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Saturday, 21 November 2020

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.


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