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nether void
Caldari
Shrapnel Industries
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Posted - 2008.12.19 20:58:00 -
[1]
Edited by: nether void on 19/12/2008 20:59:25
I've been busy running numbers on an IPO I wanted to launch with a real life friend. It was looking pretty good as I was doing the inventory turnover model/monthly cash flows, albeit a slow broiling investment, until I started working on opportunity cost. That's when the crap hit the fan.
Ok let me set it up without giving away too much:
Our plan so far is to raise 1.4 Bil through equity financing via 5% monthly dividend Preferred Stock shares. Sounds good so far. The total project financing would be 2.0 Bil, via our own investment of 600 Mil. So 2.0 Bil invested. Monthly dividends would be to the tune of 100 Mil. Seems fine.
I estimated a very conservative margin on our sales at 9%. Not great, but who cares. Some of the whole deal is supposed to be fun, and what we decided to produce and sell is for 'fun'.
So I ran the inventory turnover model at max sell per month 80 units of product, with 3 inventory turn overs per month. Seems right.
At end of month, dividends are paid, working capital is set aside for new stock, and all retained earnings (including SHRAP 30% share) to be re-invested into a DBANK limited account at 6% return (I know it's going down at the first of the year, but it's small peanuts).
What we are trying to do is generate enough liquid to buy back the original shares, and then go full open on dividends: all profit -> dividends. This would take approximately ... 9 months or so, I think.
That didn't seem too bad until I did opportunity cost in two different scenarios:
1. We take our 600 Mil, and just stick it in a DBANK limited account at 6%. We do nothing.
2. We have no money whatsoever, and instead of working on production we spend the time missioning. I figure we can both do 10 hours worth of missioning a month (lol probably 20). This is a stand in for the time we're spending on this production project. Lots of logistics and market watching to get it all done. So at 10 Mil/Hr missioning, and then sticking the 200 Mil in DBANK limited at the end of each month, we can make some pretty serious cash.
Check out this graph. It's a 12 month period, with end of month totals. Looks like Missioning is where it's at. Kinda ****es me off.
http://i77.photobucket.com/albums/j79/thenethervoid/DamnIPO.jpg
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Packtu'sa
Nabaal Construction and Industrials Corp
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Posted - 2008.12.19 21:14:00 -
[2]
Unfortunately, this is quite often the case: a business plan doesn't necessarily meet the returns that other seemingly simple jobs can. On the other hand, consider that missions require whole blocks of time, whereas running a manufacturing operation might only take five minutes at a time.
You could say the same thing about mining Crokite for two hours every day and add up how much ISK you'd make compared to running a 10bn ISK IPO: but what's the point? There are many other things to consider, like access, time commitments, expertise, enjoyment, et cetera. I spend a lot of time on manufacturing and finances, but I enjoy it a whole lot more than missions.
Packtu'sa [NCIC]
Founder/CEO, Nabaal Construction and Industrials Corp |
Waseem
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Posted - 2008.12.19 21:18:00 -
[3]
Edited by: Waseem on 19/12/2008 21:20:55
Edited by: Waseem on 19/12/2008 21:20:36
I can't image how upset you would be if you had good numbers for isk/hr for missioning.
ISK out -199,413,037.52
ISK in 872,948,205.60
Does not include selling ~100m in LP items. The ISK out is for skill books and ammo mostly. This is just me doing the missions.
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Packtu'sa
Nabaal Construction and Industrials Corp
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Posted - 2008.12.19 21:22:00 -
[4]
 Originally by: Waseem
Edited by: Waseem on 19/12/2008 21:20:55
Edited by: Waseem on 19/12/2008 21:20:36
I can't image how upset you would be if you had good numbers for isk/hr for missioning.
ISK out -199,413,037.52
ISK in 872,948,205.60
Does not include selling ~100m in LP items. The ISK out is for skill books and ammo mostly. This is just me doing the missions.
With how many hours of missions, though?
Packtu'sa [NCIC]
Founder/CEO, Nabaal Construction and Industrials Corp |
Callista Omenswarm
Astronautical Engineering
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Posted - 2008.12.19 21:22:00 -
[5]
Yeah but at the end of it, you've also earned enough from the DBANK account to buy back the original shares, so instead of the 1.5(and a bit) you show, you'll have 3.1 bil.
Still probably putting you under mission running for much more effort.
And then when you start looking at how comparatively profitable griefing, piracy and scamming are.....
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Darin Raltin
Amarr
Two Brothers Mining Corp.
Kraftwerk.
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Posted - 2008.12.19 21:27:00 -
[6]
Edited by: Darin Raltin on 19/12/2008 21:28:08
Where was it assumed that IPO's and missioning were mutually exclusive?
Nothing prevents you from running said IPO and when you aren't directly managing it, run missions or whatever else it is you do.
Its just about streamlining the process - remote management tradeskills, securing/locating a proper supply chain. All of the "work" on my bonds (public and private) are on the front end - lurking on the forum, buying the supplies ... but once I get started all I have to do is just monitor price which I can do from the ****pit (EDIT <--- wow ....)of my mission running battleship.
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nether void
Caldari
Shrapnel Industries
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Posted - 2008.12.19 22:00:00 -
[7]
Originally by: Darin Raltin
Edited by: Darin Raltin on 19/12/2008 21:28:08
Where was it assumed that IPO's and missioning were mutually exclusive?
Nothing prevents you from running said IPO and when you aren't directly managing it, run missions or whatever else it is you do.
Its just about streamlining the process - remote management tradeskills, securing/locating a proper supply chain. All of the "work" on my bonds (public and private) are on the front end - lurking on the forum, buying the supplies ... but once I get started all I have to do is just monitor price which I can do from the ****pit (EDIT <--- wow ....)of my mission running battleship.
The missioning hours are approximately equal to the hours we figure we would spend on logistics and managing orders. Again assuming the worst. e.g. hauling our own mins, etc.
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Waseem
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Posted - 2008.12.19 22:00:00 -
[8]
Originally by: Packtu'sa
With how many hours of missions, though?
That would be roughly 40 hours of missioning. A little less since whenever I get the easy ones to farm like AE/GE/Damsel I do them until they expire.
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SencneS
Amarr
Rebellion Against big Irreversible Dinks
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Posted - 2008.12.19 22:02:00 -
[9]
DBANK looks like the best option to me :)
No work, no mission running, hell you don't even need to login to the game.
Talk about easy money!
Amarr for Life |
nether void
Caldari
Shrapnel Industries
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Posted - 2008.12.19 22:09:00 -
[10]
Originally by: SencneS
DBANK looks like the best option to me :)
No work, no mission running, hell you don't even need to login to the game.
Talk about easy money!
Yeah I know. And if we do missioning at the same time, you can just add the missioning and DBANK graphs together. Then the IPO looks like some kind of torture in comparison. lol
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Ambo
State Protectorate
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Posted - 2008.12.19 22:22:00 -
[11]
There are three things that imediatley struck me about your analysis:
1) IPOs on this scale (a few bil) should be about establishing trust and competency more than earning cash.
2) What if dbank legs it with the cash? (I'd rate this as unlikley but certainly should be a consideration)
3) I'm suprised at how low your estimated profits are - 9% per month is really exceptionally low. Partincularly for such a (relatively) small amount of isk. I'd say anything that's coming in below 20%/month is not somthing you should be looking at making an IPO/Bond out of.
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Trader? Investor? Just want to track your finances? Check out EMMA |
nether void
Caldari
Shrapnel Industries
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Posted - 2008.12.19 23:41:00 -
[12]
Originally by: Ambo
There are three things that imediatley struck me about your analysis:
1) IPOs on this scale (a few bil) should be about establishing trust and competency more than earning cash.
2) What if dbank legs it with the cash? (I'd rate this as unlikley but certainly should be a consideration)
3) I'm suprised at how low your estimated profits are - 9% per month is really exceptionally low. Partincularly for such a (relatively) small amount of isk. I'd say anything that's coming in below 20%/month is not somthing you should be looking at making an IPO/Bond out of.
1. Agree, which is why I went for a smaller item. I had originally planned something bigger: about 15bil, but figured smaller was better while I got experience with larger scale logistics, etc.
2. True. Although even just missioning with no margin on the cash would still far outstrip what I've shown on the IPO.
3. We chose a product we were excited about making that would net some margin, albeit lower than other products available; as opposed to a product I could give two craps about making, but at a nicer margin, like 20%. Part of the fun was supposed to be in haiving a company that belongs to a specific industry rather than a generic 'make as much money as you can regardless of how or what you're making' type of operation.
An example is how we invested in Citadel Heavy Industries. It's kind of cool knowing our investment is building capitals. I wouldn't be as excited if it was making titanium toasters, even though the margin was higher. (Of course this only applies to EVE - In the real world I would invest in the toasters)
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Atima
Minmatar
House of Marbles
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Posted - 2008.12.19 23:53:00 -
[13]
I beleive reinvestment plays an important part in IPO's, so instead of a straight line it should be exponential. Eventually it will become more profitable than missioning, the issue is how long will it take for this to happen?
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Mari Katarin
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Posted - 2008.12.20 00:18:00 -
[14]
IPOs are all about volume, volume, volume. Yes, when you're dealing with a small amount of investment capital the nearly 0 investment 10M/hour of missioning or mining (or ratting!) blows the business out of the water.
Now, what if you were able to return 10% on 100 billion? Good luck missioning up 10B a month. Really.
Which may be why there are so few "quality" IPOs and bonds lately. Anything on the small side (to build trust, as was said) is not worth the effort. And coming in here asking for 20+B is going to get you laughed off the forum.
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Joseph Shephard
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Posted - 2008.12.20 00:21:00 -
[15]
Nether, are you using 9% as your average profit on items you sell, or your average profit for the entire month? Because, for instance, the product I sell has a 10% profit margin but I can sell about 4-6 batches per month, so my monthly profits are still about 50% (while I have such small amounts of capital, later this will drop). It's true that if you run missions and salvage for the same number of hours per day you probably make significantly higher returns, but I can manufacture and sell without being at my computer. Mission running is work intensive and requires you to sit at your computer the whole time.
I've found it to be generally true that the Eve market pays you for how much attention you have to devote to your task. Investments take the least work, so give the lowest return. Manufacturing is the next least work with the next lowest return. Then trading, then high level missions/salvage/looting, etc.
J. Shephard
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nether void
Caldari
Shrapnel Industries
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Posted - 2008.12.20 01:18:00 -
[16]
The main problem with what I was thinking about selling is it takes a lot of materials to generate one unit, so I had to set a max units sold per month to cap my logistics requirement. If I ran it with no limit, reinvesting all earnings then yeah it would be a serious money maker.
Also I've looked into the volumes being moved on the market. I think the 80 units we plan to/planned on selling were about 1.7% of the market share, so it was definitely doable without jepoardizing margins (oversaturated market), but again logistics is another bottleneck.
If I hedged the plan with wholesale supply and sales contracts, it would work a lot better.
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MilowFV
Echo Heavy Industries
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Posted - 2008.12.20 01:43:00 -
[17]
I take care of a lot of logistic with afk hauling. If I have some mineral to pick up I just send the freighter to grab it while I go do other things. Come back load it up and send it home. My actual time spent doing anything is only 5 or 10 min even if it does take my afk freighter hours to make the trip.
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cosmoray
Cosmoray Construction
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Posted - 2008.12.20 02:46:00 -
[18]
Logistics is the huge time burn for any manufacturing business.
Build as close as you can to your market. Source your minerals as close as possible.
Changing manufacturing jobs takes about 10 minutes a day, its the hauling and buying stuff that is a pain.
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Kazzac Elentria
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Posted - 2008.12.20 03:25:00 -
[19]
Originally by: cosmoray
Changing manufacturing jobs takes about 10 minutes a day, its the hauling and buying stuff that is a pain.
And it just scales ever more as you increase the size of what you are building.
Time it takes me to set up my capital jobs for the week. About 30 minutes to an hour.
Time it takes for me to source the mats, get them moved and ready to roll? At least 10. |
nether void
Caldari
Shrapnel Industries
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Posted - 2008.12.20 22:19:00 -
[20]
Originally by: Kazzac Elentria
Originally by: cosmoray
Changing manufacturing jobs takes about 10 minutes a day, its the hauling and buying stuff that is a pain.
And it just scales ever more as you increase the size of what you are building.
Time it takes me to set up my capital jobs for the week. About 30 minutes to an hour.
Time it takes for me to source the mats, get them moved and ready to roll? At least 10.
10 hours?
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Kazzac Elentria
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Posted - 2008.12.21 05:47:00 -
[21]
Originally by: nether void
10 hours?
To build 5+ capital ships, their required mods, and in addition the mats required for my T2 and T1 line.
Yes, moving mats in that size of logistics can be a PITA when its 3 or so people.
I'm sure Xabier can pipe in here the logistics as well, since he easily trump my volume in terms of build. |
Bad Bobby
Ugly Toys
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Posted - 2008.12.21 07:37:00 -
[22]
Originally by: nether void
So at 10 Mil/Hr missioning
Seriously, 10 mil per hour? That's way too conservative. I pull in 50m per hour doing level 4's on my own, since there are two of you involved you can surely make more than that.
One key thing to making fast money with missions though is to turn this opertunity cost calculation on to how you do the missions. Is looting/salvaging worth the time? Is killing all the rats worth the time, when you're not forced to by the mission criteria? Is the LP gain from completing many missions at high speed better than hanging around and trying to suck every last bit of isk out of one mission? It will depend on your ships, agents and skills of course so what works for me may not work for you.
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nether void
Caldari
Shrapnel Industries
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Posted - 2008.12.21 21:06:00 -
[23]
Edited by: nether void on 21/12/2008 21:06:48
10mil an hour is pretty conservative, but my buddy and I fly T1 battleships with named weapons and T2 tanks, so we aren't really flying through the missions. I bumped it to 15mil/hr. I also changed the product we're looking at making, gaining a couple to 3 points margin. Changed the dividend rate from a flat 5% to a growth stock until the IPO is soluable. Also this new product has a smaller logistical impact, so it will be easier for us to manage.
The new graph still doesn't look great, but at least the IPO is beating the DBANK option of doing nothing now. lol
Missioning really needs a huge nerf.
New graph
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Le Skunk
Low Sec Liberators
Chubby Chuppers Chubba Chups
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Posted - 2008.12.21 21:22:00 -
[24]
Originally by: nether void
Missioning really needs a huge nerf.
New graph
Ahmen to that, good news is CCP are starting to come around to this idea
SKUNK
Originally by: CCP Navigator
People who think I am joking or talking big are going to understand very quickly that there will be order
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Lienzo
Amanuensis
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Posted - 2008.12.22 06:48:00 -
[25]
Hang on a sec.
I'm bad at maths, but missioning returns shouldn't compound over time. They should just provide a baseline governing where the barrier to entry is in practical business affairs.
Granted, it's a pretty high baseline to meet for most entrepreneurs. =\
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Alatari
Gallente
Winterdawn
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Posted - 2008.12.22 14:02:00 -
[26]
Originally by: Lienzo
I'm bad at maths, but missioning returns shouldn't compound over time. They should just provide a baseline governing where the barrier to entry is in practical business affairs.
The missioning returns will compound if you place them into an DBANK account at end of every week/month, instead of leaving the ISK in your wallet.
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You can't do that with a Planet. |
Midas Man
Caldari
Dzark Asylum
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Posted - 2008.12.22 15:07:00 -
[27]
Originally by: Alatari
Originally by: Lienzo
I'm bad at maths, but missioning returns shouldn't compound over time. They should just provide a baseline governing where the barrier to entry is in practical business affairs.
The missioning returns will compound if you place them into an DBANK account at end of every week/month, instead of leaving the ISK in your wallet.
Hope you have your flame suit on , just opened up a debate that will be as widly discussed as the "my minerals are free". Your dbank returns are profit from your investments and are nothing to do with missioning and shouldn't be confused 
But without getting anal about it. There is a cap to what mission can earn you, it can fluctuate slightly but ~50 mil an hour is about as much as you can earn grinding lvl 4's and there is no way to improve on that dramatically.
IPO's/Trading/Manufacturing on the other hand doesn't have a "Cap" as such. You are only capped by logistics and Capital and in both instance's they are not hard "Caps" and are pretty much unlimited, ie once you dont have the time in the day to move your minerals and goods around personally you can contract it out, so logistics cap can be overcome and if you do well your available capital should be rising all the time.
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nether void
Caldari
Shrapnel Industries
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Posted - 2008.12.22 16:08:00 -
[28]
Edited by: nether void on 22/12/2008 16:10:22
Originally by: Midas Man
Hope you have your flame suit on , just opened up a debate that will be as widly discussed as the "my minerals are free". Your dbank returns are profit from your investments and are nothing to do with missioning and shouldn't be confused
But without getting anal about it. There is a cap to what mission can earn you, it can fluctuate slightly but ~50 mil an hour is about as much as you can earn grinding lvl 4's and there is no way to improve on that dramatically.
IPO's/Trading/Manufacturing on the other hand doesn't have a "Cap" as such. You are only capped by logistics and Capital and in both instance's they are not hard "Caps" and are pretty much unlimited, ie once you dont have the time in the day to move your minerals and goods around personally you can contract it out, so logistics cap can be overcome and if you do well your available capital should be rising all the time.
I consider the DBANK return from a limited account 'Cash' as it would be seen on a balance sheet; not an investment. Investments are things you cannot usually draw on; whereas obviously the standard or limited account you can draw on. That's why I consider them the same in that regard.
Also the cap for me on ISK/ Hr for manufacturing has an 'effort' variable. Missioning takes almost no effort; therefore, when I compare it to manufacturing I try and compare on the same level of effort.
With 15mil/ hr on missioning, you can see that's a really low amount of effort. I could for sure double that with a CNR with faction fitting, but that's more effort than I'm wanting to put in right now (I'd have to mission a lot harder to get there quickly). Same with manufacturing. I could probably make a lot more by putting in a lot more effort, outsourcing logistics, etc, but then that takes more effort.
Reason I'm keeping the effort low like this is I burn out a lot easier on MMOs than I did when I first started playing them 11 years ago. lol Family and career do that to a dude. =) But this is the level of effort for me that keeps the game fun. More effort usually means I'm going to become burned out/ bored with the game a lot faster.
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Midas Man
Caldari
Dzark Asylum
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Posted - 2008.12.22 16:37:00 -
[29]
Originally by: nether void
Also the cap for me on ISK/ Hr for manufacturing has an 'effort' variable. Missioning takes almost no effort; therefore, when I compare it to manufacturing I try and compare on the same level of effort.
With 15mil/ hr on missioning, you can see that's a really low amount of effort. I could for sure double that with a CNR with faction fitting, but that's more effort than I'm wanting to put in right now (I'd have to mission a lot harder to get there quickly). Same with manufacturing. I could probably make a lot more by putting in a lot more effort, outsourcing logistics, etc, but then that takes more effort.
Reason I'm keeping the effort low like this is I burn out a lot easier on MMOs than I did when I first started playing them 11 years ago. lol Family and career do that to a dude. =) But this is the level of effort for me that keeps the game fun. More effort usually means I'm going to become burned out/ bored with the game a lot faster.
Whilst I understand where you are coming from.
To make 100mil on Missioning I would need to spend 2 hours sat infront of my PC constantly issuing commands.
Alternatively I could make 10 Battleships. Which would involve placing 7 orders (station Range) for minerals (about 2-3 mins). Log out for the day. Log in following day set up manufacturing job (30 seconds). Log out. Log in 2 days later and put ships on market (30 Seconds). Wait a few days for sales. In a perfect world I could make the 100mil in about 10 mins gametime (5 mins online time and 5 mins research pluging buy/sell prices of minerals and ships into a spreadsheet)
The Manufacturing route here is alot less effort and I could even spend 30 mins online modifing orders so my buy/sell cycles are quicker but all in all its not much effort.
Now if you want to make 1 Bil
with Missioning that means 20 hours of actively playing to get to the 1 bil.
with manufacturing all i need to do is
a) build 10x as many ships (No extra time just place orders 10x as large for minerals and wait longer out of game)
b) build 10 of another 9 different BS's again just increasing the size of the mineral orders and 10x the 30 sec install time)
The extra time this route is only if you want to clear through your inventory rapid and comes from modifing orders.
I am getting to the stage where games dont hold my attention for too long, but doing manufacturing or trade in Eve allows me to pursue anything in RL while still gain wealth in game. And gaining wealth at a rate I didn't believe possible when I was running missions. I mainly trade but dabble in Manufacturing when opertunities call to me, and I usually have the Eve client logged in while Im at home but maybe spend 30mins - 1 hour active modifing orders. While the trade manufacturing is looking after itself, Im free to spend time with the family, play other games or see some of my profits go up in smoke "trying" to PvP etc
Also whilst logistic and the effort involve can get very dull on large scale oppertunities there is no need to put that ammont of effort in unless you want more reward. You can make money in Jita 4-4 buying minerals off sell orders (good luck getting the job installed crazy queue's hehe) and still make resonable profit especially if your comparing it to DBANK or similar interest rate. It seems alot of effort but if you work to the saying "Work smarter not harder" you can find ways of making massive returns with little to no effort.
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Xabier
Amarr
THE SORORITY
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Posted - 2008.12.22 16:40:00 -
[30]
Typically the number your looking for when coming up with a business plan is 30%, that's what your ROI per month should be, that means that starting out you can pay say 10% ROI out and your still making 10% for reinvestment and a nice 10% wage for yourself.
Normally I assume 5% variance either way on overall ROI, if its up to 5% under its coming from my wage, if its 5% over its into reinvestment, doing this enables you to prepare to expand your business without the need to continually make new launches as well as improve your NAV so that should you decide to sell up you can pay off all your creditors and still have a tidy profit afterward.
IMO lack of financial planning for expansion as well as ensuring you leave yourself a wage at the end of the month coupled with people trying to do things with razor thin margins and leaving little room for error or market adjustment is the biggest contributing factor towards IPO's which just up and quit, or those that choose to scam.
Xabiers Capital Bond #1/2 (FINISHED)
Xabiers Capital Bond #3/4
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