Lets Talk Money

While I have been running Sadistica for only a few months, I have been looking for corps strong enough to help me found an alliance for about a year and a half now. In the past I have done this by sitting in whatever alliance's public channel I was in at the time and asking tough questions. Those tough questions would usually be answered because many people in an alliance's public channel seem to believe that anyone wearing the alliance tags MUST be a recruitment officer. Other times I've simply built a rapport with various CEOs or directors through daily interaction and then started asking probing questions.

When I say tough questions I don't mean things like “How much isk do you have in your wallet?” or “Can I f*** your mom?”. I mean questions like 'How many pilots does your corp field on an average roam?”, I then check the killboard stats and call bullshit if their stated numbers don't represent historical numbers. Questions like “You claim to have capitals, can you show me their fits?”, this question is difficult to answer by any except the most organized of corps as they're often the only ones with a unified capital doctrine and thus fittings on hand to show me.

Then there is my favorite question, and incidentally the impetus for this blog, “How does your corp make it's money?”. This question is almost always answered with “Well we do a little missioning, sometimes some mining” or “We run anomolies and incursion in HS” depending on whether I'm talking to a highsec corp or a nullsec corp. What makes this question interesting is that it instantly tells me whether the person in question, usually the CEO, has any concept of corp isk.

After the young CEO/director has finished explaining how they make their money I often correct them with “I was more interested in how your corporation, as an entity, makes its isk, not how your members do. Can you explain that a bit more for me?”. Sometimes they don't answer and just leave, but usually they answer with something along the lines of “Well we have a 5% tax rate... We have mining ops occasionally where everything goes to the corp...”. So the corporation's income comes from 5% of any bounties/agent rewards/concord rewards over 50,000 isk, and slave labor. This means that any capital expenses incurred by the corporation, be it a space rental bill, the cost of a POS to live out of, or the monthly fuel needed to run that POS will likely be covered by the personal isk of the corporation's leaders. This is a bad thing, strong corporations are not just strong militarily, they're strong economically. Should they not be, when things start going bad, ISK will quickly become a very potent drama llama. So lets talk about money.

Types of Money

There are three main types of isk and two main types of income sources.

Personal Isk & its Sources

Personal isk is owned by an individual. As the main type of player in EVE, an individual has the most isk making options available to them. They can get it by ratting, mining, missioning, PI, incursioning, anoming, station trading, import/export, the list goes on. There are dozens of possible income sources for an individual, and thus dozens of ways to acquire personal isk.

Corporate Isk & its Sources

Corporate isk is owned by a corporation. Corporations are the second main type of player in EVE, I say this because corporations are controlled by players, not NPCs. Corporations however have surprisingly few income sources. They are: Corporate Tax, POCO Tax, Station Tax/Fees, Moon Mining and Moon Reactions. I am aware of no other income sources that either expressly require having a corporation to do, or expressly dump into the corporate wallets.

Alliance Isk & its Sources

Alliance isk is owned by an alliance. Alliances are the third main type of players in EVE. I say this because alliances are controlled by their executor corporation which is in turn controlled by players. An alliance has two income sources: Station Taxes and Fees. I say this because you must have an alliance to own sov which is a requirement to owning a station. I am aware of no other income sources that explicitly require an alliance.

Types of Income Sources

Active

Above I have broken down the types of isk and the income sources associated with those types of isk. It should be blatantly obvious that nearly all of them require at least a single player's time to collect the isk. These are active income sources. Active income sources are larger then passive income sources in both isk collected and number available.

Passive

There are a few exceptions though, Corporate Tax, POCO Tax, Station Tax and Station Fees do not require a player to collect. A player must still do something to generate the tax or fees, but the collection is passive. These are the only passive income sources in the game that I am aware of. Passive income sources are individually smaller then active sources, but scale infinitely and do not incur managerial overhead.

Why ISK Separation Matters

In EVE, when you start to expand as a group, a common breaking point is finance. For a simple example, lets talk about POSes. As of this post, a large caldari tower burns 40 blocks of fuel an hour, there are 24 hours in a day, and 28 days will represent our 'month', the blocks themselves are around 12,500 isk a unit. So a month of fuel costs 12,500 * (40*24*28) = 336,000,000 isk/month. The tower itself is about 280 million, and the gear, depending on what you're doing is between 50 and 150m. These fuel costs are about the same for all large towers, but gear can be as expensive as a billion isk for a full deathstar, or as cheap as 30 mil for a basic moon mining tower.

So lets say you're setting up a single tower for your corporation to live in, you want a large deathstar so you 'can stay safe'. That tower is going to cost you between 750m and a billion isk depending on how you plan to fit it out. It is then going to require you to feed it 336m a month in fuel. Not too bad right? What if it explodes? Now you're buying it all over again. What if you want to 'be safe' in another system? Another billion isk down the drain and another 336m a month. What about a mining/reaction network? 500M for towers here, 300m over there, a fuel bill in the billions, and oh look! Seed reaction material is going to cost you 750m too!

This will very quickly become a strain on a corporation's leadership. Strained leadership quickly become burnt out leadership who don't login anymore. Separating out personal isk and corporate isk allows these strains to be spread more evenly.

Should there be a fight among core leadership, when one leaves, they may be inclined to take expensive assets under the guise of “I paid for this!”. This hurts everyone in the corp as critical assets are now no longer available. Separating out corp isk and personal isk reduces this incentive so long as you keep unpaid debts at a minimum.

Separating Corp and Personal Isk

Separating corporate isk can be a difficult task in an established corporation. So lets discuss creating new systems that will allow isk to be separated out over time. We will once again use the POSes as an example.

Lets say your corporation is looking to move out to nullsec and rent space with Rebel Alliance of New Eden. The system you want is going to cost you 1b/month. The system you're looking to rent does not have a station, so you'll need a POS to live out of. So your initial capital requirements are going to be 1b for rent, 750m for the POS + Gear and 336m for the POS'es fuel. Excluding moving expenditures, you're looking at just under two billion isk to move out to nullsec. Your corp doesn't have any isk of it's own, but your membership is chomping at the bit and are offering up isk to get the job done. Lets solve this problem by implementing a simple bond measure.

A Bond Measure in Action

Assumption: The corp will generate more isk in tax then it takes to pay the monthly bills.

A simple way to implement bonds in EVE is to determine the amount of isk you need to raise, in this case two billion, and then determine the individual bond share prices, lets use 100m. Now we can sell 20 bonds and raise the capital. If you issue out 20 corporate shares you have a simple way to tell how much debt the corp is in and to whom that debt is owed.

So, John Galliger buys 5 shares, the CEO of the corp buys 10 and Alexi Varennikov buys 5. The CEO then uses the 'Give shares' mechanic to give 5 to John, 5 to Alexi and 10 to himself. All corporations start with 1000 shares, so these shares are inconsequential in volume and do not represent a threat to the CEO's position so long as he is active. They do however offer an excellent way to keep track of debt, as the CEO can now look at the shareholder's window and see exactly how many shares each person owns, including himself.

The corporation then moves out to their shiny new nullsec home with their POSes in tow and lets the corporation's tax rate fill the wallets. As the wallet crosses 1.4 billion isk the corp will reach break even for the monthly accounting. Any isk above 1.4b can then be used to pay down debt. If the corp makes 2b/month in taxes, and buys 6 shares back from it's investors every month it will be out of debt in a little over three months.

Shares are not items within the game, so there is no secure way to transfer them. For this reason I highly recommend being very selective about who you give/sell them to. A share may be given to any corp or player in the game, but there are no ways to recall or otherwise force a share back into the corporation of origin.

In the above example the CEO is in a different position then the other investors. He owns some of the debt just as they do, and will be repaid just the same as they will. However the CEO must also administrate the entire affair, this will require the CEO to spend his time, a valuable resource in EVE. The CEO's time is not repaid in isk, instead he is paid for his time in power. That is, he will be able to do things with the POS as it is a corporate asset and thus under his control.

Bear in mind, most bonds have an interest rate associated with them to entice investors. The above example does not include this, however tacking on a fixed interest rate or other value is trivial. For example, a 25% term rate would just mean paying the share holder 125m back for every share instead of 100m.

Benefits of Bond Measures

By implementing a bond measure it becomes very simple to keep track of corporate and personal isk, even when it is beneficial for the two to mingle such as detailed above. They also make asset separation easy, as no one individual owns the assets involved. The corporation owns the POS and it's gear, while the individual investors own the debt.

Debt may be repaid at any interval and under any terms.

Bond measures scale aggressively, and can work for providing capital from corporations to alliances, or from players to corporations as demonstrated.

Bond measures do not require any power sharing, that is you do not need to have your investors in positions where they can break things.

Benefits of Separating Isk

Separated isk allows corporations and alliances to be more resilient in the face of external pressures because it will remove a common cause of internal drama.

Separated isk allows for leadership members to be changed out without needing to pay back a past member for the billions they put in. The past leader's debt is logged with the corp already and payments go out as normal. This allows for leadership to be dynamic in the face of burn out and changing circumstances.

Separated isk allows for proper accounting, which will make it easier to audit your corporate or alliance finances and ensure the real world agrees with your spreadsheet projections. This is because it limits reasons for an individual to buy a ship with corp funds and go “Meh, I was owed it anyways”.

TL;DR

Practice good accounting or the drama llama will find you.

Source: Katmomma - Deviant Art

Note:

All of the above methods are at work within Sadistica. The alliance is executored by the holding corp, the holding corp owes 1b to FELON for founding it, and FELON holds 10 shares of the holding corp for this reason. FELON owes me, it's CEO, 2.2b for seeding various projects, as well as 1b to another member for seeding a different project. Each of those project's profits are used to sustain the project and pay down debt as able. I hold 22 shares of FELON, and the other member holds 8, he bought into a 25% term rate, and will receive 125m/share, where as I bought in at 'CEO's a bitch rates' and will get 100m/share back.