Forming a company is actually really easy. You just have to fill out some paperwork with the government, pay a registration fee of something like $250, and off you go! You could form an LLC to sell lemonade on the side of the road, if you wanted to.
Running a company on the other hand, is a pain in the ass. Forget about games for a minute and just think about a company in the "acme widget" business. What does the company do? They sell acme widgets to people. How do you tell if the company works? Their income exceeds their expenses, year over year. How do they get income? They sell acme widgets to people who want to buy them. So, the task for the company is to produce acme widgets and get them in front of people and make them want to buy the acme widget for a price which is higher than the total cost it took to get the widget in front of the purchaser. That's a dense sentence, so let's unpack it a bit. First, you have to worry about manufacturing your acme widgets at a factory. You have to worry about the total cost of production at the factory. Let's say you operate on a large volume basis and your manufacturer can produce one acme widget for $0.10. Now, you need to get that widget into a place where people can buy it, such as a store. You have to physically ship that acme widget to a retail store and they have to stock it on a shelf. The cost of shipping is your logistical cost, added onto your production cost. Let's say this adds an additional $0.05/widget. You sell the acme widget to a retailer with a significant markup from the raw cost of production, so you sell it to them at $9.75/widget. The retailer will then mark up their wholesale cost by 300% or so, and sell it at around $29.95 + tax. But, simply getting your acme widgets onto a store shelf isn't enough. Nobody knows what they are, why they need it, or where to buy it. So, you have to spend lots of money doing marketing and advertising across multiple media channels so that the average joe knows what an acme widget is and what it's for. Avg Joe may not leap out of his recliner to run to the store to buy an acme widget, but maybe the next time he's in the store and he sees one on the shelf, he'll pick one up. He goes to the checkout stand, opens his wallet, swipes a credit card for a transaction, and walks out the store with an acme widget. The retailer, wholesaler, and manufacturer get paid a portion of the final transaction cost. Now, multiply the Avg Joe by 5 million, and you start to see some significant profits, provided you did everything correctly.
This is a perfect scenario, but there are a LOT of risks here. What happens if the product is faulty and you paid for 100,000 units? What happens if you can't find a retailer willing to sell your product? What happens if you don't do any marketing or advertising? What happens if you miscalculate the actual costs of production? What happens if you get sued for one reason or another? What happens if the products sit on the store shelves and never sell, and then the retailer sends it back to you? What happens if you took out a loan to fund the production and shipping costs but you didn't make a profit to cover the principle? You can't do all of this on your own, so you'll need employees and partners. What happens if an employee isn't productive? What happens if a partner fundamentally disagrees with the direction of your company or your decisions? What happens if another company finds a way to produce a competing product for less and they undercut your product offering?
Running a game company is even harder. Traditionally, the model was very similar to an acme widget because a company would ship out physical discs to retail outlets. However, the hardest part about making games is that you have to pay the total cost of production up front before you can sell any units. A game can cost you 3 years to produce and take a staff of 10 people, each who need to get paid every pay period, and you don't make any income until the product is finished. That's three years of surviving without income, but shouldering costs. What happens if you budget your finances so that you run dry on the last day of the third year, but you find out you need another six months? What happens if you produce your acme game and release it, but nobody buys it or likes it? What kinds of actions can you take to identify and mitigate risks? The great thing about games is that since its a digital good, you can make infinite copies in an instant and the logistical costs of delivering goods is zero, so you can scale as fast as you can sell. This means that there's a certain point where the number of sales will break even with your initial production costs, and every sale afterwards is profit (a lot of game companies don't break even).
Anyways, if these kinds of things get you excited, start a business. If you don't want to think about any of these kinds of problems, work for someone else who does.
