At Ecclesiar, having a factory running doesn't necessarily mean making money.

This is one of the most common traps for those who start working in the industry: look at the amount produced and think that the more products leave the factory, the greater the profit.

In practice, the most important question is another:

How much money is really left in each unit produced?

It is this account that determines whether it is worth producing, buying the product ready or simply waiting for a change in market conditions.

The first calculation: actual cost of production

Before putting the workers to produce, the industrialist should calculate the cost of each unit.

In a simplified form:

Cost of production = raw materials + labour + other costs

In the case of a factory using iron, for example, it is not enough just to look at the selling price of the weapon.

If iron is expensive, workers' wages have increased and there are still other costs involved, the value needed to manufacture each unit can get much higher than it seems.

Imagine a hypothetical situation:

  • Iron: 15 CC

  • Manpower: 6 CC

  • Other costs: 2 CC

The total cost would be:

15 + 6 + 2 = 23 CC

If the gun is sold by 25 CC, the profit will be only:

25 − 23 = 2 CC

The factory is producing and selling, but its margin is small.

Producing more doesn't always mean profiting more

That is a fundamental point.

If each unit leaves only 2 Profit CC, produce 100 units generates 200 CC gross profit under the same conditions.

But if the cost of inputs rises and the margin drops to 1 CC, produce the same 100 units generates only 100 CC.

What if the cost exceeds the selling price?

In this case:

higher production = greater injury.

Therefore, before increasing production, the industrialist needs to find out if there is enough margin to justify the work and resources employed.

And when buying is better than producing?

That's a question many businessmen forget to ask.

Imagine a gun being sold on the market for 25 CCs.

If the total cost to your factory is 23 CC, producing can make sense.

But now imagine that the price of iron increases and the cost of production goes to 27 CC.

In this scenario, making the weapon to sell it for 25 CC means losing money.

If there are weapons available on the market by 25 CC, buying directly can be more economically interesting than manufacturing.

That is why the industrialist must constantly compare:

Cost to produce × price to buy.

There is no obligation to produce just because you own a factory.

And there is a third option: to wait

It doesn't always have to be between producing and buying.

Sometimes the best decision is simply wait.

If the price of iron is temporarily high, producing now can result in a very small margin.

The entrepreneur may prefer to wait for a change in the price of inputs, a change in demand or a better opportunity to sell.

This is where the concept of timing.

In the market, the moment you buy the inputs can be as important as the price for which you sell the final product.

The selling price also needs to enter the account

Another common mistake is to look only at the cost.

Cheap production is not automatically profitable.

Imagine:

Cost of production: 10 CC

If the product is sold by 11 CC, there is a margin of only 1 CC.

But if there is a possibility of selling by 15 CC, the situation changes completely.

Therefore, the industrialist needs to observe both sides:

how much it costs to produce and how much the market is willing to pay.

If the selling price falls while the inputs remain expensive, the margin is compressed.

If inputs fall while the selling price remains high, an opportunity arises to increase profitability.

The golden rule of the industrialist

Before you start production, ask three questions:

1. How much does it cost to produce a unit?

Add all relevant costs.

2. How much can I sell this unit for?

Observe the market and not just the price you would like to receive.

3. How much is left?

Do it:

Profit per unit = sales price − total cost

Then:

Profit of production = profit per unit × quantity sold

If the result is too small, it may not be worth taking the risk.

If it's negative, producing doesn't make sense at that moment.

If the margin is good and there is demand, then increasing production can be an interesting decision.

Produce, buy or wait?

In the end, the real job of an industrialist is not simply to keep a factory running.

It's making decisions.

Sometimes the best choice will be to produce.

In other situations, buying the ready product will be cheaper.

And there will be times when saving the capital and waiting for an opportunity will be the smartest decision.

A stop factory may seem unproductive. A factory producing with damage is much worse.

At Ecclesiar, the entrepreneur who learns to calculate his costs before producing is no longer just a manufacturer.

He starts thinking like a real industrial.