Wednesday, January 9, 2013

The road to the 10B kit

I'm an engineer, not an accountant.  So my strength is in processing the numbers and running the system, as I said before in Lessons in Accounting.  But now with a solid plan, a healthy revenue stream, and a transparent view on other expenditures, I've been able to get the next benchmark in my sights: jump freighter production.

To explain my personal organizational structure, I use "work weeks" to keep control of my manufacturing lines.  It gives a simple factory cycle that can be repeated week over week.
  1. Buy materials
  2. Build intermediates (components, T1)
  3. Build Products
  4. Sell Products
By establishing a regular clock, it's easy to account for inputs and outputs.  Keeping all workers synchronized also simplifies the logistical load immensely.

So, starting with the first cycle after Christmas, I started a planning spreadsheet.  Not the prettiest, or extremely accurate, but enough to keep tabs on the important metrics until something more eloquent can be devised.

Why kit-costs are important

As I said before, it's my personal habit to always build bigger and better things, reinvesting ALL profits into the next thing.  The core metric I've been focusing on hasn't been profits, but kit costs instead.  By keeping week-over-week investments flat, I am able to bank the profits.  

Also, by monitoring kit costs, I am able to more intelligently pick products.  Instead of betting big on higher risks, I can reign in outputs into safer mainstays.  This also prevents the other unintended consequence of big kit costs, long payouts.  Since the short term goals require a lot of liquid isk available quickly, it makes more sense to take lower risks to avoid getting stuck with product.

Why 10B?

I have a friendly rivalry going back and forth with my friend in Aideron Technologies, TheAhmosis.  One metric I've been living in the shadow of since leaving Aideron Robotics is 50B net sales/month.  We managed to achieve this peak for two months before industry was spun out and Aideron Robotics joined FW.  After leaving, I focused on really maximizing the profit per contributor; shifting from a broad-base focus to an agile profit-chasing focus.

I've been steadily growing my production base from an initial 2B buy-in all the way to 10B in less than 6 months.  As the buy-in grows, the options for higher margin products grow.  It will be easier to pounce on ships and heavier investments.

Where to Next?

I see sustained kit costs topping out near 15B without investing in capitals.  My character and personal time resources really get strained at that point.  There is the ability to grow near 20B without capitals, but the time required to keep up with the invention steps would become prohibitive   I would like to move my PVP-main character to capitals, since that would be easier to manage with his lowsec lifestyle, but that would add another 6B to the kit costs, and really mark the maximum my characters can do with the current skill set.

The hope is by the time I reach this maximum, ISK can be poured into expanding to a real corp venture, and leaving the "solo"-industrialist lifestyle behind.  There is an absolute ceiling in view from here and continued growth will require new friends and partnerships.  As it stands, I have not come anywhere close to maximizing ISK extraction from the market.  I will hit an effort ceiling long before hitting a market volume ceiling.

Also, I would like to migrate to a non-synchronous work style.  This would open up more flexibility in producing products, without getting locked into production cycles that are longer than market cycles.  Currently I am hovering around a 10d cycle, because of my ammo production, and this ties in nicely with EVE's build time cycles.  By going asynchronous, modules and ships could be done in smaller batches.  Smaller batches means less ticks between market bubbles, which in turn means less slouching on the way out of products.  This will require new code and accounting structure though.  So I will stick to the synchronous work-week scheme I'm using now.