufacture 2,000 copies (that’s $12,000 total) and another $4,000 (that’s $2 each) to freight them (and get them through customs) to you.
  • You borrow $16,000 from a rich relative (interest free!) to spend on the first printing.

[I’ll write about direct sales, pre-production costs, and Kickstarter shortly. But to understand the 5× number, you really need to understand the cash flow and profit associated with selling through distribution.]

Your total cost is $16,000 to get the games to you. That’s $8 for each game. This is often called your total landed cost: it is the total cost to “land” the game in your warehouse — or garage, Amazon Fulfillment, or wherever you’ll store them. You follow the 5× number and set your MSRP at $40. It is important to remember that it should be 5× your total landed cost, not just your manufacturing cost. You spend your $16,000 and (after several months) receive 2,000 copies of the game into your warehouse. If you were to track your cash flow as a line chart, it would look something like this:

Cash Flow At 5× — A: 1st printing ordered and arrives at warehouse.
Cash Flow At 5× — A: 1st printing ordered and arrives at warehouse (2,000 total units printed)

If things go well, distributors will buy the games from you. They will pay roughly $16 for each copy (60% off MSRP), and you will have to pay to ship the games to them. (They will be buying a large quantity, so it won’t cost too much per copy. Let’s say roughly $1 a copy.) In the first few months, let’s say you a little more than half your inventory. You receive just over $16,000 from distributors, and you spend $1,000 shipping the games to them. Your cash flow looks like this:

Cash Flow At 5× — B: Money spent on 1st printing recouped (1,033 units sold).
Cash Flow At 5× — B: Money spent on 1st printing recouped (1,067 total units sold)
— Note: These graphs show a steady rate of sales. However, sales are rarely steady. I’ve heard most games sell the majority of what they’ll ever sell in the first three months.

You have now recouped all of your rich relative’s initial $16,000. Note this carefully: if your MSRP is 5× your total landed costs, you have to sell more than half of your inventory just to recoup the cost of it.

In the next few months, let’s say you sell the rest of your inventory. You receive another $16,000 from distributors, and you spend another $1000 shipping the games to them. You have now recouped your initial $16,000 and made another $14,000, which is great! If it took you less than a year from placing the order to selling through that first printing, you’ll be happy.

Cash Flow At 5× — C: 1st printing sold out ($15,000 profit)
Cash Flow At 5× — C: 1st printing sold out ($14,000 profit)

But note this carefully: you still haven’t made enough profit to pay for a second printing on your own! Even if your MSRP is 5× your total landed cost, all the profits from your first printing will go towards your second printing. You have sold 2,000 copies, but you still don’t have quite enough money to pay for a second printing and pay your rich relative back. (After making some sales from the second printing, you’ll be able to do that.)

D: 2nd printing ordered. E: Break even.
Cash Flow At 5×
— D: 2nd printing ordered (4,000 total units printed)
— E: Target: Break even point with $16,000 in profit (2,286 total units sold)

Once you sell 2,286 copies, you will then have enough money to pay your rich relative back and you’ll have made enough profit (on paper) that you’ll be able to afford to pay for a third printing when this second one sells out.

Direct sales, preorders, and Kickstarter campaigns certainly change some of the things about this graph for your first printing. But if you want to sell through distribution and hope to sell out and do a reprint, it doesn’t change the 5× number. I’ll examine the cash flow associated with a Kickstarter campaign and a first printing in my next post, but it’s important to remember that (even after a Kickstarter campaign) this graph applies to your second printing and all subsequent printings. If you have set your MSRP at 5× your total landed costs, then these will be true:

  • You’ll spend $X for the printing.
  • You’ll have to sell roughly half to break even.
  • If you sell out, you will nearly double your money to $2X.
Cash Flow At 5× — Each printing can just about double your investment
Cash Flow At 5× — Each printing can almost double your investment

Going back to the example, let’s suppose you instead set your MSRP at $25. That’s 4.16× your manufacturing costs (instead of 5× your landed cost). You’ll still spend $16,000 to land the games in your warehouse, but distributors will only pay you $10 each for the games. Your cash flow graph would look like this:

Cash flow chart
Cash Flow At Less Than 5×
— A: 1st printing ordered and arrives at warehouse (2,000 units printed)
— B: Money spent on 1st printing recouped (1,778 units sold)
— C: 1st printing sold out ($2,000 profit)
— D: 2nd printing ordered (4,000 total units printed)

If you only charged 4.16× your manufacturing costs, you would have to sell 1,778 copies (84% of your printing!) just to make back your money. If you completely sold out, you would only make $2,000 in profit. You would not have made anywhere near enough money to pay back your rich relative and pay for second printing.

In fact, it would take eight printings before you’d be able to pay back your relative the initial $16,000 they loaned you and be able to afford a future printing on your own:

Cash Flow At Less Than 5× -- E: Break even point (10,667 total units sold)
Cash Flow At Less Than 5×
— E: Target: Break even point with $16,000 in profit (16,000 total copies sold)

(From what I hear, very few games will sell 16,000 total copies.)

If you plan to sell your game through distribution and if you hope to sell out of your first printing and do a second one, your MSRP must be at least 5× your total landed costs.

I hear from many Kickstarter project creators who question this 5× multiplier, and many of them plan to sell games into distribution with an MSRP that is significantly less than five times the total landed costs. If you find yourself in this situation, I would strongly recommend you do one or more of these things:

  • Increase your MSRP
  • Find ways to lower your costs
  • Plan not to sell through distribution

Each of these options could warrant a full post, but in the next post I want to examine how a Kickstarter campaign changes this cash flow graph. The second post is now live:

→ Do You Have To Charge 5× Your Landed Costs On Kickstarter?

I’d love to hear from you about your experience. Have you successfully released a product into distribution? Are you planning a product release or a Kickstarter campaign right now? How do these numbers line up with your experience?

This Post Has 76 Comments

  1. Randy, this has been an extremely helpful article. I have been hemming and hawing on the MSRP of Sans Allies, and much of what you are describing above was absolutely our experience with Parenthood. On that one we were only about 2x production, and that didn’t even count the shipping costs. We got stung pretty badly on that one in order to make sure our backers got what they deserved. I am certainly much more savvy to these things now, and I really want to thank you for putting that very clear 5x number out there. That’s exactly what I was needing.

    Follow-up question: we’re considering whether or not the KS pledge amount to receive a copy should be less than the ultimate MSRP, as an incentive to back the game rather than waiting for retail. Would you say that this could be less than 5x? Maybe 4x? I presume, based on the formula, the answer would be no, and maybe KS should be 5x with retail 6x or more (assuming this is still a reasonable price), but I’d like to hear your thoughts on that, too.

    Thanks again, Randy! Enlightening as always!

    1. I’ll explore that in detail in the next post in this series, but you don’t *have* to charge 5× on direct sales to be profitable. Direct sales are more profitable, and you can pass that along to backers. For World’s Fair 1893, I gave backers a 25% discount. The numbers are just so different between backers and distributors:

      * A distributor buys the game for 40% of MSRP ($16 in this example), and it’s really cheap to ship it to them per copy (since they buy bulk; I assumed 50¢ for this example). I make $15.50 for each copy: $8 to cover the landed cost and $7.50 in profit.
      * Let’s say a backer buys the game for 75% of MSRP ($30 in this example). After KS fees, I get $27. That’s more money coming in, but it’s also more expensive to ship one copy. Let’s say that’s $10. I make $17 for each copy: $8 to cover the landed cost and $9 in profit.

      In this example, I could offer a 25% discount to backers and still make more profit because it is a direct sale.

      There are two other factors worth mentioning:

      1. I offer a discount on my games to Kickstarter backers because I know they are taking a risk to preorder the game so far in advance. Once the game is available, I do not discount it. I believe in my games, and I believe the MSRP is the fair market value for them. I want people to go to their local game store and buy the game.
      2. There’s some debate about how much you need to discount the game on Kickstarter. You should get more backers at a lower price, but it’s usually not clear just how many more. It often takes a LOT of extra backers to make up for the discount. That deserves a whole post in itself. 🙂

      1. Randy,
        Thank you for this incredible and informative post. As we prepare for the launch of our KS campaign, we plan to have to versions of the game available, a deluxe and a premium. From your experience, do retailers normally prefer the premium version? This information would be helpful in determining MSRP. Thanks!

      2. Or, there is another solution: sell more. 2k copies doesn’t seem that much in the end, especially when you look at how big the market is.

        If everyone is selling their games at 40$ and you price yours at 35$, there is a chance that while you’ll earn less per copy (1.5$ in your example), with more copies sold, you’ll make a bigger profit in the end (and it should be easier to sell cheaper game than the more expensive one – unless we consider board games Veblen goods). You might even lower your production costs more, which could bring the profit up.

        The bad side of this is that you’ll have to invest more at the beginning, but, with luck, it’ll pay off in the end.

        So: 2000 copies for MSRP 40$ ~= 7.5$ profit * 2000 = 15k $
        3000 copies for MSRP 35$ ~= 6$ profit * 3000 = 18k $

  2. Thank you for taking the time to post this analysis Randy. I’m a numbers guy but also a visual guy too, so I found this to be very helpful. I have questioned whether or not the 5x manufacturing cost formula is truly necessary, but this puts it into perspective for those of us who haven’t yet gone through the process and don’t have the experience yet with post-KS distribution and longevity in the business.

    Thanks again for sharing this, you’ve now sold me on why it’s important for MSRP to be 5x manufacturing cost 🙂

  3. Excellent article and exactly why it is SO difficult for independent publishers to survive. To make money and thrive you must attain economies of scale. Kickstarter will get you going, but you will need more than that to thrive.

    Additionally, the 5x decision cannot be made in a vacuum. IF utility < cost, NO ONE WILL BUY IT! So who cares if you followed this general rule, you are sunk. In other words, if you do not find a competitive cost of printing and freight, you will price yourself out of the market.

    It is a hard game we play, this publishing game. Good luck to you Randy and everyone else. I look forward to your continued success!

    1. Thanks, A.J.! You are absolutely correct: you can’t set your price in a vacuum. I hope to write a post about how I’ve gone about determining the MSRP for our three games. When doing a small printing, it’s really hard to get the cost down to 1/5 of what people will pay for it.

      (For many people starting out, I think the best answer may be to skip distribution, make some profit, and start building up the cash reserves and a following to do bigger printings in the future. That’s definitely a post I plan to write soon.)

      1. Great blog post, sorry to be so late to the discussion. You mention “skip distribution” in your comment above this. Do you mean skip the retailers and simply send direct to KS backers?

        1. Kind of. Kickstarter backers get their rewards first. Most people print more copies of their game than they need for their backers. The question then is how to sell those extra copies. Do you sell them into distribution to be sold to retailers? Or do you skip distribution and sell them direct to consumers yourself, usually at conventions or on your own website.

      2. Hey! Thanks for an amazing Article.

        Regarding skipping distributes, we are a new gameboards company in MENA, we are thinking of publishing and selling (having our own ecommerce site) by our selves. We -naively- think this is the best approach to get the most of our investment and can put the cash in again to produce more. especially that we will import other games as well, to have multiple option for our customers. Am i missing something, or my way of thinking is correct?

        I would really love to talk this through with you if you have time.

    2. @جهاد خالد

      Good question! There’s not a single best approach. It’s tough either way, selling directly to customers or selling distributors/retailers, and I’d recommend a really strong plan before you print hundreds or thousands of copies of a game.

      As far as I can tell, the biggest publishers do not primarily sell directly to customers: they instead sell primarily through retailers (usually through distributors). But that doesn’t mean you have to. Tim Fowers runs (what appears to be) a successful publishing company without using distribution: I’d recommend any interviews you can find with him if you are considering that. Here’s one:


  4. Randy, I may have overlooked something in your post during my speed reading session during lunch… yet, I wonder how the cost of shipping rewards out to backers impacts your comments about recouping the landed cost of Mfg.

    1. @Tom,

      Thanks for the comments! You did not miss it; this post is primarily about selling through distribution. In those cases, you won’t be shipping a single copy of the game to a backer or customer. I touched on it a little in a comment above …


      … and I’ll be addressing Kickstarter in the next post. Customers/backers pay a lot more than a distributor for a game, but then you have to spend more shipping it directly to them.

  5. Randy: This is superb. Thanks for taking the time to put together such an excellent explanation of the 5x formula. I’m going to link to it on my post about MSRP, as this is a must-read for any publisher that wants to put their games into distribution.

    1. Jamey: Thanks for linking to this post from your site. It took me a while to get a good understanding of these, and a while longer to figure out a good way to share them with other project creators. I hope a lot of people find it useful!

  6. Great post Randy. I beat this same drum all the time (even to big publishers). The price of games is too low across the board. The challenge is that most publishers are players and we want games that we buy to be cheaper, so we price our games that way.

    Kickstarter does move things around a lot as you mentioned, most noticeably, you can start above that zero line. It has changed the risk/reward dynamic in an amazing way.

    1. @lukepeterschmidt, I didn’t focus at all in this post on what games *ought* to cost, so I appreciate you sharing your comment. (I don’t have too much insight to add to that: as a publisher I would love for people to pay me more, but as a gamer I’m happy with current prices.

      Yes, I’m so grateful to the Kickstarter platform and the tabletop community there. Without that, I certainly wouldn’t have gotten Foxtrot Games off the ground!

  7. Did I miss something or did you completely forget to pay your ARTIST, EDITOR, GRAPHIC DESIGNER, and MANUAL LAYOUT? That’s a least several thousand dollars on the cheap.

    1. @James, Yes, I mentioned in the post that there are other fixed costs that I’ll talk about in the next post. I saved that for a couple reasons:

      * Many of the people who question the 5x number are also handling that themselves. I’d hate for someone to say, “I don’t have to charge 5x because I did my own artwork.”
      * The most important thing I want people to take away from this post is the cash flow and profit associated with a single printing. Because these costs are fixed, upfront costs (and not marginal, per-unit costs), it makes that less clear.

      I hope you’ll check out the next post!

    2. Well said James. Us graphic Designers out there appreciate not being under valued.

      Great post overall though. Excellent explanation. Very easy to understand even for those not savvy with numbers.

    1. I hear mixed reports on this, so I don’t know what’s normal and what’s rare. I have sold well over 2,000+ units of every game I’ve had in distribution. (Though, to be fair, that’s only one game so far. 🙂

  8. And how about distribution? No distributor wants to buy your game unless you have already sold 2000 copies and it is popular. Also, the comment about shipping in KS is true, that it cost more to ship, but supposedly you bill the shipping to the backer, at least this has been the current trend. We use a model of 7 to 10 times the cost to get our MSRP. It would be interesting to see the cost model on an actual game, like Zombicide. Also, in your example you have not made any profit so essentially you have done all the work of shipping the games and running the company, billing the distributor and filing your income tax for free. I agree with James as well, artwork alone for a board game is killer. Your article is well written and does give good warnings if a little abstract.

    1. @Mitchell: Thanks for sharing. 7x-10x total costs is great: well done!

      I apologize for the seeming abstraction: these are very close to the real numbers for my last Kickstarter campaign *World’s Fair 1893* (rounded for simpler math). We’re printing more than 2,000 because of the Kickstarter campaign and other funds we have. But if that campaign had had 1,000 backers and we used only the Kickstarter money for printing, then 2,000 units and these numbers would be very close.

    2. @Mitchell, Oh, and There definitely *is* a chcken/egg problem to get into distribution for us tiny publishers. I didn’t talk about that here, but you are absolutely right. Too many Kickstarter creators wait until after the game is produced to try to figure that out, but it’s often too late. This post is about the underlying mathematical realities of selling through distribution, but getting into distribution is defintiely another challenge!

  9. Good stuff Randy. It resonates very well with our experience at Nauvoo Games. Keep up the great work.

  10. Excellent info, and backed up by a ton of anecdotal experience from the industry and publishers I know.

    I’ve heard from some smaller or first-time publishers where they look for 5.5x or even 6x CPU = MSRP because they are being overly (sometimes justifiably) cautious rather than risk failing to deliver on a Kickstarter campaign or letting quality spiral out of control for the first time they work with printers out of China, etc.

    1. Thanks! It’s very tough to balance those two numbers as a smaller publisher. Unit/freight costs are higher for small printings, and without a strong loyal fan base it can be hard to charge higher prices. We all have to start somewhere, and I’m very grateful for the tabletop community on Kickstarter for helping us get Foxtrot Games off the ground.

  11. G’day,

    Thanks for taking the time to write this up. I think there’s a much shorter way to explain this based on your numbers:

    Of the final retail price:
    – 1/5 goes to manufacturing and shipping
    – 3/5 goes to distributors (because you’re giving a 60% discount)
    – Leaving 1/5 as profit, which is immediately reinvested in the next game.

    1. I think this summary is a great wrap-up; I bet it would work nicely as a pie chart. Thanks! There are probably a lot of ways to explain this: some would be shorter, others longer. I’ve been talking with Kickstarter creators in this situation for awhile, and I have found this simple but detailed example to do the trick more effectively than some other longer or shorter approaches.

  12. Randy, this post has provided the closure I needed regarding the 5x manufacturing ‘claim’ and its validity. Thank you so much for taking the time to put this together, it is such a relief to have something ‘concrete’ for once. =P

    I am completely new to self-publishing and hoping to do so fairly soon (looking to launch a Kickstarter campaign like so many others in March); the local game store owner gave me the 5x as a model but with your detailed post and walkthrough I now understand why.

    Very excited for the rest of the series, especially about discounts and those fixed costs! You’ve re-inspired me to start a blog about what I’ve learned thus far!

  13. Aren’t you counting paying back the $16k twice? You go 16k in debt to do the first printing. When you earn the first 16k (net $0) now you have the 16k cash to give back to the investor. You don’t need to get another 16k.

  14. Haven’t had time to read the comments, but wanted to note. Sometimes with the timing on a KS, you need to set your MSRP before you’ve got a firm grasp on the full landed cost (i.e., shipping might not be a known number by the time you launch, but your unit cost of manufacture should be right there on the quote) — your manufacturer might be able to give you a guesstimate, but that’s ballpark at best until the realities of whatever fluctuations and particulars of shipping at the time the thing’s actually ready to ship set in. That’s why the 5x multiplier is the *minimum* multiplier, when it comes down to it. 🙂

  15. Great article. As a small publisher, Revolution Games, we set MSRP at 4x the total cost of the game. Artwork, production, initial advertising, prototypes, research material, shipping to us, etc. About 60% of our sales are direct to customers and 40% to stores and distributors. We do not use Kickstarter and are self funded which has some real advantages and challenges. We aim to break even on all of our costs at about 35% of the run being sold. Now that sounds like you can make good money on the remaining 65% but you need to sell them and that is not a guarantee. Very easy to end up with lots of unsold games sitting around.

  16. Great article, Randy. I’m always worried by first time publishers that don’t fully consider what it takes to keep making games, as opposed to just making one game.

    Anecdotal accounts I’ve heard, after being in the industry for around a decade, are that the target used to be closer to 10x, especially 20 years ago.

    1. Thanks! I think the multiplier always depends on the base. If we are talking just manufacturing costs, 10× for board games seems good but also doable. If we are talking total costs, though, I have a hard time (with my admittedly limited experience) believing that 10× is even doable. But of course: the larger the multiplier, the better!

  17. I think James Mathe recommends 6x.

    On the brighter side, you don’t have to hit 5x in a Kickstarter (and you shouldn’t, in my opinion) because you’re selling direct to gamers, and your costs are higher than they would be when manufacturing for retailers (because a manufacturing run for retail will be for more units than your KS run — unless your KS goal is REALLY high).

  18. This post got a lot of feedback in a lot of different places. I have changed two things since the original publication based on that feedback:

    • I added the words “at least” in a lot of places. I always intended 5× to be seen as the absolute minimum multiplier; the higher that multiplier is, the more profit you will make on each copy you sell.
    • I changed the cost of shipping games from your warehouse to distributors. Instead of 50¢/copy, I increased that to $1/copy. (This changed the number of printings required in the final diagram from 6 to 8!)
  19. Most excellent article …. Don’t forget the costs of just pure research , if you are doing a historical game … When I work on a project , I usually don’t have the most recent research books and magazine articles on the subject , so , $$$ to research materials …. And , if there are other games at the scale or same topic that you are creating , might need to buy some other folks games to make yours better in some ways , or , at least different/interesting enough folks will shell out money for yet another Bulge/Dday/Stalingrad/Gazala/xxxx game ….. Play test copies also rack up the cost ….

    1. Absolutely! In these examples, I start off assuming the game is designed and developed and ready to manufacture. I’ll talk about artwork and other upfront fixed costs in the next post.

  20. Excellent explation and kudos to you for being generous with your experience, Randy! Much continued success to you and your company. Lanterns was played at our last meetup in Lake Mary.

  21. This article seems to be based on game designers that have NO CASH AT ALL when they start this endeavor.
    If I don’t loan $16k from anyone, or even just reduces the the loan to $10k and spend $6k that I have saved up myself; How does that affect the chart?

    1. Great question! Two thoughts:

      * These charts emphasize cash flow because I’m usually talking with Kickstarter creators who do not have the money on hand. Having the money doesn’t change the charts much, but the $0 line represents something different: “recovering your investment” instead of “running out of money”. Assuming you want to recover your investment, you still want to end up above that $0 line. But you do have more flexibility to dip below it when it makes sense.

      * Most people spend money to get a game ready for Kickstarter. (With Lanterns, we spent about $5,000 before the campaign on artwork and marketing; with World’s Fair 1893, we spent about $10,000.) I’ll talk about those upfront fixed costs in the next post.

  22. Excellent, clear exposition of the issue, Randy.

    There is an extra complication for those of us in EU countries: VAT (Value Added Tax).

    Our equivalent of MSRP – the selling price to the public – must include VAT. In the UK this is 20% (and most other countries are similar), so the quoted selling price (incl VAT) has to be 6 times the cost (ex-VAT – commercial prices are usually quoted without tax).

    And it’s no good thinking that it doesn’t apply if you’re not VAT-registered (there’s a turnover threshold before you’re obliged to register): the distributors and (almost all) the retailers selling your game will be and must therefore charge VAT.

    What’s more, if you’re having the game manufactured outside the EU (China, say), VAT is due on the cost of the games (and the shipping cost!) on import to the EU. (It may be worth registering for VAT, even if you’re below the threshold, so that you can reclaim this cost – though you’ll then have to charge VAT on your sales inside the EU).

    [My credentials? I’m a freelance bookkeeper and, over the last 20 years have run two games distribution companies, both of which only lasted a few years, and have had a ringside seat with a failing games publisher!]

  23. […] Do you want to make a second print run in the future? One consideration is if you want this to be a one-and-done product or if you’re hoping to make multiple print runs. If the latter is true, your calculation must take into account the expense of a second print run. You’ll need to make enough retail units for the sales of those units to allow you to afford a second print run. Randy Hoyt wrote a great article about this. […]

  24. Hi Randy,
    Wonderful article.. Here’s my situation. My game Feudum costs roughly $20/game for 1500; but $15/game for 10,000. Your 5x figure puts my game at an MSRP of $100 at the lower print run. But, my game has no where near the components of a game like “Eclipse” which had an MSRP of $100. Based on comparisons to other games, my game should be around $75/game (which works out, if i print 10,000). What should set my MSRP at during the KS phase of printing?

  25. Hi Randy,

    Thanks for a good article. I’m no businessman really, but a 5x markup doesn’t seem like that much to me. Aren’t many products marked up 10x or much more?

    1. @Gary, Absolutely! This article is written to someone who wants to get started publishing board games, has heard the 5x number, and believes it is outrageously high. This article is meant to show that person why it has to be at least 5x. But (of course) the higher the markup the market will bear, the better it is for the business. Getting 10x in board games isn’t possible unless you are printing in much larger quantities than the intended audience for this article.

    2. Gary,

      It’s all relative to the product you’re dealing with and what the market can sustain. Niche items tend to see a higher profit margin, so do things like vehicles, but grocery stores and items which are carried in big box retailers tend to sell for penny profits. Finished product tends to sell for more than raw product.

      Would you be willing to pay 200 for a copy of ticke to ride? how many could really afford to anyway? Sony doesnt’ make but mush off of there game consoles they only make money from the game sales themselves. Wal-Mart tends to only get a dollar or two off off a game sale, I think its a little more than in recent years, but not by much.

      It’s not to far off too ponder why should a game publisher get sales at such high margins?

      5x or 6x isn’t really that much, but keep in mind that’s the store shelf price not what you’d see into your pockets, cut that in half and then cut that in half again and that’s what the publisher should get before the bills are due.

      To avoid paying taxes you’ve litterly got to make capital investments within 90 days, reality it’s less than 30 days from the time the money arrives and in truth you should have that money spent on paper before it ever arrives. Sitting around for six months and waiting for all the income to drip-drop in isn’t what trickle down economics is all about.

  26. (First of all, I’m not a tax attorney or an accountant. So just keep in mind that none of this is official legal advice.)

    If you are in the United States, then I believe you’ll have to pay sales tax on direct sales to people in your state. In this example, I don’t have any direct sales, so I believe that’s not an issue.

    For income taxes, the details depend on what kind of company you have. But, generally speaking, you only have to pay income taxes on “profits”:

    – I believe sole proprietorship and single-person LLCs pass there profits through as income to the owner on a Schedule C on a cash basis. (At any point below the $0 line, you would have not have any taxes due because your expenses outweigh your revenue.) Until you get permanently above the line (around point E), you would not have made any cash profits; until then, I believe you wouldn’t have any taxes.

    – For partnership LLCs, S-Corps, and C-Corps, I believe you have to pay taxes on revenue even if you spend it all on excess inventory. That certainly makes things more complicated to track, and you may end up owing money sooner.

    I didn’t factor taxes in at this point because the article is about getting to break even (profits of $0) to have the cash to afford a reprint. But if you are aiming for a specific amount of after-tax income, you should definitely keep in mind how much your profits will be taxed.

  27. Hello Randy,
    I’m guessing your are busy producing your Spy Club game at the moment, good luck with that & well done on a successful campaign!
    Just wanted to say a huge thank you for these articles, you have simplified the complexity of the process, even though i know it will be far more complex with global variations & real world issues. Without people like you, I would be even more clueless, much success to you.

  28. While very basic, I agree with the 5x or 6x model but I disagree with the formula. As a business manager, it displeases me that anyone would get an interest free loan.There is nothing wrong with a 2,ooo dollar profit, in fact, I would argue that this is much better. In business taking on more debt keeps your taxes lower. You are not making a 2k profit, you’ve made 18k in sales, the next step should be to find a larger buyer so that you can borrow more money and run a larger printing.

    Let’s assume double the size printing from the first run, This go around you’d only have to borrow about 6k and now you’ve sold 4,000 games and made 10 bucks off each one. You would have 40k and be in debt 24k. At this point you should be able to find even bigger sales out there, you’re game should be getting printed in foreign markets and revenue should start flowing in from other markets.

    Usually, when borrowing from that rich uncle you should be agreeing to pay back in 36 months, but you should also have a clause in there for an extended line of credit. So when you went back and got that extra 6k it extended some of that debt beyond 36 months.

    Lets further assume you owe Rich 24k. But you’ve got 40k setting in your bank account, your one duty as a publisher is to find a larger buyer for that game (not buy a house, or a car or paying the bills, everything goes back into the business at this point, everything) Run another 4,000 copies and sell them at a 10 dollar profit margin. Now you’ve got 56k in the bank and 24k in debts.

    To keep from paying so much taxes you should be going out and buying a warehouse or something and some office space at this point, getting a loan from the bank or Rich to do that with. You should have more debt on the books than cash in hand at this point, you’re still a young company and you need to grow.

    Look at the game wits and wagers, sold a bunch of copies from a young company, they advertise nationally and that’s not cheap, they probably make 6 bucks off that game but they’ve sold over a million copies. It’s that companies brand though. They made the market and that’s what a good businessman does.

  29. Amazing article! I hope that a year later it will still be possible to receive feedback in the comments. I have come here looking for information on how to break down the price of a board game. I am a Spanish editor and there is not much information in my language about how to calculate the MSRP (PVP in Spain) correctly.

    I understand the 5x rule once you have the final landing cost. What i know until here is that the multiplier comes from 5 different sides: manufacturing, author, distributor, store and taxes. 5 pieces of the puzzle.

    Where do the taxes come from? From the final price or the sale price to the distributor? Is the percentage of the author deducted from the sale price to distribution with or without taxes?

    Is this example correct?

    Landing cost of the game x5 for the future MSRP. (PVP in Spain).

    So, if my MSRP is 24,95 € i have to subtract the VAT (IVA in spain) that is 5,23€ = 19,72 € (first multiplier)
    Now, subtract the distributor + retail discount (50% in Spain) that is 9,86 = 9,86 € (second and third multiplier)
    Subtract, from the distributor price, the 8% of the author that is 0,78 = 9,08 € (fourth multiplier)

    If the landing cost of a game is 5, the profit per game is 9,08 – 5 = 4,08 € profit. (fifth multiplier)

    I hope I have explained myself well and apologize for my grammatical errors. Thank you so much 🙂

    1. @Delirium G –

      I’m glad you found the article helpful! I didn’t talk about taxes for two main reasons.

      * Everyone should talk to accountants about taxes for their own region. I’m not qualified to give tax advice in my own region, and I know very little about taxation in other regions.
      * This article focused on pricing your products to sell to a distributor with at least enough to keep a positive cash flow (with zero profit) in between your first and second print run. In my region with my company’s structure and partnership, (I believe) I would have no tax liability in that specific case.

      The overarching goal of this 5x formula is that you make enough profit when you sell through one print run to be able to have the cash on hand to afford to pay for a second print run. You’ll want to factor in your taxes wherever it makes sense to make sure that’s the case.

      I hope that helps!

  30. Thank you very much for your answer!! 🙂

    I’m going to bother you with another question but it’s really something I can not figure out. I have read in several websites and blogs that to calculate the landing cost of a game must include not only the costs of manufacturing and shipping but also illustrations and graphic design. But I’ve also read the opposite, that there are publishers that only include manufacturing and shipping from the factory. The difference is very important to know what is the most optimal and usual. Why do some decide to include them and others do not?

    Many thanks for your time.

  31. I really like this post and advice, As a manufacturer I actually get to talk about this point with numerous creators and they don’t believe me when I tell them they got to lower manufacturing and shipping prices to /5 of the retail cost. Excellent post, if its ok, I would love to link this post or other posts to my site 🙂

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