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Sunday, 24 January 2016

Financial Review of 2015

Now that 2015 has come to an end, time to take stock of where my business stands financially and how it did in 2015.



My Strategy

As a reminder, i have 2 accounts and so 6 alts in total.  One alt in each trading hub (Jita / Amarr / Dodixie / Hek / Rens) and a second on Jita trying to make my null sec trading work.  Each of the alts (except the null sec trader) also sells into a second region, the Jita alt sells into two regions.  In all, therefore, i am selling into 10 markets (i don't sell into Jita).

My strategy remains unchanged.  I am looking for slow moving products to sell at high profit margins (minimum 20%).  This is in contrast to other (much richer) traders out there who look for fast moving but low margin items to sell.  My style suits my play time.  I am trying to avoid the competition whereas the other traders take them on (and win).

An item that I can buy for 100m ISK from a Jita sell order and sell in Dodixie for 130m in 5 days time with no maintenance to the sell order is fine with me.  In fact, that would be just ideal.  If i had 5 products that did that then i would earn 150m ISK over 5 days for 500m ISK invested.  That is close to getting me a Plex a month.  (before taxes etc etc but you see my point)

My overriding aim is that each business venture must be able to Plex an account per month and my total time spent on my businesses each day must not exceed 45 minutes.

As a general rule, if I am able to log on for at least 45 minutes each day then I make 7bn ISK per month.  When real life is busy I make less (sometimes close to nil) and other times I make more.


Current Wealth

My current wealth stands at 266bn ISK.

My wealth is calculated by adding all Sell Orders less 20% value of Sell Orders as a provision against cutting prices over time + Buy Orders + Items in Production + Items for sale in hangers  +Items for sale in transit + ISK balance + Plex.

I don't value BPOs or BPCs or Ships or Towers etc.


If i did not have that 20% provision (=34bn ISK) against my Sell Orders (=171bn ISK) then my Wealth would be 300bn.  But i like the concept of this provision - it reminds me that i will doubtless need to reduce the prices to shift the items to sell as competition comes in.

When i look at how the sell orders are split over my alts, it is noteworthy that my Amarr business is smaller than Dodixie.  This is a reflection that Amarr, whilst being a large market, is quite competitive.  In fact, i suspect i am slowly starting to leave Amarr.  I have always found Dodixie works best for my strategy.

The Jita sell orders are actually sell orders in two regions near Jita.  I don't sell more than a few items in jita - way too competitive.


My Corporation holds the ISK balance and Plex.

The 8.7bn of items sitting in Jita are items stored there to replace items sold in the trading locations.  I would have had them couriered to those locations in early January.



Profits made in 2015

In 2015 i made 109bn ISK vs 96bn in 2014.  That equates to about 300m per night.

Perhaps not an inspiring increase on 2014 but i will plead Real Life getting busier.

Within that 109bn, my Plex investment made me 31bn ISK (vs 6bn in 2014).  I started the year with 72 Plex and ended the year with 94 Plex.  I bought 22 Plex in March for 798m each.  My average cost per Plex is 711m ISK vs todays price of 1.1bn ISK.  This has been a superb investment.

The rest of the 109bn was made through trading and manufacturing, as detailed in my blog post My Current Business Operations.

Given how busy Real Life has been i have not really changed what i sell much.  If anything, i have started selling the T2 variants and some Blueprints that typically sell for over 1bn ISK.

Therefore, when i put that altogether in the mix, and my Trading / Manufacturing made me 78bn ISK in 2015 vs 90bn ISK in 2014 which is a fairer reflection of real life being busier.


Monthly Profits

My monthly profits have varied from a small loss(!) in December to 20bn in November.


I am increasingly finding that my Plex investment is making me 3-4bn per month, sometimes more.  In December the price of Plex fell which, despite positive trading profits, pushed me into a loss.  I honestly have no idea what i will ever do with my Plex holdings.  I have plenty of ideas how CCP could allow those of us who hold Plex to use it as collateral to make an EVE banking system but this is for another day.

Another way of looking at my monthly profits is to ask what is the monthly profit as a % of my wealth (i.e. Return on Capital Employed per month).  I tend to make between 0 and 7% ROCE each month.  In other words, my wealth tends to rise by 0 - 7% per month.




Make up of Wealth

My aim is to ensure all my wealth is trying to make a profit.

Hence ISK in my wallet is not very helpful, it is not making me any profit at all, and never will - though i tend to operate with 10bn ISK in my wallet at any time to cover daily business costs.  That is how i roll.

Also, items for sale in my hangers is of no use - right now that is running at 10bn ISK also which i need to reduce.  These tend to be items that i once wanted to sell but for whatever reason are no longer in demand or items waiting to be shipped out to the selling locations.


As at the end of 2016 i had sell orders of 171bn ISK and 104bn of Plex all trying to make a profit for me.



Plex Account

I started investing in Plex back in February 2014 (at a starting cost of 636m per Plex!).

My reasons for investing in Plex i detailed in an early post but in summary i find this is the best way of investing surplus ISK to hold its value in the game (i.e. an inflation hedge).

Since then i have entered the Plex market a further 5 times and now own 94 Plex, valued at 104bn ISK.  I last entered the Plex market in March 2015.  My total cost has been 67bn ISK - so a nice tidy profit.



One side effect of this 104bn ISK of Plex is that a 5% fall in the price of Plex will reduce my wealth by 5bn ISK.

Hence, in the December Plex price fall, my total wealth actually went backwards despite positive trading profits due to the fall in the value of my Plex holdings.

4 comments:

  1. Hi

    I have read your blog for some time now and have been interested in your ISK making ventures. My ISK balance tends to increase albeit painfully slowly as I am in a corp where I PVP and so buy ships and fittings etc, But I also have my entire fortune (nearly 30b) sitting in my wallet which I know is something that you do not do. However I want to have those funds available for buying “stuff”.

    I am thinking of trying what you do though with maybe 10b of what I have, I now have 6 toons as I have subbed another account, although trying what you do will be difficult as I live in a WH but I think that it should be doable even with a lot of flying around.

    Some questions did spring to mind when reading this post was…

    1. Do you include the cost of transport in that 20% margin of yours? Let say for arguments sake you buy something in Jita for 100m that sells in another hub for 120m, I know that you use express delivery on your couriers and so (and this is all assumption here) if you have 10 items that you bought in Jita for 100m each, that is 1b, if you sold all at 120m that is 200m profit, but looking at red frog a rush job of 1b of goods from Jita to Dodixie is 104m which is a massive chunk of your potential profit, that will only give you 96m profit (assuming no other factors).

    2. What trade skills did you give your characters, I assume Accountancy and margin Trading, but anything else?

    Thanks

    V

    ReplyDelete
    Replies
    1. the 20% margin is purely the (sell price less the buy price) / (sell price). So the margin covers the sale taxes and transport costs.

      For hauling, I use New Evolution Express which barely takes up 3-5% of the margin, if that.

      Key Trade Skills - Accountancy (reduces sales tax); Broker Relations (reduces order costs); Retail / Trade / Wholesale / Tycoon (to be able to have many orders on the market).

      I don't use margin trading given I do not set up Buy Orders (and I don't station trade).

      Delete
  2. For your "no-orders policy" in jita, I have just "top" orders in jita, I try to cap the price upwards in jita with a ceiling, so people wanting to step in the market, first have to eat my ceiling. That gives me 2 advantages, first; I see market movement, second; I can see if its the market shifting (several buyers) or just a big competitor stepping in. The bigger players who have done that, are all listed / flagged now, so I know when they are moving stuff in my markets. Jita is the best place for this if you ask me.

    ReplyDelete

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