Finances 201

To pick up where we left off, we saw how our fictional Eve Corporation, Plasma Creations uses taxes to bring in the ISK to pay for its overhead costs through the use of taxes. Like any corporation though, you will want to bring in a steady stream of profit in order to expand and develop into an even more prestigious corporation.

The first thing we need to do after we determine our standard overhead costs is to find out our operating costs. Operating costs differ from overhead costs because they are more pliable and fluctuate more often, usually based off of the current market in EVE. In Plasma Creations we have four divisions within the corporation:

Mining
Manufacturing
Logistics
Security

We will need to determine the actual flow of ISK both into and out of each of these departments. Let’s take a closer look. The figures will all be fictional and used to illustrate the technique, it is up to you the future CEO to find out for yourself how this will work out for your individual corporations – but here are the basics.

The Mining division of Plasma Creations is responsible for delivering refined minerals to the corporation through our Mineral Buy Orders. Plasma Creations pays in the neighborhood of 80% market value for these minerals to ensure members of the division make ISK and Plasma Creations gains a discount on it’s manufacturing needs.

Unless otherwise needed for expanding corporation use, Plasma Creations will buy a weekly allotment of the following:

2 million units of Tritanium
1 million units of Pyrite
½ million units of Isogen

An estimated cost for these units (in today’s current economy) is: 36 million ISK. This amount is expenditure and comes out of the corporation wallet in the front end of the monetary cycle.

The Manufacturing Division receives the minerals and makes Igo Boom Tech 2 cannons and is responsible for maintaining the output of these modules as well as ensuring the corporation has at least a one month supply of BPC’s (Blue Print Copies) on hand at any given time. Corporation members are given enough minerals and BPC’s to handle production and are paid a dividend of 10% of the profit form the sales of these units, divided by the amount of production they handle. The production needs are usually split evenly amongst the members in this division to make it easier on our accountants. This expenditure goes out at the back end of the monetary circle. At current economic prices, this equates in a 14 million ISK split between members per week or 10% of profits.

The Logistics Division receives the finished products and seeds various stations around the Heath Region and places them in the marketplace for sale. The cost of fuel for Carriers is covered by the corporation and the up front payouts for these operations are around 24 million ISK.

Last but not least, the Security division is paid 5% of profits for their escort duties and generally run 7 million ISK per week.

The weekly sales of the Igo Boom Tech 2 cannons are 200 million ISK. After 36 million ISK is paid out to the Mining Division and 24 million ISK to the Logistics Division, leaves 140 million ISK. 10% is given to the Manufacturing division and 5% to the Security division, leaves 119 million ISK for the corporation.

Obviously some of these costs will fluctuate as your corporation expands – prices of minerals or fuel may rise, profits from the sales of your production may go down; ships get attacked and cargo is lost, etc. What you are looking for here is a general idea of what is going “out” of the corporation’s wallet and what is coming “in”. This allows you to figure out future planning for your corporation so you can determine timelines and get your corporation into position to act on those plans.

Expansion

Perhaps your first expansion will be to grow your corporation from one POS (Player owned station) to four. This would allow you to say double your production and research activities, equating into twice as much profit. To keep the logistics side of all of this simple, let’s say you want these three additional POS’s to be in high-sec space.

First, you will need to determine how much these POS’s will cost you, which you will do by figuring out what you can make yourself as a corporation, or buy what you need from the marketplace. Let’s put out the blind figure of 18 billion ISK out there to accomplish this.

With profits of 119 million ISK per week, you will need to figure out how much of this you should ear-mark for the POS expansions. Let’s make the math easy and determine it will be 100 million ISK per week, 400 million per month. According to this plan it will take you three months to raise 1.2 billion ISK… 30 months to raise 12 billion ISK. In an MMO, most anyone will feel daunted by this task. However, there are options…

First off, let’s scale back to just 1 POS at 6 billion ISK. According to our savings plan, this means that within 15 months we will be able to expand. This is still a long ways to go, as anyone would suspect. So let’s start looking at ways to cut into this timeframe and make it even shorter.

This is the time to start making friends and making deals with other corporations and possibly start fuelling possible future alliances. You will be surprised to find that you may end up saving as much as 30% or even more. Now you only need to raise 4 billion. Working with your members you may want to host all-for-corporation weekends for a couple of months (100% tax and you run missions and mining ops), this can generate a lot of ISK quickly and reduce some of your outgoing costs – especially with the mining operations.

By the end of this you will probably be looking at only 3 months to get into your first POS. Now you start saving money on research, production which adds to your bottom line. Production is increased as you bring the POS online and now instead of 119 million ISK per week, you start making 50% more or 180 million ISK per week and you grow again.

One thing that separates the corporations of Eve from guilds of other games is that Eve is a long-term investment in game terms. So a couple of months between goals are not to be unexpected.

Conclusion

In the next part of this series, we’ll explore the worst case scenarios that should be included in your business plan: Bailouts – what happens if everything goes south? We’ll also start looking into how to put your business plan into action in the world of Eve. The final part of the series will come after that and we’ll explore even deeper into the day to day activities of running a successful corporation in EVE.