Starting in the Amarr Market

I have decided to set up an alt in the Amarr market.  Still the second largest trade hub after Jita.

Business Strategy

in prior periods of playing Eve, i had shied away from Amarr given its competitiveness.

Now, i don't know if Amarr is more or less competitive than before but i am using my standard strategy of focusing on high margin, slow moving items to avoid the competition, i now have 7bn items for sale in Amarr.  I contract out the hauling - still plenty of people willing to take the long route around from Jita to Amarr.

I don't sell exactly the same items in Amarr as i do in Dodixie but there are some overlaps.  Broadly though the groups are the same: skillbooks; blueprints; ship equipment; and implants.

In total, i have 40 items for sale at a time.

In fact, i am running out of Trade slots, my maximum is 45 - hence i will need to increase my skills to post more items for sale.

Character Trade Abilities

My character is trained in Trade Skills to:

Accounting Level 4 - means my Sales Tax rate is 1.4%

Broker Relations Level 4 - means it costs me 3.8% to list items for sale

Contracting level 4

Corporate Contracting Level 1

Marketing Level 1

Retail Level 3

Trade Level 4

It took me under a month to get to these levels.

My next step, in the next two days, will be to raise Retail to Level 5 and Marketing to Level 2 in order to start on Wholesale - that will take me about 11 days from point of start.  The additional two levels of Retail will give me 8x2 = 16 additional selling slots, and each level of Wholesale will give me 16 selling slots.

Once i have enough Trade slots i will start training Advanced Broker Relations, which will reduce the cost of changing the price of a Sell order, my current cost is 3.8%/2 = 1.9% (i.e. half of Broker Relations cost)

It feels like it is going well so far.  I will get a clearer update in the next few days when i assess how November has been.

Now using all three alts

Therefore, as i stand today all 3 alts are in use: Seller in Dodixie; Seller in Amarr; Buyer in Jita (who is training to go into manufacturing).

I want to get this lot running before i think of starting another account - and i must remember i limit the time i spend on Eve Online to 45 mins a day.

The need to invest isk up front in business in Eve

I always like to think of my Eve business in a manner that i would a real life business . . . . . though i don't actually run a business in real life, but lets overlook that small matter for now.

So, move on if this is not your thing . . . . . . read on if you want a small ramble through comparing my business on Eve to the real world.

Eve is a pure cash economy, no Credit

There are some big differences to the real world - there is no concept of credit in Eve (now that the margin trading skill is removed).  I.e. i can't pay for an item i bought 30 days later and likewise can't sell an item to someone on credit and be paid 30 days later.

Eve is more or less a pure cash economy.  I buy an item and pay cash immediately.  Someone buys an item from me and i get the cash immedately.

Therefore, i operate in the markets (or any business venture) isk has to be put in first (lets assume i am a pure business here and not selling loot from blowing things up).

Example

Consider my current business which is the simple idea of Buying from sell orders in Jita, couriering the items to Dodixie and then putting them up as Sell orders.

Consider the ISK needed upfront for an item costing 100m isk that i plan to sell for 135m isk:

1) Cost of the item = 100m

2) Courier cost to transport the item to Dodixie = 2% x 135m = 2.7m

3) Broker fee to list the item for sale = 3.78% x 135m = 5.1m

4) lets assume i change the price once = 1.89% x 135m = 2.6m

items (2) to (4), the cost of selling the item, come to 10.4m isk.

In other words, to sell an item costing 100m i have to spend 100m to buy it and then an another 10.4m isk to sell it.

I then sell the item for 135m isk and pay 2.75% sales tax = 3.7m isk.

Gives me a total profit if 20.9m.

Margin = 20.9/135 = 15.5%.

The real world

If this was a retail business (think Walmart) then in real life it would be likely that i would buy the item on Credit from Jita (to pay in 60 days time) and then sell the item for cash in Dodixie.  A great business model because i don't need to put down any cash.  I get paid for the item in Dodixie before i need to pay for the item in Jita.

If this was more seen as an industrial business and i was a distributor here then i would also be paid 60 days later in Dodixie . . . . . so the cash dynamics would look like the currently do in a pure cash economy . . . . i need to invest the cash first.

Account Plexed

This will be the last time i make a separate post on the matter but, as is my strategy, 15 days before i needed to Plex the account i start to use the daily profits to buy the 500 Plex required.

This time it took me 3 days to generate 1.4bn isk of profit to purchase the 500 Plex - admittedly, not yet a sign of my daily run rate but rather three decent days on the markets.

So, my account is now plexed for a further 30 days from when the current Omega time runs out in 10 days.

All in all, i paid for one month of Omega at the start and i have been playing Eve Online for free since with minimal effort and i expect this will continue.

Disintegrator Skill Books - the massive price spike

The Small / Medium / Large Disintegrator Skills are needed to operate the Tech II Triglavian Weaponry.

Up until a few days ago they were sourced from drops in Abyssal Deadspace.

That now seems to have stopped and therefore, at present, there are no new Disintegrator Skillbooks coming into the game.

All the details are on Strange Net's excellent youtube series, the relevant youtube cast is here

As would be expected, this has caused a price spike:

Now,  the question of course is whether this was a deliberate decision by CCP or a mistake?

The only way, it seems, of being able to use a Tech II Triglavian weapon is by learning one of these skills.  And Skillbooks are consumable items - once used they are destroyed.  Unlike Blueprint originals, for example.

So in the face of the new supply being cut to zero, the prices have done exactly what we would expect them to do - risen sharply and the supply on the market is falling fast.

I have made good ISK during this rise though without really realising what was going on.

The risk now is that CCP reinstates drops or somehow seeds the skillbooks into the game again - in which case the prices will drop rapidly.

For now, i think i will pull away from this market.  I might be wrong but i only have Wealth of 9bn isk as i write this post so sitting on a 500m isk loss from one item would be noticeable.

Month end update - October 2020

At the end of my second full month, my wealth is 7.2bn ISK after paying 1.4bn to upgrade Omega for another 30 days.  My wealth increased by 4.1bn in October.

Account Plexed

A key aim of generating sufficient isk to buy plex to play the game for free continues.  500 Plex was bought for 1.4bn isk.  This will continue each month going forwards.  i continue to buy the Plex 14 days before the end of my Omega time using the daily income from Trading which should easily give me plenty of time to spare.

Accounting for the Income, wealth and isk flows

I put up a post before this one which takes the nerdy journey through accounting.  Worth a read if that is your sort of thing.

Onwards to the next aim

This time in Eve, i don't want to purely focus on trading by having characters in each trading hub.  I want to experience as many of the isk making ventures in Eve that i reasonably can.

So, the aim with trading is to get to 10bn monthly income after buying the Plex to extend the Omega account.

To that end, the increase this month of 4.1bn (5.5bn pre Plex) was disappointing.

I was hoping to see an increase of 5-6bn post plex payment - but that was not to be.  Maybe i will need to set up in another Hub, we will see.  I have an idea for Amarr.

Once i get to my target trading income i will then expand into manufacturing as a first step.  But that may not be for a few months yet.

Analysis of Trading Profits

In all, i made sales of 37.0 bn isk (25.5bn in September) which created income of 5.6bn (1.4bn was used to buy Plex, 4.2bn invested back into the market) vs 4.5bn in September.

Purchases of items from Jita cost 27.1bn, so my pre-tax margin was 26.6% (37.0-27.1)/37.0 vs 30.9% in September.

So, closer this month to my 25% target - that is fine by me.  I used to operate on a 20% target but the increase in taxes as forced me to increase my profit target (i.e. pass the costs onto the consumer).

But then i need to take a whole series of costs off:

Courier Fees: i aim to pay 2% of sales value to the Courier = 2% x 37.0 = 0.7bn

Sales tax cost me 1.0bn ISk (=2.7% of sales), as expected given i am Level 4 Accounting Skill

Broker Fees costs me 2.6bn (=6.9% of sales).  Now, i can break this down into the initial listing fee of 3.78% (because i am Level 4 Broker Relations) and therefore the rest is the cost of changing the price which is 1.14% a shot.

So, i know the listing fee = 3.78% x 37.0 = 1.4bn and therefore the price change fee is 1.2bn (2.6 - 1.4). This 1.2bn is 3.1% of sales.

So, the post-tax margin is 26.6% - 2.0% - 2.7% - 3.8% - 3.1% = 15.0%.

Fees and Taxes take 11.6% off my margins (2.0+2.7+3.8+3.1).

15.0% is respectable but at the lower end of what i should get.   i can improve on it if i train Accounting and Broker Relations  / Advanced Broker Relations to level 5 . . . . . which is on the "to do" list.

Dodixie Seller character

For now, this is the only seller i have and it is my Main character.

The skills relevant to Trading that i have are:

Accounting: Level 4; means i am charged 2.80% of the sales price on completed sale vs the normal 5%

Broker Relations: Level 4; means i am charged 3.78% to list an item for sale; and for every price change, whether up or down, i am charged 1.14% of the new sales price

Advanced Broker Relations: Level 4; means i can reduce the cost of changing the price of items i already have for sale. I decided by train this rather than go all for Plex.  With no skill i would be charged 1.89% to change every price.  Level 4 has brought this down to 1.14%.

Trade: Level 5; increases the number of items i can list for sale by 4 per level.

Retail: Level 5; increases the number of items i can list for sale by 8 per level

Marketing: Level 2; this allows me to set up Sell Orders in stations other than the one i am in; i don't use this really

Given the level 5 Trade and Retail, i am able to post 65 items for sale (5 + (5x4) + (5x8)).  With no Trading skills you can post up to 5 sell orders

It would take me 38 days to train Accounting, Broker Relations and Advanced Broker Relations to Level 5.  And i still have to train Wholesale and Tycoon to increase the number of Sales Orders i can have up

As i write this i am using 64 sales slots up - so i am days away from buying and training Wholesale which will give me an additional 16 slots per level.

Rightnow, i have stopped training Manufacturing on my Jita character and i am focusing on Accounting, Broker Relations and Advanced Broker Relations to bring my costs down.

Items i am selling in Dodixie

The days of buying blueprints in Jita for 600k and selling them in Dodixie for 2.5m were good at the start but now dont make a difference.

So, at present, i buy items in Jita for 30m to 250m and sell them in Dodixie for margins of over 25%.  So far, on average of 26% before tax, 15% after tax.

The most expensive items i sell cost c400m in Jita and Sell for c600m on Dodixie.

I have moved off Blueprints for now and sell a few Skillbooks and mostly for now tier 2 ship equipment.

Each night i courier about 1-1.5bn isk of items from Jita to Dodixie.  The total cargo volume is 50-160m3.  So small but valuable items.

i find evemarketer very useful to find new ideas.  Also, i am using Eve Tycoon which seems to have more of the latest items in its market browser.

I stick to high margin products that sell slowly.  Items that sell 1 or 2 per day dont attract the big traders.  They cant benefit from scaling this up.

Currently, i have 64 items for sale in Dodixie worth 10.1bn isk.

Outlook

November will be all about increasing the sales in Dodixie higher, so much like October.  The daily sales in October averaged 1.23bn.  If i assume i need to make 10bn + 1.4bn income per month (=11.4bn) and i assume i can achieve 15.0% margin then i need to make monthly sales of 76bn and so daily sales of 2.5bn.

I have a long way to go!

Aims for November:

1) Continue to expand the Dodixie trader sell orders and reduce trading costs
2) Plex the account

Current wealth is 7.2bn ISK made up from:

• items for sale 8.9 ISK

• less a 20% provision 1.8bn ISK*

• ISK in wallet 0.1bn ISK

When i add up my wealth, I don't count assets I use in the course of my business such as ships, fittings etc nor do I add back any expenses such as skills purchased etc.  The wealth I disclose is made up of items that are ISK or are in the process of being converted to ISK.  Any ships or skills or fittings etc i buy are counted as expenses in that month.

* I take a 20% provision against the items I am selling.  Eve calculates wealth by adding up the value of the sell orders hence it is possible to increase your wealth by buying an item for 100m ISK and putting a sell order for 120m ISK (in this case your wealth would increase by 20m ISK).  For me, I want my wealth to be calculated at cost.  I know that the value of my sell orders will likely fall over time as I update my orders downwards as competition reduces their prices before my items are sold.  Hence the 20% provision is my best guess as to what the maximum reduction I would need to make to my sell orders as a whole before they are sold.  In an ideal world I would value my sell orders at the value which I bought the items for.

Accounting for my business

This is a post that talks about accounting for wealth.  It looks at the simple comparison of adding up assets each month to compare to the prior month as well as looking at how the sales made in the month generate the profits which generates the isk which is then reinvested into the market (i.e. shows the accounts for my business as you would see them in real life).

this is an accounting post, so move on if your nerd alert-o-meter is sounding the alarm.

in the next few days i will put up a post that discusses October in the traditional way.

Accounting for my wealth

During October, my wealth rose by 4.2bn isk to 7.2bn.  I am disappointed in that but that is the subject of the following post.

the simple method of looking at this 7.2bn is:

So, basic stuff much like a share or property portfolio would be compared. Cash + assets less some provisioning to estimate possible costs to liquidate the assets to cash.

But life gets more interesting if we want to see how did the 37.0bn of sales i made in October end up becoming an increase in wealth of 4.2bn (7.2-3.1 and a rounding error).

Lets look at the table below which is effectively the "Profit & Loss Account" for September and October.

(items in yellow are numbers i have inputted from data sources, the rest is calculated)

So, 37.0bn of sales became 9.9bn of of profits (i.e. i bought items from Jita for 27.1bn and sold them in Dodoxie for 37.0bn which gave me a total profit of 9.9bn isk and therefore was a margin of 26.6% (9.9/37.0).  That is inline with the 25% margin i target.

So far, so good.

But i then have to pay four sets of costs on all this - referring to the memo below:

1) Sales Tax: for the full month of October i was Level 4 in Accounting and therefore i pay 2.70% sales tax = 1.0bn isk (actually is it 2.75% but rounding errors . . . . . )

2) Broker Listing Fees: for the full month of October, my Broker Relations skills was Level 4 and so i paid 3.78% of the listing price as a fee = 1.4bn isk

3) Broker Price Change Fees: however, i know i paid the brokers 2.6bn isk in total and therefore 1.2bn (=3.11%) was the fee paid to change the prices of items for sale to keep them the lowest price

4) Courier Fees: and finally, i generally pay 2% of the sales price as a Courier Fee to get my items from Jita to Dodixie within an hour if i can.

In total, that brings my October margin down from 26.6% to 15.0% as these four costs came to 4.3bn isk.  So my profits after trading costs are 5.6bn in October (9.9 - 4.3) vs 4.5bn in September.

And then from this i pay 1.4bn to buy 500 Plex to keep the Omega account.

And therefore, my monthly profits which is the increase in my wealth comes to 4.2bn isk in October.

The Balance Sheet of my business is simple for now.  It is Cash + Items for sale less the provision which should equal (balance too) the sum of monthly profits to date:

Note that 'Retained Income' is the sum of all profits my business has ever made and so equals the prior month's retained income + this months profit.

But see how the 'Profit & Loss account' is merely the movement in the 'Balance Sheet' of September to October for my business, and see how the sum of the profits is split between Items for Sale and Cash.

The Cashflow Statement is also quite simple though we must remember that i seek to invest all my isk back into the market and therefore when i look at the cash i have left over at the end of each month it is basically none.

But for the really nerdy here, the cashflow statement is interesting to see how it is generated:

The first part of any cashflow statement is to take the Trading Profits in the Profit & Loss account and adjust for all 'non-cash' items.  i.e. Profits are not Cash but over time they add up to be the same.

So, looking at October, the 5.6bn isk trading profits are reduced by 5.2bn to reflect the increase in stock (=items for sale).  Lets think about that for a second.  At the end of September i had 3.7bn of Sell Orders on the market (see the top of this post) and at the end of October i now have 8.9bn of Sell Orders on the market.

So, in isk terms i increased my investment in the market by 8.9-3.7 = 5.2bn isk.  In other words, i sucked up an additional 5.2bn of isk that the trading profits generated.

Now, i also take a provision against these sales as an estimate of worst case cost to make the sales complete.  This is a non-cash item that reduces accounting profits but does not change the cash position, so we need to reverse it out.  The increase in the provision from September was 1.0-0.7 = 0.3bn isk and so we add that back (i.e. trading profits were lowered by 0.3bn isk but the cash generated was not changed by this accounting entry).

What that means is that the 5.6bn of trading profits actually generated 1.4bn isk of cash because the rest was invested back into the market into Sell Orders with a small adjustment for an increase in provisioning.

This 1.4bn isk generated was spent on Plex to continue the Omega and so once all is said and done, i did not generate any surplus isk on October and ended up with the 0.1bn isk i started with!

. . . . . . and that is the nature of high growth companies that need to spend alot to continue their growth.  All their surplus cash is reinvested back into the business.  It looks like they are not generating any cash but in fact once they stop growing the cash generation is fantastic!