Today I’ll be tackling some goldmaking basics and how I view goldmaking.
Goldmaking is a series of economic decisions
This might seem a bit too academic for some of you, but I think it’s important. Goldmaking entails making a LOT of consecutive economic decisions. With Tradeskillmaster we can make rules for a lot of the decisions on a general basis, but we are still making decisions. What materials do we buy, at what price and what quantity, what items do you farm, what items do you craft, what price do you try to post it at etc.
To make better decisions you need to know what the main goal the decisions are trying to support.
Profit obviously?
Obviously we are trying to maximize the amount of gold we make. Depending on your goals you may have different time scales, if you need to pay for a token by the end of month to keep playing that is obviously different from someone trying to be the richest they can be in a year. To compare different items, strategies or anything else however you will have to compare the profit or what you gain to what you have to pay to get that profit. And when I say pay here I don’t just mean gold.
The bottleneck
In economic decision making and investment analysis you usually compare decisions based on their return on investment, how much money do you get back per money you put in. This is because capital or money is usually the limiting factor in capital markets and thus the most important input factor to maximize the value of. In WoW your gold total can be a limiting factor, but once you pass a certain gold amount it won’t be the biggest bottleneck to getting richer. Time will be!
Absolute gold per hour
That means what you are trying to maximize will eventually be your absolute profit per hour. I’ll illustrate with a simple example. We have two markets you can focus on, one has items with a crafting cost of 100 gold that sell for 200 gold and one has items that cost 2000 gold to craft and sell for 2400 gold. We assume the sale rate and crafting time is the same for this example. That means the profit margin is 100% for the first item and just 20% for the second one. But for the second one you are making 2 times as much gold per hour. So if you only had 2000 gold it would probably be better to craft 20 of item one for a profit of 2000 gold, whereas if you had 200 000 gold you could spend the same time crafting 20 of item two and earn a profit of 8 000 gold in the same time.
Fast sales and high profit
When starting out you want items with two characteristics, fast sales and high profit margin. You want to get any gold you invest back quickly, and as much of it as possible. Generally I think fast sales is the top priority as you can then reinvest your gold more quickly and take advantage of compounding. Making 20% profit 5 times in a day is better than making 100% profit once.
Top markets include: gems, enchants, consumables, max level gear, bags, profession equipment.
Long term: raw profit only
Longer term you can focus on raw profits only. This is what you can do when you no longer spend all your gold when restocking the faster markets. For retail this is where slow, but high margin markets like battle pet and transmog flipping become valuable as the implied gold per hour is massive. You can also do more expensive crafts with lower profit margin that tie up gold.