This article has been overdue for almost exactly a year. Finally... it is time that I type this down.

Why you should make a sequel
Generally, you should sequel a game that deserves to be sequelled. If you need to continue the story, then make a sequel for it. If you want to fix minor flaws in gameplay, then it should be a patch, not a sequel. If you need to fix major flaws, but still maintain the game world, then maybe you should have a sequel.

Examples of required sequels:
1. You made this really crappy game, ending with aliens destroying you and the world. Everyone hates it. You don't wanna abandon it. Make a sequel (but fix all the problems).
2. You made this adventure game about a prince who falls in love with a frog. In the end, the prince marries the frog. Everyone loves it and wants a sequel. Make one. Perhaps "having kids" would be a problem and they both ask for a divorce which starts...
3. You make a game about people fighting in an arena. You think that it would be better with more weapons. Make a patch.
4. You make a game about people fighting in an arena. You NEED to include lots of weapons, a completely different weapon style, and bunches of new shops. Make a sequel.


How you should make a sequel
First, and most importantly... RULE 1: Play the prequel to sequel or ask someone else to do it. Just keep playing it until you get sick of it.

You'll find the flaws that you need to fix. Those are the main points you should focus on your sequel. Remember, most games are about gameplay... fix the gameplay first.

Next, find a good place to continue the story. Let's take a couple of examples.

Example 1:
You make a game about a prince rescuing some princess. In the end, the prince becomes a level 999 (maximum) Warrior of the Eternity with a sword that kills most monsters on sight. Everyone lives happily ever after.

Hmm, hard one. You can't really improve on the prince. You can just make the prince lose all his skills, his stuff, and his kingdom, but that would kill the 'happily ever after thing'. Rule 2: Don't damage the prequel

So, focus the sequel on the couple's grandchild long after they died. Make an evil necromancer resurrect the dead prince and turn him into a super-zombie. Or whatever you like.


Making sequels as a continuation thing
Let's say that you've worked on a game long enough for someone to throughly enjoy it. But then... you don't know how to end the game. It's simple, you can just stop the game there and then, and make a sequel for it. Sequels serve as a nice chokepoint for game storylines.

Heck, you can make a series for a game until you decide on an ending. It works just like the Reality-on-the-Norm series or The Sims series (well, they're expansions, but about the same cost).