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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 09:29:00 -
[1]
Edited by: Atima on 10/08/2011 09:30:42 This sounds familiar
I can also add that I can pledge 90 capital buildslots for the upcoming expansion for a nominal fee.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 09:49:00 -
[2]
Originally by: Tekota
Originally by: Jerry Pepridge would like pledge 20b
I did fall for a Misty post a while back so I guess I deserved that one
Originally by: Atima This sounds familiar
I can also add that I can pledge 90 capital buildslots for the upcoming expansion for a nominal fee.
I'm going to have a hard time proving a negative but as an attempt all I can say is as already buried in the wall above that there will be no expansion / rollover etc. I have plans for future, sure, next step will be to add a third freighter run on Tekota which will require 1 more freighter print, 1 more cap construction print and 1 more cargo bay print. That'll result in Tekota's 10 manufacturing slots being largely utilised (think I worked out 82% total utilisation a while back). That'll obviously take some time to set up and be likely way into the future.
Next step after that would be to basically replicate the science and industry slots on Tekoto - as seen from the skill board link above he's going to need some serious (all though in fairness perhaps not that much) training to achieve and take away from my training of Tekota - and I tend to get distracted on him and think silly things like training for a Tengu or something. Anyway, that step would indeed be a significant upscale but that's something I'd probably look at operating entirely under collateral (ie sitting in a 3rd party's corp and producing from locked down prints). Either way it's a long way off and I haven't really thought about how to approach it.
Don't see a need for 90 slots for a long while :o)
You will most certainly want to expand if you have performed any form of efficiency planning on your BPO's.
Otherwise it would lead me to believe that you have not researched your business at all.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 10:03:00 -
[3]
Tell me how you calculated this 20%. Was that from base mineral cost against the freighter BPO? if so, you've failed.
You forgot to account for the cost of the component BPO's or if your buying BPC's - adding them onto the mineral costs.
I suspect this is what you have done. If you have not then 20% margins on freighters and build times which I believe are in the 5-10day range ( can't remember ) Then everyone would be building them.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 10:07:00 -
[4]
Originally by: Tekota
Originally by: Atima
You will most certainly want to expand if you have performed any form of efficiency planning on your BPO's.
Otherwise it would lead me to believe that you have not researched your business at all.
If you mean time efficiency then yes 3 freighter prints is my ideal per char - that means running 3 freighters & 3 cargo prints constantly, 2 cap construction prints not far off constantly and the single armor and propulsion prints running with a bit of spare capacity.
If you mean payback efficiency you could cost the above set of 3 freighters, 3 cargo, 2 cap construction, 1 armor & 1 propulsion at around 14bn. Profit of that runs to roughly 850 - 1.1b per month. So break even at lets say 15 months. That is infinitely quicker break even than say T2 BPOs.
If you mean efficiency in terms of isk per slot per hour then freighter production is terrible as I've already noted. The best I can get 10 slots running (when producing from NPC stations at least) is about 3m per slot per day. Regular T1 production will easily surpass that, I typically aimed for 10m per slot per day and generally hit that or came just under - and I'm quite sure there are many better targets I could have been producing. But as stated my aim here is not to make maximum isk per hour, my aim is to provide a very low maintenance stream and I'm accepting as the consequence of that low maintenance a low profit in return.
I was refering to time efficiency of BPO usage. On carriers this required aprox 50 prints in production to provide 90%+ efficiency.
Maximising BPO efficiency in capital construction is an important factor to your rate of return in my experience.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 10:13:00 -
[5]
Originally by: Candy Oshea
Originally by: Atima Tell me how you calculated this 20%. Was that from base mineral cost against the freighter BPO? if so, you've failed.
You forgot to account for the cost of the component BPO's or if your buying BPC's - adding them onto the mineral costs.
I suspect this is what you have done. If you have not then 20% margins on freighters and build times which I believe are in the 5-10day range ( can't remember ) Then everyone would be building them.
is what i was trying to get at in a nicer way
Baptism by fire and all that. I made similar mistakes to this guy when I first started up. It resulted in me going MIA and providing the opportunity ( and temptation ) for a significant scam from a then near unknown character.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 10:23:00 -
[6]
Use that figure to calculate your rate of return against the cost of the blueprints for 1 month.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 10:36:00 -
[7]
Another thing worth doing is take data exports for the minerals and freighter prices.
Create a spreadsheet and calculate the profits over the past 6 months or so, use the avg price for minerals + freighters for each day. You can then see how the profit margin on construction of freighters changes over time. It helps prevent the mistake of a 'good day' in your initial calculation.
You could also delay the prices of freighters as there is a lag in your construction or alternatively consider your first construction run as a sunk cost ( I used this method as your always going to want a run of minerals on hand IMO ) It reduces your rate of return but not significantly as the mineral prices for 1 run is only 10-20% of the cost of blueprints.
Also when calculating your rate of return dont forget about the minerals in the cooker.
You really have to pay attention to your cashflow in capital production. There is a delay between selling your stock and purchasing your next run of materials. Dont overextend yourself or you will find yourself sitting on blueprints out of production. This is very bad because a delay in 1 blueprint is a delay in your entire production chain ( Because you maximised efficiency right?! )
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 11:19:00 -
[8]
Edited by: Atima on 10/08/2011 11:19:22 I'm questioning the validity of the bond as I suspect that he may struggle to make a 5% return which in turn makes this bond a loss making activity for him.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 11:40:00 -
[9]
Originally by: Lauren Hellfury
Originally by: Atima Edited by: Atima on 10/08/2011 11:19:22 I'm questioning the validity of the bond as I suspect that he may struggle to make a 5% return which in turn makes this bond a loss making activity for him.
I understand that, but how does the calculation you requested help to demonstrate this in any way? He gave a per freighter profit of circa 140m when compared with build cost. He has also given a total BPO value of circa 10b. Now, granted the profit figure is a little high and was probably the result of a favourable market at the time of purchase/sale. But 140m as a percentage of 10b (1.4%) doesn't really seem to offer anything in the way of measuring profitability.
With the offer as it stands he is liable for a little under 100m in one month and then a little under 2.1b at the end of the second month. So anything over 100m profit per month he'll keep.
I'm sorry to hijack the thread like this but I'm just trying to understand how your question/request relates to demonstrating any issues over the validity of the bond or the ability to pay based on size/interest.
My questions were not to help with investors but to have him question his own actions. I suspect freighters make less than 5% per month, probably less than 3% when everything is taken into consideration. When you look at his initial investment and the oppertunity cost of it you can see freighters are an exceptionally inefficient investment for your ISK. I would suggest he considers selling his BPOs and putting his money elsewhere.
For what its worth, I'm not trying to ruin his bond, Just trying to help him out before he makes similar mistakes as I did.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 12:29:00 -
[10]
Originally by: Lauren Hellfury Ah gotcha. I knew I was being dense in some way. So it's about the overall return that you receive for the isk that you have tied up in it rather than being to do with the return offered to investors compared with the isk created as profit.
Today will not be a complete waste as I have learnt stuffs.
Yep he has tied up 8bn of his own isk which he will use to make a profit that will barely cover this 2bn bond. in return for this minimal profit he will make he is tieing up his buildslots and alot of his time - time which I think he underestimates.
It has been atleast 1 year since I updated my capital construction spreadsheets but I was making 4-8% on building carriers with a highly efficient BPO collection - It was over 50bn in BPOs just to make it possible. Freighters were even less profitable. I suspect the margins have become even worse since then however that is just speculation on my behalf
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 13:44:00 -
[11]
Originally by: RAW23
Originally by: Atima
Originally by: Lauren Hellfury Ah gotcha. I knew I was being dense in some way. So it's about the overall return that you receive for the isk that you have tied up in it rather than being to do with the return offered to investors compared with the isk created as profit.
Today will not be a complete waste as I have learnt stuffs.
Yep he has tied up 8bn of his own isk which he will use to make a profit that will barely cover this 2bn bond. in return for this minimal profit he will make he is tieing up his buildslots and alot of his time - time which I think he underestimates.
It has been atleast 1 year since I updated my capital construction spreadsheets but I was making 4-8% on building carriers with a highly efficient BPO collection - It was over 50bn in BPOs just to make it possible. Freighters were even less profitable. I suspect the margins have become even worse since then however that is just speculation on my behalf
I think you're overstating the issues here. The interest on the bond will only be something like 75mil per month so there is little question of the bond sucking in all his profits from the 10bil+ total. My understanding is that returns are in the realm of 4% per month (and I think BSAC was aiming for 5% in their freighter construction IPO). If the whole things was being financed at a cost of 4% that would certainly be a problem but the vast majority of the isk is coming from his own pocket and he will see the returns from that (low as they are).
I don't question his ability to meet the interest on this, I question his resolve to do so - It is going to be alot of effort for minimal reward on his part. I also question his business plan and his desire to expand it when it is fairly ineffective. I'm only speaking from my own experiences and mistakes.
He is borrowing isk at a greater cost than his expected returns from this venture. This whole venture reduces his current profits and increases his workload.
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Atima
Minmatar House of Marbles
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Posted - 2011.08.10 16:36:00 -
[12]
Edited by: Atima on 10/08/2011 16:38:53
Originally by: Tekota As experience grew further I realised that freighter production was a terrible end goal as the isk per slot per day is abysmal.
That's the fourth sentence :o)
Buried within wall-o-text is also: As noted above my profit on this venture is really quite bad and as such I can't offer particularly good rates.
Thanks for this folks it has been illuminating. The initial and instant result of this discussion had me scurrying away to double check my maths as I feared I'd gotten something horribly wrong. Something that makes one do that is always a good thing :o) I'm confident now in my maths and I think (correct me if I'm wrong) we're all pretty much on the same page regarding the maths and what is left is a discussion of calculating profits against loaned amount versus against the total venture, whether the interest on the loan will take too big a chunk of the profits realised from it and whether there are infinitely better things I can do with my isk.
Percentage return across total venture versus loaned amount is where the 20% versus 3-5% profit discussion comes from and whilst I hadn't considered the 3-5% angle directly I had done so in terms of a total payback / break even point calculations so was aware of this angle and happy with it before launching. I think I'm correct in saying that my break even calcs correlate with the 3-5% return on total venture illustration; again please do say if I've missed something.
The interest on the loan taking too big a chunk of profit realised is again something I think I've shown I had considered and worked out in advance, weighed things up and decided that for a couple of months it was worth it to avoid having stagnent production lines if I could obtain low interest rates (and grateful to Raw for his consideration of this matter also).
That there are better things I could be doing with my isk and my slots I don't contest for a second. I have done many of them. Freighter production at best, with 10 slots utilised in NPC stations is going to run, as I've already stated, at a pessemistic average of 3m per slot per day. As mentioned, plain regular T1 production (in fact several of the ship prints currently with Raw) can turn 10m per slot per day with a favourable wind and they require substantially less isk tied up in expensive cap prints. The reason I want to stop doing those things and move to freighters is not because I think they'll make more money, I know and have already demonstrated that they'll make less than a third of what I was previously doing with far greater isk tied up. The reason I want to move is that margins are so thin (margin as a straight up cost of mins versus sale cost of end product) are so thin that a couple of percent swing in mineral baskets can move a product from profit to break even - this then necessitates short production runs of no more than a couple of days in order to be able to track mineral prices more accurately.
Now undoubtedly there are things I can do that have the same once every ten or so days clicking combined with far better isk making. In three years I've yet to find these, that undoubtedly says something about my skills but unless you'd like to share :o)
Trade comodities.
Otherwise best of luck with the freighters - It is not such a bad thing if you have large ammounts of capital free. I just don't see capital production as the best thing to do at your current stage, otherwise I do not doubt your ability to run it and also I believe you have set the bond in an ideal way.
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