My selling prices and profit margins

[jaguarskx]

This is an update to my original post which contained an error in the formula is used for Profit Margins. ‘Circumcisor’ has pointed out the formula should be:

Profit Margin = Profit/Selling Price.

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I've read a posting about how people look mostly at income, but not profit margins. This is a posting of the many types of factories I have own, their production cost, selling price, and profit margins.

I tend agree that most people just look at total income (this is only an assumption though). However relying solely on profit margins alone isn't the correct way to look at product either. In the end it all boils down to the combination of both total income and profit margins, just like in real life. I haven't really done any hardcore analysis of the best profit margin scenarios for all the products though. I prefer to be paid in real money for doing analysis like at my job. But here goes some of my factory set ups.

When setting up my factories I always take into consideration how much I should be buying or selling my products for, the more I play the more I tweak the numbers arounds that I think would yeild the best profits. I kinda like to spread the wealth around a little bit and have all my factories have a decent profit margin. So certain commodities are sold somewhat cheaply to my own factories. (Note: the following deals with whole numbers to make calculations easier.)

SPP - If I own factories in a sector then my SPP will sell Energy Cells for 15, I would not allow other races to buy from the station, and I have a ship that sells E-Cells for the best price with a 2 jumpgate limit. Thus, my factories are guaranteed to buy E-Cells for 15 credits or less (from AI SPPs). It also guarantees that the station sells E-Cells for at least 15 credits, usually it more when given a jumpgate range of 2. E-Cells cost 13 credits to produce when buying Crystals at average price. Thus my profit margin is at least 13%.

I seem to go against what most other players would do, that being setting such a high price for E-Cells. My 15 credit E-Cells seems to be a bargain compared to posters who state that they sell E-Cells for 21+ credits. While 21+ credits will increase your profits, time needs to be taken in consideration. How long will the TS seller have to wait before another factory within range requires E-Cells at that price? I do have SPPs in a few sectors where I do not have any other factories, and set a sell price at 19 credits. That’s still a very good profit.

Cattle Ranch - Only requires E-Cells, so if I remember correctly (IIRC), at 15 credits for energy it costs 75 credits to produce Argnu Beef. I sell it for 100 credits. That means at least a 25% profit margin, more if my transports (TS), buys E-Cells for less than 15 credits. I do not allow AI stations to purchase from me, but some of my Cattle Ranches have TSs selling to AI stations. Because my Cattle Ranches also sell to other races, I can typically pick up Argnu Beef from a few Argon Cattle Ranches for about 61 credits. It’s the best of both worlds, I sell my resources to the AI at a good profit, and I buy my resources from the Argon Cattle Ranches very cheaply, thus reducing my production costs.

Cahoona Bakery - Meatsteak Cahoonas uses both E-Cells, and Argnu Beef. At 15 and 100 credits respectively, it costs 53 credits to produce and I sell it for 72 credits. That's just over 26% profit margin. Note that it is usually higher than that because I noticed that AI controlled Cattle Ranches sells Beef for 61 credits because they have high inventories. Again, I do not allow other races to purchase from me, but some of my stations do sell Meatsteak Cahoonas to other races.

Silicon Mine - Silicon mines produces Silicon Wafers, with E-Cells at 15 credits it cost 360 credits (IIRC) to produce Silicon. With a selling price set to 430 credits that nets a decent profit margin of just over 16%. Silicon is the only product that I sell way below average price, which is 504. I decided to do that to ensure my factories which require Silicon has a cheap source. Because I sell to other races that are up to 2 jumpgates away, I usually make more money selling to other races.

The real benefit to this strategy is that I can then purchase Silicon from AI controlled Silicon Mines at around 208 credits. This is similar to the situation with Argnu Beef, where my own stations provide enough to AI controlled stations so that their own stations do not need to go out and purchase resources. Thus, my TSs can make a bee-line to a Silicon Mine with very high inventory. I know this works because I check other races' inventories as well.

Profit margin if sell price = average price is just over 28%. Maybe I'll build a series of factories loops in a remote area to experiment with different prices, such as Paranid space around Cardinals Domain. Anyway, getting back to factory loop profit margins.....

Crystal Fab - Crystals are the end product of this loop that I've set up. Basically, I sell Crystals at the average price of 1684 (IIRC). The cost of production is 1,214 credits. That nets a profit margin of about 28%.

Why don't I sell at maximum price? Simply because I have too many SPPs that relies on Crystals that if they need to purchase from AI controlled Crystal Fabs and from Trading Station there will be a supply shortage. I have too many Crystal Fabs (definitely over 40), that if I relied on Trading Stations to buy at maximum price and sell at average that I would simply be starving my own SPPs of Crystals. In other words, there would be supply and demand inefficiencies that would trickle down to all my factories; slowing down production, and ultimately reducing profits.

I may just build a couple of Crystal Fab loops in the sectors around Cardinals Domain, just to see what happen now if I set Crystal prices to max. The down side would be that my UTs may skew the results.

Wheat Farms - I primarily sell Delaxian Wheat to other AI controlled Cahoona Bakeries, but I do have two Rine Factories that uses Wheat. Therefore, I actually set two prices for Delaxian Wheat; 35 credits for my own closed loop (only 2 Wheat Farms), and 40 credits in Wheat Farms that have TSs to sell to other races. At 15 credits for E-Cells it costs 23 credits to produce Wheat. That's a profit margin of just over 34%, and about 43% respectively.

I have noticed that sometimes the Wheat Farms are at about 85% of inventory capacity before the Delaxian Wheat starts selling. I haven’t seen one yet at full capacity with a price of 40.

Rime Fac. - Cloth Rimes are sold to Trading Station. The resources required are just E-Cells, and Delaxian Wheat; which means it costs 234 credits to produce. At a maximum selling price of 356, my profit margin is just over 34%. I only have 2 Rime Facts in Argon Space, while it makes good money there's just not a lot of demand for them.

Quantum Tube Fac. - Quantum Tubes are a great source of income for me, because this is one product that I do sell at maximum price. The resources required are E-Cells, Meatsteaks, and Silicon. That means my production cost is 2,428 credits. With a max selling price of 3,666 credits the profit margin is about 34%.

Soyfarm - I produce my own Soja Beans for 19 credits, and sell for 28 credits a good profit margin of 32%. But the actual profit is only 9 credits for each Bean sold. Kind of disappointing if you look at it that way, but I have TSs that sells to other races, so actual profits are a bit higher. That also means if I flood all other Soyeries with my Soja Beans, then I can pick up Soja Beans for my own Soyeries slight cheaper. I typically see other Soyfarms selling for 25 - 29 credits

Soyery - The purpose of Soja Beans is to produce Soja Husks, it costs 281 credits to make. Like Wheat, I have 2 selling prices, I sell to my own factories in closed loops for 384 credits (average), and other Soyeries selling for 525 credits to everyone else. That's a margin of just under 27%, and 46%, respectively. Now those are nice figures.

Advanced Satellite Factory - Now this is really a cash cow. The resources necessary are E-Cells, Silicon, and Majaglit. I have 2 of these factories, one in Preacher's Void, and one in Pontifex Realm. Why there? Well simply because there is an over-supply of Snail Farms, and Space Jewelery Factories. So much so that I set the buy price of Majaglit to only 14; that's only 3 credits more than the minimum selling price. At that price level, there is no reason to build my own Snail Farm, and Space Jewelery Factory. If I did build my own factories, I would be operating at a loss to keep a selling price of just 14 credits. Anyway, my production cost is 6,190 credits, and I sell at the average selling price of 13,476 credits. That's a very good profit margin of about 54% or 7,286 credits. I am always at zero (0) inventory. So I just may increase to the maximum selling price of 14,149 credits. That's a profit margin of just over 56%, or 7,959 credits. Unfortunately, there is no great demand for Advanced Satellites outside of the Paranid sectors.

Plankton Farm - I sell planktons to AI controlled Cattle Ranches, and also to my Stott Mixeries for 24 credits. That's a profit margin of about 38%, but just 9 credits for each puny plankton sold.

Stott Mixery - Stott Spice is the real purpose of those Planktons. At 24 credits for Planktons, and 15 credits for E-Cells, the cost to produce Stott Spices is 59. While the maximum price is 97 credits, I only sell the Spices for 76 credits (72 is average). That's because the maximum Cahoona Bakeries will buy them for is 77 credits when they have no inventory. Still it is a decent profit of about 22%.

Okay one last factory, I have more types of factories, but this post is already longer than I initially intended.

Computer Factory - Computer Components cost 979 credits to produce, based on the purchase price of E-Cells, Meatsteak Cahoonas, and Silicon. At a max selling price of 1,550 that's a nice profit margin of almost 37%, or 571 credits.

[The_Abyss]

The time it takes to make profit margins is also crucial of course. Nice piece of insight though.

[Bonners]

One or two observations if I may?

That's because the maximum Cahoona Bakeries will buy them for is 77 credits when they have no inventory

77Cr is the max price that you can actively sell to the Cahoona Bakeries. They WILL come to your station and buy from you at the max price of 97Cr though, esp if the Stott Mixery is far enough from competing Boron territories.

and 40 credits in Wheat Farms that have TSs to sell to other races

Again, they WILL come and buy from you at max 46CR

The same is true for other 2ry Resources ie A Teladianium Foundry in Reservoir of Tranquility or Lucky Planets etc. You will never have more than a modest stock awaiting purchase - the most I had was 1000u of Plankton in Red Light, but it all sold once the AI had realised the factory was there.

[Pirate Hunter]

Added to New Ultimate Guide to everything if you have no objection.

Edit: Abyss this guide would be lost in the forum without a Ultimate Guide to everything which is stickied. The FAQ's dont go into this mutch detail.

[Bonners]

The time it takes to make profit margins is also crucial of course

With respect, a 118% Profit margin is far better than the usual SSP margin of 52% whether it is measured in seconds, minutes or hours.

Which is why the SSPs are NOT the cash-cows they are believed to be.

They are, however, cheap to establish and they stimulate the local economy too.

[shaka]

To be meaningful, profit has to be measured with respect to time because the game has an in built time line, as well as the fact that the player is spending his or her real world time earning those credits. So saying ‘I can make 400% profit with a particular fab’ is not helpful if you don’t know how often that profit turns into cash for the player. If it’s every few minutes, great. If it only happens after 10 hours…well…IMO it’s not ideal.

Consider these three examples for an SPP producing 276 crystals every 1.5 minutes (the numbers as you’ll see later are for sake of argument only and assume that you're getting crystals for free from a loop but the same argument would hold true if you were buying crystals for more than 0 cr):

1. It sells them at 18 cr every 1.5 minutes. Profit=276*18/1.5=3312 per minute

2. It sells them at 22 cr but it sells less frequently, say every 2 minutes. Profit=276*22/2=3036 per minute

3. It sells them at 14 cr but like hot cakes, say every minute. But since it can only produce them at 276 per 1.5 minutes Profit=276*14/1.5=2944 per minute

Customers with demands your fabs can’t fulfill are as wasteful for your finances as products sitting in a fab not being sold. So if you want to maximize your profit, your objective for any given fab selling to the AI is as follows:

“Set the selling price that allows your fab to sell the product as quickly as it makes it”

Not a revolutionary idea, I know, but I hadn’t seen it described like this in other guides. Of course you can stimulate the economy to increase the demand and create or destroy supply fabs, but once it all settles down again, the above rule will still apply.

Another factor to take into account is that your production time is not constant because your raw materials are not always 100% available. As I've discovered, even loops don't guarantee this.

This is why I love this simulation - so many variables to tweak to get things working optimally and there's still the chance that the 'axis of evil' will trash your experiment.

[CHAZZ]

And there is the phenomenon of saturating the market. This is not Earth's Third world: i don't care if 'they' are hungry or not(in X2). I prefer to make 10 credit profit selling 2 items rather to make 10 credits selling 5 items of the same type. Once an AI trading Station buys 50*standard order if the TS is out of goods* you can say goodbye to that station for a nice while.
Feed 'them' through the straw, and make 'them' pay dearly.

Chazz.

[Circumcisor]

Just to clear up a small misconception people appear to have - "margin" is a ratio of profit to sale price. A sale of 100 with a cost of 75 is 25 profit, which is 25% margin - not 33%. 33% is the ratio of profit to cost price, otherwise known of course as "mark up".

[Circumcisor]

With respect, a 118% Profit margin is far better than the usual SSP margin of 52% whether it is measured in seconds, minutes or hours.

Which is why the SSPs are NOT the cash-cows they are believed to be.

Wrong. Completely and utterly wrong, and brimming over with wrongability.

Firstly, a margin of over 100% is a physical impossibility unless you are given money to take away the resource. A margin is the ratio of profit to the sale price - you can not make more profit than the price of the item. If you get something for free and sell it for £300 you've made £300 profit (300/300 = 100%). You can't get better profit than that.

Second, let's say the best margin is 80% instead of 118%.

I buy a resource for 50, and sell the product for 250. That is 200 profit, 200/250 = 80% margin.

I buy a resource for 50, and sell the product for 104. That is 54 profit, 54/104 = 51.92% margin.

At first sight, the 200 profit item looks the best, and clearly it is.

However, if I can make 5 products with 54 profit in 2 minutes I've made 270 profit. If it takes 2 minutes to make one product with 200 profit, I am clearly going to be better off making the product with the lower margin.

Margin can only used as a measure of profitability when the products being compared are sold in an equivalent timescale. As production cycles vary in X2 factories, profit margins are irrelevant in this game.

The real measure must be the profit per chosen time factor. You should use profit per hour as a general indicator of how good a factory is performing - and at 60k per hour, an SPP is by far the best performing factory.

[shaka]

Wrong. Completely and utterly wrong, and brimming over with wrongability.

Blackadder fan no doubt!

[Circumcisor]

Close - from Red Dwarf

[JonR]

rimmer?

[jaguarskx]

Just to clear up a small misconception people appear to have - "margin" is a ratio of profit to sale price. A sale of 100 with a cost of 75 is 25 profit, which is 25% margin - not 33%. 33% is the ratio of profit to cost price, otherwise known of course as "mark up".

I stand corrected.

Since Pirate Hunter is including my post as part of the "Ultimate Guild to Everything" I will be updating my original post to correct my profit margin ratios, and also to include additional information. Therefore, the original post will be heavily modified, and I post whatever I have in a couple of days.

Since there is a lot of information to include there will be multiple updates.

[JungleJim]

Abyss,

I think this article is a great example of the type of information that the FAQ does not (and should not) contain. I've skimmed through the FAQ and not found any of the deep insights to game play that the Ultimate Guide to Everything contained.

I'd really like to see some form of it return. Even though dated, it contained loads of still very useful information. When I saw its stickied status lost I quickly bookmarked it. I referenced that material on a weekly basis and plan to continue doing so.

[The_Abyss]

I believe that the user piratehunter stated that he was working on something which was up to date and could be kept up to date which would be a replacement. But I haven't heard anything yet.

[Pirate Hunter]

I have posted it to the Forum. Currently its a work in progress put if its on the forum other people can check it out and help me bring it up to date.

[Circumcisor]

I stand corrected.

Since Pirate Hunter is including my post as part of the "Ultimate Guild to Everything" I will be updating my original post to correct my profit margin ratios, and also to include additional information. Therefore, the original post will be heavily modified, and I post whatever I have in a couple of days.

Since there is a lot of information to include there will be multiple updates.

It is a common oversight and only picked up by (sad and picky) accountants like me.

Another interesting measure of factory performance could be the payback period - if it costs you 600k to set up a factory, how long will it take to get your money back in profits?

That could be an interesting experiment. I'm not volunteering to do any analysis yet, but I am confident that the SPP would come out on top again as they are generally cheap and produce profit quickly. My gut feeling tells me a well placed silicon mine would come second - Argon mines are very cheap and there are a few tasty 'roids about with good yields.

[Space Scum]

So the more I ccharge the faster I'll make my money back. But how long do I have to play before breaking even?

[pjknibbs]

So the more I ccharge the faster I'll make my money back. But how long do I have to play before breaking even?

That's only true if you can still sell everything you're producing at the higher price. If you set your price so high that people rarely visit your factory it spends a lot of its time idle (because it's full and can't produce any more goods), which reduces your profit. A well-placed factory CAN sell at full price without ever getting full, but you have to THINK about it...

[dzhedzho]

And there is the phenomenon of saturating the market. This is not Earth's Third world: i don't care if 'they' are hungry or not(in X2). I prefer to make 10 credit profit selling 2 items rather to make 10 credits selling 5 items of the same type. Once an AI trading Station buys 50*standard order if the TS is out of goods* you can say goodbye to that station for a nice while.
Feed 'them' through the straw, and make 'them' pay dearly.

Chazz.

Yeah this is where comes the selling ship with big cargo bay - saturate one factory at a time kind of thing