#5 - Assume that people will accept lower salaries to work in game development

It's a fact of life: game development salaries are typically lower than in other fields of the software industry.  Companies involved in networking solutions or business software usually require college degrees (and they make profits), while game studios are still, by and large, seat-of-the-pants operations.  Therefore, they can (and must) pay less.  However, I believe that this "fact of life" is about to become history.

Game development is getting more and more complicated every day.  Writing cutting-edge software for the PSX2 *is* rocket science, and it will require the very best and brightest programmers and artists in the world.  Now, these people can be separated into two categories: those who can't imagine working outside of game development, and those who can.  As long as we could get by with only the first group, we could keep wages down.  As the industry grows, it will require more and more people from Group #2, and to get them, it will have to match the salaries and benefits paid by the Intels and the Lucents and the Lucasfilms of this world, because, as a job applicant pointed out to the PHB in a Dilbert cartoon, smart people are not often actively looking for pay cuts.

So, unless you are willing to settle for naive, inexperienced, second-tier developers, don't budget too low.

(Besides, you'll probably be better off with one really good guy making $100,000 than with two mediocre ones making $40,000 apiece.)

As a corollary, do not expect top people to accept lower salaries in exchange for bonuses and cuts of eventual profits.  Some risk-takers might be willing to go for it if the potential rewards are high enough (and I do mean HIGH), but savvy developers know that a) very few projects, even the high-profile ones, actually make enough money to pay for bonuses and profit sharing, b) accounting can be quite creative when it comes to profit sharing plans, and c) why would they take your $50K + $20K bonus package when they can get $75K guaranteed elsewhere?

Step #6