Everything you ever wanted to know about business, part 2 [WGC]
Day 721, 10:04
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Published in Canada 
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by
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by Alias Vision
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In part 1 we looked at each industry sector, what some of their considerations are and the challenges of the opportunities found there.
A question of quality and planning.
The quality level of a good is a counter intuitive one here. In theory a higher quality good should be better right? Here it is not always the case. New owners should always be aware of the quality factor.
Raw material quality.
Raw material is the only sector in which quality is linear. A Q2 good is twice as valuable as a Q1 good, a Q3 good is three times as valuable as a Q1 good, etc... A prospective owner in raw materials should always have a plan to either start as a Q2 immediately or plan to upgrade quickly after the initial investment. The reason for this is that a Q2 company will produce 80% more goods than a Q1 company with similar wage costs, a Q3 company 140% more than that same Q1 company and so on.
It is because similar Q companies will compete for the same waged workers. If company A as a Q1 has 50$ in wage commitments and company B as a Q2 has 60$ (but often they have almost identical payrolls) in wage commitments, that 80% increased production is a huge advantage. In raw materials it pays to be patient.
Here is a rough estimate of the progression of production for raw material companies:
Q2 will produce 80% more than Q1.
Q3 will produce 33% more than Q2.
Q4 will produce 16% more than Q3.
Q5 will produce 7% more than Q4.
Additionally raw material producers should have identified a foreign market they wish to enter. This is because raw material will sell domestically first and flood the market. The best margins for profits will be in foreign markets with low or non-existent import taxes. Research international markets in whichever resource you plan to exploit and identify potential winners. If there are none, that may mean it is not a good time to build in that sector. As a matter of fact, it is always a good idea to research international markets in every industry before jumping in. Sites such as ereptools.net offer you the easiest access to this kind of data (including figures like world stock).
Manufacture quality.
In manufactured goods, quality is not as linear. The easiest example is with weapons. A Q2 weapon is not twice as good as a Q1 weapon but 25% superior only. That means that when it comes time to sell a weapon you can't simply ask for twice as much as a Q1, the market will not support it. As a rule, you should be able to do very well in any manufactured good as a Q1. There will always be demand for basic weapons, food, moving tickets and gifts.
Upgrading quality in manufacturing requires the most research. Observe your market, see if the higher quality good is being purchased. You want to make sure there is enough volume that you will be able to sell with the competition. If there is chronic shortages, that is an immediate opportunity. If half the inventory is getting sold on a regular basis, the buyers are there.
Most people, especially in war thorn regions, will feed themselves at a subsistence level only. Because of the way wellness increases, they may not be able to afford or justify higher quality food. However, this market is viable as citizens attempt to remain at their highest efficiency especially during peace. The higher the quality of their company, the greater the cost to wellness and the more likely they are to purchase better food.
Higher quality guns will move as soldiers try to put as much damage up as they can. Purchasing these better goods will often depend on price. Because of the smaller benefits to upgrading, you must make sure you can sell at a cost no higher than the benefit granted (so if Q2 gives you 25% more damage over Q1, you probably won't purchase it as long as it costs more than 25% more). A basic gun may be a necessity but a higher quality one is often a luxury, know your market.
Gifts will often be purchased in bunches. They are the number one luxury consumer good. Although they can be used as a strategic resources as discussed in part 1, most owners will realize their sale from the citizen with extra money looking for that immediate boost. The increased value of gifts, contrary to what is stated for other manufactured goods, is linear. A Q2 gift will yield twice the benefit of a Q1, a Q3 three times a Q1 etc... So if the market allows, you can sell at greater margins in a good environment.
Moving tickets are often the rarest good on the market and that allows them to be very expensive. This is the savings grace as nobody purchases anything greater than Q1 moving tickets. If you settle in a nation that travels a lot and has a good manufacturing sector (meaning a lot of potential workers at reasonable wages), you can generate interesting profits. If you are in a nation that suddenly becomes isolationist, you can go broke rather fast. Export licenses here can work well if you have identified your customers accurately.
Construction quality.
Again this was touched upon already in part 1. The hospital and defence system industries are, if not government controlled, then government sponsored. Over time these governments have invested to allow them to build infrastructures of Q4 and Q5. A similar investment for private citizens would be massive and not even guarantee success because after that expenditure of money you still have to find the workers and raw material. Also as non-consumable goods, these structures only need replacement when war destroys them. In fact, in the case of defence systems, the massive amounts of damage managed during conflicts have rendered them almost obsolete, at the very least less important. So the easy advice here is leave the business of building hospitals and defence systems to government and already established outfits.
Housing is interesting in that it can follow the progress of a population. When the population is young it can only afford Q1 houses. As they mature and their wealth increases, they often upgrade what they have to something better. The challenge remains the non-consumable nature of the product. Because a house is the single biggest purchase a citizen can make, it often tends to be the one they do the most research on. It is also the one product they are most likely to purchase from an individual rather than the market. Do not expect to passively produce in the housing market. You often have to create your opportunities here.
Know your market.
It is crucially important if you are to be successful that you understand the market you are operating in. That means research beforehand and constant monitoring after. It can be little things that make a huge difference... for instance you may notice that your particular market is most active in the early morning. So if you put your best offer out at that time, you are more likely to promptly sell your products. Don't overprice and get greedy. If you consistently make small profits on each of your goods, you will grow your wealth and be better able to weather the dips in the economy. Along those lines, keep a healthy reserve. A good reserve is more than two days wages and stock. A really good reserve is five or more days.
Study international markets for opportunities. Often the best places to look are in nations experiencing a baby boom. But be careful! Others are doing the same thing as you and you need to evaluate if the initial cost is worth the investment. Hungary was an extraordinary market during its baby boom, France was not as it got flooded with new arrivals in a short period of time.
Manage your workforce efficiently.
It is often too tempting not to put the biggest wage offer out there to attempt to attract that high skill worker. You have to calculate the impact it has on your bottom line. Do not think you can poach a worker for a high wage and lower it later for your own benefit. Someone else out there is going to offer something similar and you will lose that worker.
The job market, like the goods markets, fluctuates. This fluctuation creates opportunity. When you need a worker, look at which group is offering the best bang for the buck. It may not be that skill 7 worker, it may be the skill 5 guy. If you get the lower skilled worker at a reasonable price, you will have more flexibility in offering him raises and building his loyalty to you. Loyalty in the workforce is the rarest of commodities. If you can foster that, you will be extremely successful but it requires constant attention to details. Workers are by nature mercenary... offer the best wages and they will jump... unless they have been shown another way. A worker that was taken care of during the good times is more likely to stick around with you during the harder times of economic depression when wages need to be lowered.
Also be smart in what you pay your workers. If you manage to attract a worker above skill 7, you should make sure you can retain him or her. That means offering raises at levels 8, 9, 10 etc... It need not be big raises but anything above the current job market value will encourage that person to stay with you (and those that will leave usually have other consideration than money).
The black market.
Finally no primer would be complete without at least mentioning the black market. First a truth... many of the most successful businessmen and women are active on the black market. The black market is the side business of contracts between individuals, organizations and governments. It is the realm of private sales.
There is always a risk on the black market as it is completely unregulated. There is also the potential reward of greater profits for those selling and cheaper prices for those buying. The black market requires the most work because in all cases you have to create your own demand. If you are lucky, that demand will be steady and trustworthy... if not... it can be disastrous.
Those that are interested in this need to know that all the above rules still apply but the margins are different. They will need to make a lot of personal contacts and create a name for themselves. If they have the time that is.
Work, work and more work.
So the golden rules are as follows:
-research
-have a plan
-be patient
-be willing to invest the time
If you make those the central tenet of your approach to business, you will be successful.
*The above was an article from a Member Paper of the Writers' Guild of Canada*
In part 1 we looked at each industry sector, what some of their considerations are and the challenges of the opportunities found there.
A question of quality and planning.
The quality level of a good is a counter intuitive one here. In theory a higher quality good should be better right? Here it is not always the case. New owners should always be aware of the quality factor.
Raw material quality.
Raw material is the only sector in which quality is linear. A Q2 good is twice as valuable as a Q1 good, a Q3 good is three times as valuable as a Q1 good, etc... A prospective owner in raw materials should always have a plan to either start as a Q2 immediately or plan to upgrade quickly after the initial investment. The reason for this is that a Q2 company will produce 80% more goods than a Q1 company with similar wage costs, a Q3 company 140% more than that same Q1 company and so on.
It is because similar Q companies will compete for the same waged workers. If company A as a Q1 has 50$ in wage commitments and company B as a Q2 has 60$ (but often they have almost identical payrolls) in wage commitments, that 80% increased production is a huge advantage. In raw materials it pays to be patient.
Here is a rough estimate of the progression of production for raw material companies:
Q2 will produce 80% more than Q1.
Q3 will produce 33% more than Q2.
Q4 will produce 16% more than Q3.
Q5 will produce 7% more than Q4.
Additionally raw material producers should have identified a foreign market they wish to enter. This is because raw material will sell domestically first and flood the market. The best margins for profits will be in foreign markets with low or non-existent import taxes. Research international markets in whichever resource you plan to exploit and identify potential winners. If there are none, that may mean it is not a good time to build in that sector. As a matter of fact, it is always a good idea to research international markets in every industry before jumping in. Sites such as ereptools.net offer you the easiest access to this kind of data (including figures like world stock).
Manufacture quality.
In manufactured goods, quality is not as linear. The easiest example is with weapons. A Q2 weapon is not twice as good as a Q1 weapon but 25% superior only. That means that when it comes time to sell a weapon you can't simply ask for twice as much as a Q1, the market will not support it. As a rule, you should be able to do very well in any manufactured good as a Q1. There will always be demand for basic weapons, food, moving tickets and gifts.
Upgrading quality in manufacturing requires the most research. Observe your market, see if the higher quality good is being purchased. You want to make sure there is enough volume that you will be able to sell with the competition. If there is chronic shortages, that is an immediate opportunity. If half the inventory is getting sold on a regular basis, the buyers are there.
Most people, especially in war thorn regions, will feed themselves at a subsistence level only. Because of the way wellness increases, they may not be able to afford or justify higher quality food. However, this market is viable as citizens attempt to remain at their highest efficiency especially during peace. The higher the quality of their company, the greater the cost to wellness and the more likely they are to purchase better food.
Higher quality guns will move as soldiers try to put as much damage up as they can. Purchasing these better goods will often depend on price. Because of the smaller benefits to upgrading, you must make sure you can sell at a cost no higher than the benefit granted (so if Q2 gives you 25% more damage over Q1, you probably won't purchase it as long as it costs more than 25% more). A basic gun may be a necessity but a higher quality one is often a luxury, know your market.
Gifts will often be purchased in bunches. They are the number one luxury consumer good. Although they can be used as a strategic resources as discussed in part 1, most owners will realize their sale from the citizen with extra money looking for that immediate boost. The increased value of gifts, contrary to what is stated for other manufactured goods, is linear. A Q2 gift will yield twice the benefit of a Q1, a Q3 three times a Q1 etc... So if the market allows, you can sell at greater margins in a good environment.
Moving tickets are often the rarest good on the market and that allows them to be very expensive. This is the savings grace as nobody purchases anything greater than Q1 moving tickets. If you settle in a nation that travels a lot and has a good manufacturing sector (meaning a lot of potential workers at reasonable wages), you can generate interesting profits. If you are in a nation that suddenly becomes isolationist, you can go broke rather fast. Export licenses here can work well if you have identified your customers accurately.
Construction quality.
Again this was touched upon already in part 1. The hospital and defence system industries are, if not government controlled, then government sponsored. Over time these governments have invested to allow them to build infrastructures of Q4 and Q5. A similar investment for private citizens would be massive and not even guarantee success because after that expenditure of money you still have to find the workers and raw material. Also as non-consumable goods, these structures only need replacement when war destroys them. In fact, in the case of defence systems, the massive amounts of damage managed during conflicts have rendered them almost obsolete, at the very least less important. So the easy advice here is leave the business of building hospitals and defence systems to government and already established outfits.
Housing is interesting in that it can follow the progress of a population. When the population is young it can only afford Q1 houses. As they mature and their wealth increases, they often upgrade what they have to something better. The challenge remains the non-consumable nature of the product. Because a house is the single biggest purchase a citizen can make, it often tends to be the one they do the most research on. It is also the one product they are most likely to purchase from an individual rather than the market. Do not expect to passively produce in the housing market. You often have to create your opportunities here.
Know your market.
It is crucially important if you are to be successful that you understand the market you are operating in. That means research beforehand and constant monitoring after. It can be little things that make a huge difference... for instance you may notice that your particular market is most active in the early morning. So if you put your best offer out at that time, you are more likely to promptly sell your products. Don't overprice and get greedy. If you consistently make small profits on each of your goods, you will grow your wealth and be better able to weather the dips in the economy. Along those lines, keep a healthy reserve. A good reserve is more than two days wages and stock. A really good reserve is five or more days.
Study international markets for opportunities. Often the best places to look are in nations experiencing a baby boom. But be careful! Others are doing the same thing as you and you need to evaluate if the initial cost is worth the investment. Hungary was an extraordinary market during its baby boom, France was not as it got flooded with new arrivals in a short period of time.
Manage your workforce efficiently.
It is often too tempting not to put the biggest wage offer out there to attempt to attract that high skill worker. You have to calculate the impact it has on your bottom line. Do not think you can poach a worker for a high wage and lower it later for your own benefit. Someone else out there is going to offer something similar and you will lose that worker.
The job market, like the goods markets, fluctuates. This fluctuation creates opportunity. When you need a worker, look at which group is offering the best bang for the buck. It may not be that skill 7 worker, it may be the skill 5 guy. If you get the lower skilled worker at a reasonable price, you will have more flexibility in offering him raises and building his loyalty to you. Loyalty in the workforce is the rarest of commodities. If you can foster that, you will be extremely successful but it requires constant attention to details. Workers are by nature mercenary... offer the best wages and they will jump... unless they have been shown another way. A worker that was taken care of during the good times is more likely to stick around with you during the harder times of economic depression when wages need to be lowered.
Also be smart in what you pay your workers. If you manage to attract a worker above skill 7, you should make sure you can retain him or her. That means offering raises at levels 8, 9, 10 etc... It need not be big raises but anything above the current job market value will encourage that person to stay with you (and those that will leave usually have other consideration than money).
The black market.
Finally no primer would be complete without at least mentioning the black market. First a truth... many of the most successful businessmen and women are active on the black market. The black market is the side business of contracts between individuals, organizations and governments. It is the realm of private sales.
There is always a risk on the black market as it is completely unregulated. There is also the potential reward of greater profits for those selling and cheaper prices for those buying. The black market requires the most work because in all cases you have to create your own demand. If you are lucky, that demand will be steady and trustworthy... if not... it can be disastrous.
Those that are interested in this need to know that all the above rules still apply but the margins are different. They will need to make a lot of personal contacts and create a name for themselves. If they have the time that is.
Work, work and more work.
So the golden rules are as follows:
-research
-have a plan
-be patient
-be willing to invest the time
If you make those the central tenet of your approach to business, you will be successful.
*The above was an article from a Member Paper of the Writers' Guild of Canada*
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Comments
Canadamaxxx
Great set of articles.
awesome article and very helpful!
Great article Alias. Always enjoy the things you publish.
This needs to be added to the University Wiki of Great Educational Articles...oh wait, it hasn't been officially made yet. Well, when it does, this set will be in there. Thanks for the tutorial.
One of your best articles ever.
STICKY THIS IN OUR FORUMS.
Cheers