Weeks 11/12/13: The Holidays Are Here!

So it's been three weeks. Kinda crazy but I've been able to keep things going fairly well.

Prices have been pushing up pretty heavily. All of my inputs have increased in price by 10-15% while my output has actually increased in price by nearly 20%, padding my individual profit margins nicely. It's been a rollercoaster set of weeks as my timing has been rough on getting orders placed and filled, but altogether quite profitable.

Week	Inflow	Outflow	Actual Net	Expected Net
0	0	-77,836,602	-77,836,602	-77,836,602
1	29,389,995	-21,983,814	7,406,180	8,000,000
2	24,600,000	-39,243,550	-14,643,550	10,000,000
3	33,129,974	-5,490,829	27,639,145	45,000,000
4	0	-1,499,400	-1,499,400	15,000,000
5	0	0	0	15,000,000
6	12,800,000	-17,927,889	-5,127,889	15,000,000
7	22,047,585	-50,759,711	-28,712,126	5,000,000
8	44,800,000	-32,860,026	11,939,974	5,000,000
9	44,800,000	-23,220,983	21,579,018	15,000,000
10	54,463,000	-90,676,579	-36,213,579	15,000,000
11	25,859,976	-23,612,163	2,247,813	16,000,000
12	112,205,002	-20,458,330	91,746,671	16,000,000
13	42,498,750	-98,839,034	-56,340,284	16,000,000
14	48,000,000	-32,000,000	XXX	16,000,000
15	48,000,000	-32,000,000	XXX	16,000,000
TOTAL	447,581,891	-504,391,361	-56,809,470	XXX

Altogether, a solid three week period. Total net profit of almost 38M with very heavy variable cost investments in my latest week. Thanks for visiting!

Industry Profitability

I've prompted myself to do this detailed profitability analysis since I've recently reached a skill milestone that will impact a variety of my underlying costs. In determining whether the skill books are worth the cost (some of them are quite expensive), I wanted to figure out where my break-even value for each book would be, split into various components.

I've separated my transactions into a variety of smaller codes but have decided to summarize them into three categories: per unit costs, per unit tax costs, and per unit revenues.

The per unit costs are the raw material purchase prices that I pay on the market, including any brokerage fees for placing orders or additional costs imposed by a contract. For example, placing a contract with a supplier is a fixed brokerage cost of 10,000 ISK. If that's for one unit, that's a hefty cost but at my current volume my typical brokerage is around 100K (just short of 1% of my orders).

The per unit tax costs are those taxes imposed on various aspects that do not include the direct buying or selling of products. For my planetary interaction goods, these are import and export costs.

The per unit revenue is my average revenue per unit over the current life of my project. This figure includes transaction and brokerage taxes.

Info	Revenue	Variable Cost	Taxes	Profit
Total	255,587,051	166,338,225	73,029,600	16,219,226
Per Unit	1,234,720	804,014	352,800	77,906

My return on each unit is only 6.7%, which is quite disappointing. I significantly underestimated the level of taxes that I would face in this business. There is not much room for me to reduce my individual variable costs; however, there are some avenues to reducing my tax costs that I am actively pursuing. I believe that by the end of this week I'll be able to get some quick improvements that will raise my profit per unit to around $100K each, which would improve my return to 8.6%. At 6.7%, I would be better off not buying the individual inputs and selling the intermediate inputs that I'm creating myself. I need to reach 12% for my industry to be profitable in the "cost of capital" sense. I believe that point is reachable in the long run; however, I'll need to do further analysis in the near-term to see if I shouldn't seriously consider liquidating or stopping production until my cost-cutting measures are fully implemented.

Week 10: Spreadsheet Shenanigans

Well, I messed my spreadsheet up this week. I decided that I wanted to clean up some of my information and made a stupid mistake that messed up my data history after having corrected for an error in my history. So, my table has changed slightly for every week since week 7 but I've gotten it as close as I can with the effort I'm willing to expend.

With that said, Thanksgiving weekend was kind to my sales. I found prices quite favorable and invested a very very heavy amount into my components totaling 90M worth of purchases. Additionally, I pushed over 50M of sales for the first time to-date. What's greater about this week is that I have been completely unable to produce any outputs since Saturday, yet I still managed 50M in sales, which is another reason why I'm investing so much cash into inputs.

Week	Inflow	Outflow	Actual Net	Expected Net
0	0	-77,836,602	-77,836,602	-77,836,602
1	29,389,995	-21,983,814	7,406,180	8,000,000
2	24,600,000	-39,243,550	-14,643,550	10,000,000
3	33,129,974	-5,490,829	27,639,145	45,000,000
4	0	-1,499,400	-1,499,400	15,000,000
5	0	0	0	15,000,000
6	12,800,000	-17,927,889	-5,127,889	15,000,000
7	22,047,585	-50,759,711	-28,712,126	5,000,000
8	44,800,000	-32,860,026	11,939,974	5,000,000
9	44,800,000	-23,220,983	21,579,018	15,000,000
10	54,463,000	-90,676,579	-36,213,579	15,000,000
11	50,000,000	-34,000,000	XXX	16,000,000
12	50,000,000	-34,000,000	XXX	16,000,000
TOTAL	266,030,553	-361,499,384	-95,468,831	XXX

So, my net has gone down again. Part of this is due to a revision in weeks 6/7 where I had messed up an input while a good chunk is due to my heavy investment in inputs this week. Let's hope that next week is as positive as this week. Next week will also include the unit profitability analysis as well as where my break-even point is on my fixed investments.

Market Salvaging: Introduction

My posts to this point have focused on my manufacturing business where I'm purchasing a wide variety of inputs to create a more advanced output. Over the last two months I've been slowly building up the appropriate skills and inventory to begin earning profits on what I'll term "Market Salvaging".

The idea behind this project is to identify goods that generally sell below the reprocessing threshhold for a given good. In Eve, every item can be broken down into its components at a base rate of 50% of the good's initial values minus a tax and plus some additional reprocessing skills. So, if Good A can be constructed with 100 tritanium then it can be broken down for 100 * (50% * ( 1 - TaxRate) * (1 + Skills)) tritanium.

In a well-functioning market, one would expect the price of a good to match the price of its inputs plus capital costs. In Eve, this is true for goods where the market is made up of 100% constructed goods. Ships and a large majority of the tier-1 constructed items are sold right around that price point. But there are many goods that are not player-made and are dropped following combat. For example 50mm Reinforced Nanofiber Plates I are not constructed but are dropped in this fashion. Additionally, these fittings are in low demand because they are not particularly useful and are a fairly common item. Finally, this item reprocesses into a few thousand units of a variety of materials as opposed to some items that might only reprocess into a hundred or so materials. This particular item tends to sell at a very profitable level for reprocessing and provides for a good example of the types of goods that I want to target.

The good needs to be in significantly higher supply than in demand. The supply of the good needs to be from NPC combat. The good needs to have a fairly significant amount of reprocess-able materials.

Now that I have a set of guidelines, I need to find my break-even price for each good. My approach has been to create a spreadsheet of identified goods that follow those three rules, what they reprocess into, and formulate the break-even price based upon my skills, tax rate, and market rate for the reprocessed materials. For most of my purchases, I'm looking at a 10-15% profitability per unit. There can be significant lag between when I place an order for purchase and when it is fulfilled. Since these are NPC-drops, I'm getting one to two sold to me at a time. I also work to maintain the highest offer on the market to maximize the speed at which I acquire my goods.

Approximately 10 weeks ago I placed $50 million in orders. Due to the slow up-take, I have seen about 60% of my orders fulfilled over that time. As my orders are fulfilled I replace them with new orders. I'm the only player in the market for one of these goods which has provided me with a slow but steady stream of income. And so, with that, here is my revenue information over the lifetime of this project.

Week	Inflow	Outflow	Net
0	0	-50,905,119	-50,905,119
10	35,376,045	-30,849,676	4,526,370
TOTAL	35,376,045	-81,754,795	-46,378,750

No projections or expectations for this business as it's simply a way for me to have my ISK at-work. This business is arguably running a profit at all-times as my costs can always immediately be recouped either through the reprocessing (if I've made the sale) or by simply cutting out my order. Unlike the manufacturing business, the products I'm purchasing there cannot be turned into an immediate profit through reprocessing so to wind that business down requires making profitable sales. I plan to use profits from the manufacturing business to continue expanding this business. Right now, my orders only cover three goods and I've identified dozens that qualify for this approach. Long-term, I hope for this business to carry an open escrow account of around 300M that produces around 30M per week in revenue at a profitability rate of between 5 and 10%.