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PostPosted: Mon Nov 01, 2010 3:13 am 

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User avatarAPCE Production
Automotive Genius
I have had some contact with some new companies that don't really know how to set prices, and i would like to detail a small guide that would help them.

The first thing you have to understand is that TIME HAS VALUE. So, there are really two completely seperate values that are calculated when setting your price - the price of inputs and the cost of your time. You get to decide how much your factory time costs, but i think a good way to look at it is the SIR.

The fact is, that at any point you could put your money into the bond market and make X amount of bucks per million per day. Factories are expensive, and they take time to produce. As a rule of thumb, calculate the value of your factory (right now the going rate is 4 million per day of expansion, and .5% capital investment), and make sure that that number put into the bond market would make less than what your factory is making. For instance, a 50,000 TV factory on Industrial Center land in Canjara is worth about 590 million right now. With that amount, right now in the bond market i could make about 1 million per day, or 21.X million per 21 day term. This means that in order for that factory to actually profit for me it has to make more than 1 million per day. It's the value of interest, and the value of time. (PS, thanks to Golden, that factory makes about 2.6 million per day, so it is making 1.6 million above the current rate of interest).

As i said, there are exceptions to that rule, the main exception is taxes. In order to buy bounds, you've gotta pay your taxes. You don't have to pay your taxes to produce from your factory. Taxes are a huge deal as you get big, as all of the larger companies here know (Habars gets a 13 digit tax bill as i recall), so paying them isn't fun, and is to be avoided wherever possible. For this reason, factories kind of win the tie, plus a little bit.

There is another part of setting prices though, and that is demand. Demand is so limited compared to supply, and retailers don't always want to pay for their supply, as they can stretch what they have to last for a lot longer than it has to. Because of this, player expectations and demand are probably the most important factors for pricing. For instance, i expect to never pay more than 650 for a briefcase (although my method tells me i could sell them for 500, we'll get to that later), so i won't. Even if i need them, i'll contact somebody that has a lot and get them to invoice me a few.

Another part i should mention about setting prices is that the vast majority of trading goes on by invoice, not through the market. The largest players have little groups they are apart of, and they supply themselves within their group. Sure, there are players who are kind of universal (Winners supplies raws, for instance), but they are still apart of a smallish circle of people who trust eachother. Because these are the largest players, far far far more trading goes on by invoice than by market. Because of this, MARKET PRICES AREN'T ALWAYS THE RIGHT PRICE!! I know what you're thinking. You're thinking "but if i can sell steel on the market for 135, why would i sell it by invoice for 120?" i thought that for a long time, but let me give you the answer. The thing that drives all free economies is not money, it is trust. By giving somebody a consistent contract, you are allowing them to trust you, and therefore giving you more deals in the future. As an example, when i first started playing the game, i was given a contract by Sunnyvales Best for circuitry at a really high price. He was great, he actually signed the contracts, and he probably shouldn't have for the price they were. The fact is that i havnt had contact with him since. I actually havn't even checked to see if he/she plays. I didn't do a good job of building up his trust, and i paid for it. After that, i got involved with RVE, and he has been an incredible buyer and resource for me in all of my dealings. Sure, i sold him some corn back in the day for a price that i wouldn't sell it to anyone else, but the wealth of knowledge he has given me along with all of the deals i have had with him are far more than worth the small cost. He has helped me buy and sell factories, retail stores, farms, R&D Centers, found me deals, got me into my TG, sent me numerous spreadsheets on how to price buildings, raw materials, etc, and i've helped him out too. I supplied him with a number of items for a long time, sent him my spreadsheet on various prices (a little outdated now, but i shifted the numbers to make them work again). The relationship was worth 100x the price of the small corn contract i had with him back in the day. Relationships + Trust >>> Money. Because of this, selling Steel at 120 can be > than selling steel at 140.

I will probably add to this at a later date, but for now i'm going to bed.

If you would like my spreadsheet on how to price things, give me a message in game and i'll explain stuff to you, or maybe just send it over.

Thanks,
APCE

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PostPosted: Mon Nov 01, 2010 10:47 am 

Joined: Mar 22, 2010
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User avatarRakib Corporation
Gold Ring Maker
WOW. simple rule. check out city average price and quality for retail products and set price. ask some producers about their prices and quality for industrial products and set price.


Q: why should u sell products at lower price than market via invoice?

A: market sale is uncertain. u always need cash. but there's no guarantee that someone will buy ur products in market. but via invoice, u can sell products fast and certain.

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PostPosted: Mon Nov 01, 2010 2:11 pm 

Joined: Dec 21, 2009
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hey APCE,

just to recall u, Sunnyvales Best has left simu family... He also contributed a lot to the milestone of my company... i made lot of money selling him my products initially.


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PostPosted: Mon Nov 01, 2010 8:07 pm 

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One thing to keep in mind about a market sale versus a relationship based invoice contract is you can have your cash tied up in the market with unsold products for a long, long time. You may be able to get 25 for your bricks someday, when there is a shortage, but if you have to sit on that inventory for three months to make that sale, you have lost 90 - 120 days of time of using the cash you could have had from a lower priced sale. If you sold at 16 price via invoice, for example, you could have used that cash to expand factories or build new properties that would make money and could triple your money with reasonable investments over the 90 - 120 days following your lower price invoice sale. A stable and steady customer, like Habars, who is willing to buy your products every week at a fair (but not high) price is better than getting the best price on the market you can get but having to wait a few weeks or months to make your sale.


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PostPosted: Mon Nov 01, 2010 8:10 pm 

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Professor wrote:
One thing to keep in mind about a market sale versus a relationship based invoice contract is you can have your cash tied up in the market with unsold products for a long, long time. You may be able to get 25 for your bricks someday, when there is a shortage, but if you have to sit on that inventory for three months to make that sale, you have lost 90 - 120 days of time of using the cash you could have had from a lower priced sale. If you sold at 16 price via invoice, for example, you could have used that cash to expand factories or build new properties that would make money and could triple your money with reasonable investments over the 90 - 120 days following your lower price invoice sale. A stable and steady customer, like Habars, who is willing to buy your products every week at a fair (but not high) price is better than getting the best price on the market you can get but having to wait a few weeks or months to make your sale.
:agree:


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PostPosted: Wed Nov 03, 2010 9:30 pm 

Joined: Oct 28, 2009
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User avatarAPCE Production
Automotive Genius
Thanks for your input guys. When i get a chance i will make sure to write that in there. Sitting on the market does suck - I have 400 million worth of products on the market right now.

Keep posting your input, and i will do a rewrite soon.

Thanks,
APCE

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PostPosted: Fri Nov 05, 2010 2:41 pm 

Joined: Dec 21, 2009
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btw how much profit u take as optimum in 10000/sqft standard land... i am making 5m weekly per 10000/sqft... i am talking about profit, not revenue


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PostPosted: Fri Nov 05, 2010 8:29 pm 

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My rule of thumb, for what it is worth, is if you can make 3 million to 4 million profit per day from a 50k factory, you are doing fairly well. Sounds like you are doing much better than that, which may mean that you have found a great market opportunity where demand is high and competition is low. However, that might not last, as such profit levels due tend to attract increased competition over time.


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PostPosted: Fri Nov 05, 2010 8:52 pm 

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hey professor, its not like that i am making more money... i spend a lot in research.. some products like circuitry is less profit now... coz winners selling it for 95 and i was selling it for 120-130 earlier.. now playing with enough stock myself.. had to reduce price now..

synthetics: spend a lot on research but ultimately a dumb sector.. so shut down...

i have no clientage.. totally dependent on market for some products.. got some open orders from manufactura which helped me a lot. saved sunshine from bankruptcy.

huge stock was piling up and i was unable to find buyer. sold a lot of stuff to manufactura


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PostPosted: Fri Nov 05, 2010 10:29 pm 

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Good. I'm glad my son was able to help out. Hope you did not charge him too much!


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PostPosted: Fri Nov 05, 2010 10:36 pm 

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Ankit Goel wrote:
saved sunshine from bankruptcy. huge stock was piling up and i was unable to find buyer.


To me, this illustrates the importance of having a balance within your account to the extent that you can. If you have some retail stores and can sell some of your production via your retail stores, you never have to worry about bankruptcy as a serious threat. If you are all manufacturing, and you don't have a buyer for your products, then you may not be able to buy inventory to keep factories running, and you can get into serious problems fast. Especially with raw materials, you can be locked into a long term commitment that is hard to reverse and hard to sell on the market as well. Even Winners has sometimes felt the pressure and frustration of too much inventory and not enough demand for his mines at times, which has left him feeling under a lot of stress and worry.

Excessive use of debt can also lead to serious worries about bankruptcy. Sometimes use of debt is fine. I have used it, and am using a lot of debt now. Habars and Metatron and many other top players have used debt as well. But, when that bill for the debt comes due, if you don't have a plan for when and how you are going to be able to pay it off, having a warehouse full of raw materials or factory products that you can not easily sell does not seem very comforting.


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PostPosted: Sat Nov 06, 2010 9:13 am 

Joined: Dec 21, 2009
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Professor wrote:
Ankit Goel wrote:
saved sunshine from bankruptcy. huge stock was piling up and i was unable to find buyer.


To me, this illustrates the importance of having a balance within your account to the extent that you can. If you have some retail stores and can sell some of your production via your retail stores, you never have to worry about bankruptcy as a serious threat. If you are all manufacturing, and you don't have a buyer for your products, then you may not be able to buy inventory to keep factories running, and you can get into serious problems fast. Especially with raw materials, you can be locked into a long term commitment that is hard to reverse and hard to sell on the market as well. Even Winners has sometimes felt the pressure and frustration of too much inventory and not enough demand for his mines at times, which has left him feeling under a lot of stress and worry.

Excessive use of debt can also lead to serious worries about bankruptcy. Sometimes use of debt is fine. I have used it, and am using a lot of debt now. Habars and Metatron and many other top players have used debt as well. But, when that bill for the debt comes due, if you don't have a plan for when and how you are going to be able to pay it off, having a warehouse full of raw materials or factory products that you can not easily sell does not seem very comforting.


mailed you for private discussion


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PostPosted: Wed Nov 10, 2010 7:45 am 

Joined: Dec 21, 2009
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APCE Production wrote:
I have had some contact with some new companies that don't really know how to set prices, and i would like to detail a small guide that would help them.

The first thing you have to understand is that TIME HAS VALUE. So, there are really two completely seperate values that are calculated when setting your price - the price of inputs and the cost of your time. You get to decide how much your factory time costs, but i think a good way to look at it is the SIR.

The fact is, that at any point you could put your money into the bond market and make X amount of bucks per million per day. Factories are expensive, and they take time to produce. As a rule of thumb, calculate the value of your factory (right now the going rate is 4 million per day of expansion, and .5% capital investment), and make sure that that number put into the bond market would make less than what your factory is making. For instance, a 50,000 TV factory on Industrial Center land in Canjara is worth about 590 million right now. With that amount, right now in the bond market i could make about 1 million per day, or 21.X million per 21 day term. This means that in order for that factory to actually profit for me it has to make more than 1 million per day. It's the value of interest, and the value of time. (PS, thanks to Golden, that factory makes about 2.6 million per day, so it is making 1.6 million above the current rate of interest).

As i said, there are exceptions to that rule, the main exception is taxes. In order to buy bounds, you've gotta pay your taxes. You don't have to pay your taxes to produce from your factory. Taxes are a huge deal as you get big, as all of the larger companies here know (Habars gets a 13 digit tax bill as i recall), so paying them isn't fun, and is to be avoided wherever possible. For this reason, factories kind of win the tie, plus a little bit.

There is another part of setting prices though, and that is demand. Demand is so limited compared to supply, and retailers don't always want to pay for their supply, as they can stretch what they have to last for a lot longer than it has to. Because of this, player expectations and demand are probably the most important factors for pricing. For instance, i expect to never pay more than 650 for a briefcase (although my method tells me i could sell them for 500, we'll get to that later), so i won't. Even if i need them, i'll contact somebody that has a lot and get them to invoice me a few.

Another part i should mention about setting prices is that the vast majority of trading goes on by invoice, not through the market. The largest players have little groups they are apart of, and they supply themselves within their group. Sure, there are players who are kind of universal (Winners supplies raws, for instance), but they are still apart of a smallish circle of people who trust eachother. Because these are the largest players, far far far more trading goes on by invoice than by market. Because of this, MARKET PRICES AREN'T ALWAYS THE RIGHT PRICE!! I know what you're thinking. You're thinking "but if i can sell steel on the market for 135, why would i sell it by invoice for 120?" i thought that for a long time, but let me give you the answer. The thing that drives all free economies is not money, it is trust. By giving somebody a consistent contract, you are allowing them to trust you, and therefore giving you more deals in the future. As an example, when i first started playing the game, i was given a contract by Sunnyvales Best for circuitry at a really high price. He was great, he actually signed the contracts, and he probably shouldn't have for the price they were. The fact is that i havnt had contact with him since. I actually havn't even checked to see if he/she plays. I didn't do a good job of building up his trust, and i paid for it. After that, i got involved with RVE, and he has been an incredible buyer and resource for me in all of my dealings. Sure, i sold him some corn back in the day for a price that i wouldn't sell it to anyone else, but the wealth of knowledge he has given me along with all of the deals i have had with him are far more than worth the small cost. He has helped me buy and sell factories, retail stores, farms, R&D Centers, found me deals, got me into my TG, sent me numerous spreadsheets on how to price buildings, raw materials, etc, and i've helped him out too. I supplied him with a number of items for a long time, sent him my spreadsheet on various prices (a little outdated now, but i shifted the numbers to make them work again). The relationship was worth 100x the price of the small corn contract i had with him back in the day. Relationships + Trust >>> Money. Because of this, selling Steel at 120 can be > than selling steel at 140.

I will probably add to this at a later date, but for now i'm going to bed.

If you would like my spreadsheet on how to price things, give me a message in game and i'll explain stuff to you, or maybe just send it over.

Thanks,
APCE


bold words above, how u calculated that with 590m in bond market, u can make 1m per day? SIR is 0.65%. Interest on investment is 0.40% per day.

590m*0.40% = 2.36m per day(simple interest)

if u take 21 day term as Finance page shows. all fees paid. still u can make about 2.15m


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PostPosted: Sat Nov 13, 2010 6:20 am 

Joined: Oct 28, 2009
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User avatarAPCE Production
Automotive Genius
The rates were lower when i wrote this - i personally took out about 15 billion in bonds to raise the rates :D. Also, i actually put in 600 bonds to invest, and divided the difference between 600 and the number that came up by 21.

As far as making 1 million per day in a 10kft2 factory - that isn't amazing, but it's not bad. About what i come out to using my price sheets on a 10kft2 factory. I would caution you though, as you get bigger, 10kft2 is tiny. For a 10kft2 factory, pricing is less about meeting what it's worth in bonds and more about giving you a reasonable rate of profit to expand. I recommend getting into profitable sectors and using small factory sizes as an advantage. You can switch 10x as fast as i can, which gives you a solid week before i'm in a sector running hard that you can be turning profit on it. A week of good profits can mean a lot to a manufacturer. Also, look for market trends. Don't get into industries that are a waste (engines, pipes, etc). They are money losers consistently, because people have either a.) come up with the idea it's "cool" to make them, or b.) the demand is too low to meet supply (ever). A. would be pipes, b. would be engines or CPU, for example.

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