Tutorial : How to start a profitable business - Part 3

Day 806, 11:17 Published in Canada United Kingdom by Apotygma

Nowadays, everyone in eRepublik wants to start a company. Starting a company is the first step towards the wealth. It is also part of one of the main elements in eRepublik : economy. A lot of people seem to forget that eRepublik isn’t only about war, especially with the WW4 taking place right now, but also about economy. Every single product on the market is produced by a company owned by a player or by the state, even this last one can be considered as a player.

During the next couple of days, I’ll be presenting you how to run a successful company through different part of my (extensive) tutorial. Today, I’ll publish my second part : the financing of your company. If you didn’t read the first part, read it. You will find it here :

- PART 1 : The organization
* In english (published in UK)
* In Portuguese (published in Brazil and Portugal)
* Turkish (on his way)

- PART 2 : The financing
- In English (published in the USA)
- portuguese (Published in Portugal)

If you want to translate this tutorial in another language, please PM me.

PART 3 : The projections

Today the 3d part where we are actually going to ensure that your business is profitable. How are we going to do that? Well we are going to try and think about what your profits and costs will be. If you know from the start what they will be you will know what to expect and what the risks are. Normally you will be able to check the prices on a long period through tools like ereptools, but more on this later.

We are going to make it very easy today, some people use very complicated excel spreadsheet to calculate everything, but there are very easy wages to find out perfectly the business that will allow you to earn a lot of money.

First I will present you a tool where it will calculate everything automatically, after that how you can do it on your own. I will only base myself on this tool as it is very easy to use and will not force you to calculate : the total amount of raws used, the total amount of products produced per day, the breakeven price, etc… Those are all very interesting and if there is need for, I will find a way to make an article about it, but let’s keep it simple so that everyone (even those with little time) can do it.

The way that I present may take 10 minutes per market and country, so pretty quick. Now let’s start.

1 – The easy way

I personally always use : http://truebluecreations.net/, very easy tool to know how well your company is running. You should always use it while you are managing your company, but it is also a great tool to make calculations as everything is already included. You have also the possibility to make your own spreadsheet, it will provide you more information, but it will take you more time than necessary.

So, first we need to take a look at the kind of company you want to launch and in what country. When you know that (or even if you don’t, pick one and start the calculations), we are going to base our estimations on a company that is already in the market. This will provide you information that is quite close to the reality.

When you know that, you can now go and look for a company that is active on that market. This can easily be done through http://ereptools.net/companies/browse. Pick one with 10 employees, best with a wide range of skills otherwise your information will be limited. Add this company to your page on TBC.net and we can start looking at the results.

Right now you will probably have something like this :

in big here : http://yfrog.com/eutbcj

This already gives you a good information about the possible earnings, but first we need to make some adjustments.

A – Set the costprice of raws, sometimes this calculator is wrong and it has to be updated. You can bet that the costs of raw will be pretty constant over time, this variable will only vary a little through time.
B – set the lowest sell price of the market, this will be the price that you will sell your products especially in the beginning. Later on you will be able to wait a little more until prices rise, but we will not treat that.
C – Set the profit margin to 0%
D – Enter in “Current Wage” the highest wage for that skill on the market (for a skill 5.4 pick 5, etc..)

Now we can start looking at the results, if you have 10 employees those will be pretty accurate. Right now you will be able to compare if the wages on the market allow you to make money or not, this is easily watchable on the right.

If you lose money on nearly each employee this is a bad sign, best is to pick another company or another country. The profit margin you have is on the top.

And now you are done, you know the probable earning you will have and your profit margin. Quite easy, but you will need to stay attentive because this can be wrong, everything depending on the wellness, etc… Often companies can have low productivity workers or all of the same skill. This will prevent you from having a good view of possible profits. This tool is thereby very usefull when your company is already running to find the most profitable skill or the maximum wage you can pay without losing money.

So now let’s take a look at how to calculate it on your own.

2 – Calculate it on your own

I am going to present you two methods, each possible but that should provide the same results at the end. First I will do it by using the same tool given at TBC.net, after that I’ll give you a way to calculate it using an excel spreadsheet. I will present you an article that I wrote 3 months ago using this last method.

A – With the TBC.net tool :

We are still going to use the tool I just gave you, but lower down the page you will see this :

This is a very useful tool, set it to 10 employees and then you will be able to calculate per skill level the wage you can set to turn breakeven, 5% margin, 10% margin, etc… Fill this in for every skill from 1 to 7 and copy the results in an excel sheet. Don’t forget to enter the market prices of your products and the raw material costs otherwise your calculations will be wrong.

For skills under 3, use 50 wellness and above 90. This will give you the most accurate results and will allow you to make money if they produce at high wellness than that which will often be the case. Don’t hesitate to PM people if they don’t fit into your calculation to rise their wellness.

In that excel sheet, also enter the highest job offer on the market and make an equation to deduce the one from the other. This way you will know how much money you can make with each skill level. If you see that you don’t make money, look further.

Now, to know how much you are going to earn with each one of them you can set a common comparison basis.

Q1 and Q2 : 5 skill 1 + 3 skill 2 + 2 skill 3
Q3 and above : 5 skill 4 + 3 skill 5 + 2 skill 6

It is possible that in a Q1 or Q2 you find skill 6 employees, but don’t really count on this as it will be more the exception than the rule. If you find one, keep him ! It is always interesting to have one as you may earn a lot of money with him, I personally always keep joboffers open even if I am not the best paying.

Now that you have your 10 employees, add the earnings that you have per employee skill and convert it to gold. You now have the amount of gold you will make per day ! Congratulations !

You can easily do this for several countries and several product types. The better you search, the higher your earnings will be. Some newspapers around the world do this work for you, the one I found was the Underdog’s bark, it didn’t publish much since a while, but Buck Rogers (the owner) promised to publish soon something so subscribe to be the first to know !

B – Using an Excel spreadsheet :

Now I am going to present you how to make your own spreadsheet to compare the possible earnings. I made an article using this method a couple of months ago that you can find here . You can easily look at the results or the spreadsheet here : http://tiny.cc/spreadsheet262.

So first thing to do is open an excel spreadsheet and enter the following cells, this is for a Q1 company. I made the assumption that in Q1 and Q2 you’d mainly have skill 1 to 3 workers and in Q3-4-5 mainly skill 4-5-6-6+ workers. So, no need to make it harder than needed.

- Money per day
- Total Wages (gold)
- Total RAW cost (in gold, forgot this one in the spreadsheet 😛)
- Units produced
- Sales
- Skill 1 M wage
- Skill 2 M wage
- Skill 3 M wage
- Prod. skill 1
- Prod.skill 2
- Prod skill 3

So, first we will have to fill the cells. I am going to take the example of a Q1 grain company in Australia, the first line in the spreadsheet I gave you. Some of the columns are very easy to fill. For the productivity just open a productivity tool and make the calculations. For Skill 1-2 take an average of 50 wellness and skill 3 90.

After that, we are going to take the following composition of employees. Most of the times this will not be the case, but this is supposed to make the calculations easier. So, we are going to suppose that you have the following composition (for Land and Manufacturing)

Q1 and Q2 : 5 skill 1 + 3 skill 2 + 2 skill 3
Q3 and above : 5 skill 4 + 3 skill 5 + 2 skill 6

For housing :

Q1 : 5 skill 1 + 8 skill 2 + 7 Skill 3
Q2 : 10 skill 2 + 10 skill 3
Q3 – Q4 : 4 skill 2 + 4 skill 3 + 6 skill 4 + 3 skill 5 + 3 skill 6
Q5 : 5 skill 3 + 5 skill 4 + 5 skill 5 + 5 Skill 6

So, now that you have your employees and their productivity make a formula and add all the productivity in the “Units produced cell”. As you all know, every product need a certain amount of units of production to be produced. For 1 product you need :

* Food - 1 unit
* Moving - 10 units
* Gifts - 2 units
* Weapons - 5 units
* House - 200 unit
* Hospital - 2000 unit
* Defense System - 2000 units
* Raw materials - 1 unit

So, to get the actual amount of units produced, you divide the total productivity by the amount of units of production needed for 1 product.

In the “Sales” column we are going to suppose that you sell everything you produce. This will not always be the case, but most of the time it will. So multiply the amount of units produced by the lowest price on the market. Best is to look at the local market as you will hardly make money on the international market. It is also best to put the price in gold, this will allow you to compare easily everything.

As second, you need to deduce the amount you spend for raws. For each unit of production you will spend one unit of RAWS like we explained in Part 1. I'll repeat myself or it is something I forgot : the amount of RAW you spend is equal to :
- The quality of your company * productivity

And now last, the most annoying work : you will need to enter the highest job offer on the market in gold in your spreadsheet and this for every relevant skill. How more countries you take into account, how longer it will take. For Raw materials it can be pretty quick but for manufacturing it can take a while. You will be able to use them for every single product but it will still take a while.

Now that you have the total wage per skill level, add it the same way as the productivity in the “Total Wage” column. Now you have the total wages you will have to pay.

To know the profit you will make it is now very easy : Total Sales – Total RAW cost – Total Wages. And you know how much money you will make per day. How higher you go in quality, how higher this number will be.

3 – Changes needed?

We will see further on, that it is very interesting to buy a company from the marketplace as it will save you a lot of gold (10-20% of the total startup capital). Some of them may even have working export licences to countries where you can sell at a higher price than the country you are currently looking at.

To adjust calculations using the tool I provided you, you only need to convert the products sell price (look out for import taxes !) into the currency of the country where you will produce and do the calculations again ! About the import taxes, some countries set very high import taxes because they want to protect their home market. The import taxes will raise the price you ask by a certain percentage that can go up to 99%. It is very important that you realize that an import license to a country with a 99% import taxes on the product you are going to import is WORTHLESS !

So before you buy a company, be careful about that. In RAW most of the time there will be no problems as countries that don’t have a high resource region will often not set import taxes on that product.

Last point, if you plan to sell through donation : still make the calculations with local prices of the country where you are settled. Donation prices are often under the lowest world price and very hard. It will require a lot of work to succeed, but for Q5 it will nearly always be the case.

This may seem a lot of work, but you will see that most of the time you will start with this. But more on this later !.

4 - Varia

After all this serious talk that may have bored you, here is something to compensate. If you follow exactly what I am saying and teaching, the girls in those pictures might be your futur eGrilfriends.

So thanks for reading this Third part of my tutorial, vote and subscribe to stay informed about the latest parts !