Lets assume you have a business model like mine which is to Buy from Sell Orders in Jita, courier the item to a regional Trading Hub and put the item up for sale.
Step 1 - buying the item, no additional costs
Lets assume i buy the item for 750k from a Sell Order in Jita
So far so good, there are no additional costs. The 750k is spent and the item is in my inventory. My wealth has not changed.
Step 2 - couriering the item, first additional cost
I don't courier my items from Jita to the Trading Huh. That is done by third party couriers.
For Courier Contracts i markup the cost by 20% and then offer a fee of 2% of this. So, 750k is collateralised at 750 x 1.2 = 900k. Apply the 2% fee (which is always accepted no matter how long the journey and if it is high / low / null sec).
2% fee costs 18k isk. So my wealth is now down by 18k.
Step 3 - once it arrives at the Trading Hub put it up for sale
I am Level 5 all the relevant skills to take my tax rate to the lowest possible.
This page at Eve University takes us through all the Eve Online tax rates and their formulas.
The Broker Listing fee for me is 1.5%.
I aim to make a 25% item margin. That is, i want the Sales Price less Cost Price to be 25% of the Sales Price.
For my 750k item, that means the Sales Price needs to be 1m isk, the cost price is 750k and so the item profit is 250k which is 25% of the Sales Price.
Therefore, the listing fee is 1.5% x 1m = 15k.
My wealth has technically risen by 250k, less the 18k courier costs and the 15k listing fee. However, i also take a 20% provision for every item for sale which means i reduce my wealth by 200k. Therefore, my wealth is up by 17k (=250-200-15-18).
But my cash is down by 783k. That is important to know - in this game, as in real life, profits often come before cash. Cash comes in through the door at the end. There are exceptions to this where businesses charge in advance (online classifieds) or businesses that pay their suppliers after the customers pay their cash (retailers).
Step 4 - i may need to change the price due to competition coming in with a lower sales price
Take that as read, i will always ensure my item is the lowest price.
Step 5 - i sell the item and so pay transaction tax
Lets assume i did not need to change the price, i sell the item for 1m isk and pay the transaction tax of 2 (=20k isk).
Finally, cash comes in. Profits and Cash match = 197k.
The Margin structure of all that
Sales = 1m.
Cost of purchase = 750k
Item Profit = 250k
Item Margin = 25%
Courier Fees = 18k
Listing Fees = 15k
Transaction tax = 20k
therefore, sales & distribution costs = 53k
Profit = 197k
Profit Margin = 19.7%.
What does that mean?
At its simplest this means that for every 1m sales i make 197k isk.
it also means:
if i push the margin up from 25% to 30% then the bottom line profits goes up 35%. Let that sink in.
if i decrease the margin from 25% to 20% then the bottom line profits fall 31%.
That margin is everything.
If any of the other costs such as Courier Costs or Transaction Taxes or Listing Fees rise by 1% then the bottom line profits fall by 5%.
If i increase volumes by 10% then the bottom line rises by 10%.
Basically, if i can raise the margin then that gives me the best bang for my bucks.
Also, from a cash flow point of view - to do a 1m sale i need to spend 783k first. I do 300bn in a month which means i have spent 235bn getting to that point.
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