Disclaimer: This article and template are created for educational purposes. At Narwhal, we believe in the Game Dev market and want to share our knowledge to encourage professionals to create more breathtaking products. You can freely use and modify this article and template under the Creative Commons Attribution 4.0 International License. If you publicly republish this material, please provide a link to the original article. This template and guide are provided for informational purposes only. Narwhal Accelerator is not responsible for any errors or omissions. Use this template at your own risk.

<aside> 🔗 Link for P&L Template:  https://docs.google.com/spreadsheets/d/1nOK4DpPrYrOIDfPV0FjyHbEJ8f-pyCjX/edit?gid=1628354758#gid=1628354758

</aside>

Introduction

First of all, let’s start with the basics: what are Profits and Loss (a.k.a P&L)? Simply put, it is an instrument for controlling and forecasting the budget in your business. In game development, publishers and investors often ask for a budget breakdown, and P&L is one of the most suitable formats to validate your expenses and forecast your possible income.

<aside> 🫡 This template has been structured to support studios working on PC/Console premium games, seeking investment from a publisher or any other project-based investors. The template includes predefined synthetic data simulating a successful A/AA PC and Console premium game made by a new studio with a publisher.

</aside>

We aim to keep this template simple and flexible, but it also has the potential to be modified to suit your studio's needs. In the section below, we will break down the P&L into specific lines and examine how these numbers affect your business.

Before we dive in, Narwhal would like to share some knowledge our team has accumulated over the years in investment, publishing, and production. During the Acceleration program, one of our key efforts is assisting studios in preparing the Data Room (with this P&L as a financial side of Data Room) and consulting you during the negotiation period with the next round investor. Here are some useful tips:

• You are doing this P&L for your studio, not just for a Publisher or Investor. This is your vision of how your studio will financially thrive in the next few years. Invest the right amount of time and expertise in this planning. No one is secure from risk scenarios, but if they occur, you will overcome them more easily if you are prepared in the early stages of development.
• This document will help you communicate with Publishers and Investors in a common language. For example, these P&L calculations can be used as leverage in publishing agreements. You can show a publisher why their proposed percentage or period will not meet your expectations and your studio’s expenses. Conversely, this document will help you adjust your expectations of publishing scenarios even before sending a pitch to any publisher.
• This document allows you to test your business idea in a safe environment before starting production. Imagine you want to produce a $2 million game, but your top competitors' gross revenue is only $1 million. While this may be an exaggeration and doesn't apply to all games, consider how a publisher or investor would view this situation—they would likely see the potential for success as low. You need to be persuasive with your idea or perhaps reconsider the genre and niche to convince them to invest. Conversely, suppose your competitors have gross revenue of $2 million and you plan to invest $1 million in the game production. In that case, this document will help you understand why what appears to be a good deal might not be worth investing in.

Guide to P&L

Loss

Let’s start with the most obvious part. Almost all of the expenses (around 80 percent) are studio labour costs, especially if you don’t have a sophisticated server infrastructure.

Let’s proceed to Monthly P&L tab and start from the "Total Salaries with Taxes" line

This is a list of your employees. You can freely add, delete, or change roles and their compensation. Be aware that we are using Net Salaries in the compensation rows. Gross salaries are summarised and calculated in the "Total Salaries with Taxes" line and in the years’ columns. You can adjust your tax parameters in the Parameters tab or modify this table to use Gross Salaries.

Another part of the Loss is contractors or outsourcing