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Figuring costs for BPO

Author
Arcaus Rotrau Romali
Empyrean Enterprise Conglomerate
#1 - 2012-10-24 15:03:28 UTC
I recently bought the first blueprint that I plan to use for manufacture and sale instead of my for own consumption. I was running the numbers to find my sale price and break even point last night and didn't know if in figuring my acquisition outlay should I add an amount that reflects the loss of income from my primary income source, currently mining, for the travel time to pick up the BPO or is that overkill?

Also, if I mine my own materials do I count that as an increase to my profit margin?
Steve Ronuken
Fuzzwork Enterprises
Vote Steve Ronuken for CSM
#2 - 2012-10-24 16:45:47 UTC
I wouldn't bother putting the costs for the BPO into your calculations. It's an asset, which doesn't lose value. (BPCs are another matter)


As for your minerals:
Sell them from your mining hat, to your manufacturing hat at full value. If you can't make a profit with your manufacturing hat, then you'll have to revisit why you're manufacturing.

It's a profit, but not a manufacturing profit.

Woo! CSM XI!

Fuzzwork Enterprises

Twitter: @fuzzysteve on Twitter

Backfyre
Hohmann Transfer
#3 - 2012-10-24 16:54:31 UTC
The things I include in the cost side of T1 production are:

* market value of all minerals
* cost paid to station for running the job
* BPO cost offset (e.g. I add 1M for a battleship BPO offset but nothing for drones)
* BPC costs (if any)
* market taxes / fees

Note that as mineral prices fluctuate, you may find that you cannot compete against old inventory still on the market.
Arcaus Rotrau Romali
Empyrean Enterprise Conglomerate
#4 - 2012-10-24 17:11:06 UTC
Thanks for the advice, I actually forgot about the fees for running the jobs and to look at the BPO as an asset. The minerals aren't bought/sold though, I only have the one toon so I'm doing it all first hand.
Zhilia Mann
Tide Way Out Productions
#5 - 2012-10-24 17:47:56 UTC
Arcaus Rotrau Romali wrote:
Thanks for the advice, I actually forgot about the fees for running the jobs and to look at the BPO as an asset. The minerals aren't bought/sold though, I only have the one toon so I'm doing it all first hand.


That's fine, but you still want to account for them as if they were. If you don't, you'll likely end up in a situation where production actually decreases your total value (ie, you could sell your minerals for more than your end product).
Cipio Hakoke
Tactical Manufacturing Group
#6 - 2012-10-24 19:14:13 UTC
Zhilia Mann wrote:
Arcaus Rotrau Romali wrote:
Thanks for the advice, I actually forgot about the fees for running the jobs and to look at the BPO as an asset. The minerals aren't bought/sold though, I only have the one toon so I'm doing it all first hand.


That's fine, but you still want to account for them as if they were. If you don't, you'll likely end up in a situation where production actually decreases your total value (ie, you could sell your minerals for more than your end product).

This^^ Make sure the items you are selling is worth more than the minerals required to make it or you make more money just selling the minerals. The minerals you mine are not free. You payed in time with them. So if you are selling the items for less than mineral cost then you are paying isk to build the item.
Arcaus Rotrau Romali
Empyrean Enterprise Conglomerate
#7 - 2012-10-24 20:25:42 UTC  |  Edited by: Arcaus Rotrau Romali
Right, I've got the current mineral cost factored in so I have a minimum price point for materials and since this is a small offshoot from my primary 'job' of mining the time component is negligible, it's a small item really so I can pretty much use my leftovers. Using those numbers I've figured how many I have to sell to recover the cost of the BPO.

By starting small I hope to learn the formulas I'll need for bigger projects without costing myself too much if I make mistakes.
Bugsy VanHalen
Society of lost Souls
#8 - 2012-10-24 20:34:16 UTC  |  Edited by: Bugsy VanHalen
Arcaus Rotrau Romali wrote:
Thanks for the advice, I actually forgot about the fees for running the jobs and to look at the BPO as an asset. The minerals aren't bought/sold though, I only have the one toon so I'm doing it all first hand.

I understand where you are coming from. But you need to count the minerals as if you had bought them. If not your mining profits will distort the numbers.

For example if you are making and selling an item for say 2,000,000 isk all your fee's might work out to 100,000isk. If you do not count the value of your minerals it may look like that product is making you 1,900,000 profit. But if the minerals you use have a market value of 2,400,000 than you are actually losing 500,000isk. This is not a direct loss, but comes out of your mining profits. You could have sold those minerals for 2,400,000isk but instead sold them for 1,900,000isk in the form of your manufactured product while getting zero return on your manufacturing.

It is good to get into the habit of counting all minerals you use in manufacturing at market value. If you really like manufacturing and stick with it you will very quickly need to be buying them as you will not be able to mine near enough to sustain a decent manufacturing operation. Might as well get used to doing it that way from the start.

Generally I use the sell prices in Jita for mineral values. Any minerals I get for less than that value I consider trade profits, Any minerals I mine I consider mining profit. But all are added to my manufacturing at Jita sell prices. This way even if an item has a tight margin I have a bit of a buffer if I got the minerals cheaper.

There are three profit margins you will be dealing with, and although it sounds complicated, it is much easy to find your weakest link if you track them separately.

-You will have your mining profit based on what you would sell the minerals for. This does not have to be Jita sell prices, but at least use the value you would have sold them for if you did not need them. Jita buy prices, your local hub buy prices what ever works for you. If you were not manufacturing and were selling the minerals you mined, where would you sell them, and would you sell to buy orders or set up your own sell orders? What ever price that would be can be counted as your mineral value. Or to just get a good average price without much work use Cerlestes.de for reference.

- next is your trade profit. This is isk you would make through flipping items or minerals without any mining or manufacturing. There are many many players who make billions of isk per day just buying and selling stuff in trade hubs. Jita 4-4 is a hard market to get into but there are many other smaller ones. For example if your base price of tritanium is 6.8 and you manage to score 10,000,000 units at 6.3 that 0.5 isk/unit or 5,000,000 isk is trade profit as you could have made that just by flipping the stuff to a sell order in a high traffic hub and sold it for 6.8 isk/unit.

-third is your manufacturing profit. this is the price you sell the item for minus the fee's and mineral value that went into it. Most T1 items have around a 5% margin in Jita, usually Higher in mission hubs. Some items that are really hard to make or require low/null sec reaction towers can have 50% or higher margins. This is where the research comes in. Finding an item with a good return. If you already bought/decided on your BPO's you can skip this for now. I just hope the one you got is profitable.

The next big consideration is researching your BPO ME and PE levels. Most BPO's bought off the market have a default waste level of 10%. This is often enough to make manufacturing off this BPO not profitable.Researching the ME level can reduce this. Anything below 1% waste should be enough. But perfect ME can be as low as 0.01%.

To better understand this we will use an example of two raw BPO's. BPO#1 has 10% waste and requires 10,000,000 tritanium = 1,000,000 waste per run. BPO#2 has 10% waste but only requires 10,000 tritanium = 1000 waste. researching these BPO's down to 1% will bring waste down to 100,000 tritanium for BPO#1 and 100 tritanium for BPO#2 continuing the research ME to 0.2% waste which is the lowest I generally will go, will take BPO#1 down to 20,000 while BPO#2 is down to 20. So 1% down to 0.2% saved you about 80,000 trit on BPO#1 and only 80 trit on BPO#2 while the initial research from 10% down to 1% saved you a whopping 900,000 trit on BPO#1 and 900 on BPO#2. Considering that it takes way longer to research a BPO from 1% down to 0.2% than it does to take it from 10% down to 1% the additional returns of taking it below 1% are minor.

Researching ME levels to 5-10 is always worth while, but the diminishing returns means you get less and less return per ME level the more research you do. There is a huge return from 0 to 10 but only a minor improvement from 10 to 100. very few BPO's give any noticeable returns past ME 100. Also the bigger the item the longer each level of ME takes. For example some BPO's can be researched to ME 100 in about a month, others take over 1 month to get ME level to 1.

PE research, although done in much the same manor has a very different impact. PE affects how long each run of the BPO takes. It does not in any way affect the material costs. If you are keeping all you manufacturing slots running 23/7 this can make a big difference as you will complete more runs per day resulting in higher isk/hour per slot.
Arcaus Rotrau Romali
Empyrean Enterprise Conglomerate
#9 - 2012-10-24 20:46:24 UTC
Thanks again for the advice, it's been most helpful.
Anovanov
Deep Core Mining Inc.
Caldari State
#10 - 2012-10-26 17:13:54 UTC
There's a simple good tool to help you appreciate how far you have to research a BPO:

http://zofu.no-ip.de/bpo

The new problem is where to find a laboratory slot anywhere else than a POS now.

Till 2007 i've never seen a free slot in HS in any stations.

So good luck!
Bugsy VanHalen
Society of lost Souls
#11 - 2012-10-26 18:07:33 UTC
Anovanov wrote:
There's a simple good tool to help you appreciate how far you have to research a BPO:

http://zofu.no-ip.de/bpo

The new problem is where to find a laboratory slot anywhere else than a POS now.

Till 2007 i've never seen a free slot in HS in any stations.

So good luck!

no free slots but if sending the BPO in the cooker for a month waiting 15-30 days is not so bad if you are not ready for a POS.

Finding slots with que times under 30 days is possible. Especially in low sec and high sec islands.
Tau Cabalander
Retirement Retreat
Working Stiffs
#12 - 2012-10-26 20:45:07 UTC  |  Edited by: Tau Cabalander
Anovanov wrote:
The new problem is where to find a laboratory slot anywhere else than a POS now.

Till 2007 i've never seen a free slot in HS in any stations.

So good luck!

Because nobody does free or fee based research, or runs a research alliance.

You can't buy researched BPO, or BPC on contracts either.

Nor is there an in-game blueprint trade chat channel.

Roll

I'll just leave this here: https://forums.eveonline.com/default.aspx?g=posts&m=1802268#post1802268
Salpad
Carebears with Attitude
#13 - 2012-10-27 13:18:53 UTC  |  Edited by: Salpad
Anovanov wrote:
The new problem is where to find a laboratory slot anywhere else than a POS now.

Till 2007 i've never seen a free slot in HS in any stations.


I have.

Edit: No, actually, I haven't. I forgot that you guys are talking about ME slots. I haven't started looking for those yet. I'm still only doing PL research, haven't started on ME yet. Sorry. (PL slots are fairly easy to find, in connected high-sec.)