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postheadericon The Elite Guide Continued R.O.I

Measuring your turnover, and return on investment – this involves more maths

First consider your turnover,

How much money did you decide was your working capital.
Lets assume 100 gold as it makes the sums nice and easy.

If you keep this cash separate (perhaps you put it into your Alliance and Horde guild banks and do not touch it so you can keep tabs on the amount.

Every  week, check your cash. If at the end of week one you have 180 cash then your return on investment is 80% per week. Simple
However, you then need to factor that in the second week your working capital is 180 gold, so to achieve the 80% growth again you need to finish week two with 324 gold.

At first this will just be a case of buying “more” of each item from your existing portfolio. However, soon you will be restricted by the market. You will run out of stock to buy, and your own actions will start to affect the price of the stock – causing it to rise as you increase demand.

After a few weeks you will need to drop some items from your portfolio and take some higher value items to replace them. But to keep the 80% R.O.I you need to make sure these items are as profitable as the original items, and you can “turn them over” as often

Eventually you will “peak” and be buying and selling the top level items. This may well take some time – but it will happen.

So your R.O.I will be based purely on your ability to spot individual bargains. This is where the data you have collected and populated your “material master” with is invaluable. With this you will be able to read the market.
You will then be constrained by something other than your cash….Your storage space.

If you followed our tips you have an Alliance guild,  Horde Guild, decent bags, and all ten toon’s active with bag space available. But if you are going to make tens of thousands of gold, you will still need to use this effectively.

Towards the end of our record attempt, storage space was the one constraint we had. We had two guilds all with maximum guild tabs available.
Between all the members over 160 normal bank “accounts” (16 members with all ten ‘toons each active)
And we still only just had enough.

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Measuring inventory costs

We started to measure our turnover in terms of bank slots. So here’s some more maths
Say we have 100 slots (you will have far more – but again 100 is easier)
Single market strategy means holding stock , waiting for the market to rise. However, every day that the stock is held is costing us profit potential. It is preventing us from buying other stock as we would have no-where to store it.

Suppose we spend 10,000g to fill these slots  -  an average of 100g per slot – assuming we decide we want 80% R.O.I per week.

Altogether we have 100,000g (but have no room to put anything else we might want to buy)

To get 80% ROI on our total working capital not just our invested capital per week we need to turn each storage slot over 8 times a week at 100% profit per time. OR accept that we simply cannot invest all our gold.

Each slot needs to generate 800g this week. Almost impossible.

So, every time you buy and store items,  run this calculation through.
What fraction of a week will I need to store this item, and what profit will it offer at the end ?

You are looking for 100g in 1/8th of a week. You are very unlikely to achieve this, but the closer you get (to whatever your desired R.O.I is the better.

This is where you need to be very careful what you buy. Good long term investments have to be very good.

Lower percentage short term investments will bring you more profit – but require a lot of work on your part rushing to and from the auction houses across and possibly across the factions.
A cross market approach will remove most of the storage bottleneck problem, the items will be in transit for minutes, mostly in a characters backpacks. Don’t do cross market trading unless you can make a profit straight away.  Cross market trading is profitable when it is straight to market.

A quick note : Rarely during our record attempt  did we run out of profitable “stock” to buy.

On a full server with literally thousands of level 80 characters it is unlikely to happen. But if it does get tight don’t buy rubbish just to “keep it moving” Impatience will cost you money.

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