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The Truth About Moneymaking with Skills - Understanding Inputs, Outputs, Profit and Loss Moneymaking Analysis of RuneScape Non-Combat Skills

The lemonade stand example on the previous page illustrates that it’s simple to understand inputs, outputs and the profit/loss equation when there is just one process involved. Things become more complicated, however, when there are multiple process steps, and identifying the inputs and outputs becomes more difficult. Yet it is essential that this be done, because otherwise you cannot really understand which, if any, steps are making you money.

In RuneScape, multiple step activities usually involve different skills; in fact, there are many skills that only function within the context of multi-step processes. Not understanding how to analyze these steps and how they interact with each other is the primary reason why many RuneScape players think certain skills make a lot of money when they really do not.

Let’s take one of the most common multi-step examples from RuneScape: making magic longbows and alching them. There are lots of ways to accomplish this, but let’s suppose I want to do everything myself. I might choose this sequence:

1. Pick flax.
   
   
2. Spin flax into bow strings.
   
   
3. Cut magic trees to get logs.
   
   
4. Fletch magic logs into unstrung bows.
   
   
5. Attach bowstrings to make strung bows.
   
   
6. Mine pure essence.
   
   
7. Runecraft the essence into nature runes.
   
   
8. Alch the magic longbows to get 1,536 gp each.

This 1,536 gp sum is pure profit, because I did everything myself, so there are no input costs. But which skill or activity really earned that money? Consider that each of those 8 steps contributed to the final product, and you realize that it’s not at all clear.

The truth is that in multiple-step sequences of processes, some of the steps can make money while others actually lose it, and you cannot get a clear picture of what is going on unless you break down the process. The idea is to separate the steps and recognize that the output of one will generally be the input of another.

As we saw, making and alching magic longbows “from scratch” is an 8-step process, each of which has inputs and/or outputs. This is shown in Table 10.

As you can see, the steps connect together sequentially, with outputs from some steps becoming inputs to others. The steps that involve resource extraction (#1, #3 and #6) have no inputs, only outputs; and step #8 is the final step so its output is the final product (in this case, gold pieces.) This can be readily expressed using what’s called a flowchart, as shown in Figure 129; these are commonly used to analyze business processes.

If a process generates a profit, this is because the value of the output exceeds the value of the input. This profit also represents the amount of value by which the input went up in creating the output, and so is called the value added. Looking at the difference between input and output for each of our process steps is the key to figuring out if we are making money with this process, and if so, which activities are generating it.

Table 11 is the same as Table 10, but with added columns that show the value of the inputs and outputs, and the value added for each step. The figures shown are the average Grand Exchange selling prices for these commodities at the time I wrote this topic.

By breaking down the steps and calculating value added, we can really see what’s going on with this production process. There are actually five steps that make money: picking the flax, spinning the flax, cutting the logs, mining pure essence and runecrafting. Both of the Fletching steps lose money, as of course as does alching the finished bow (Figure 130 is the same as Figure 129 but with the costs and relative value changes shown). And that’s why I constantly point out that Fletching is a vastly overrated skill when it comes to making money.

Some people might point out that yew longbows are different, and that’s true—you actually do make money Fletching yew longs, because the cost of a yew log and a bow string together is 533 gp, whereas the bows sell for 584 gp.

The problem is that too many people still say they “made 584 gp from Fletching yew longs”. The reality is that of the 584 gp price you sell the bow for, only around 10% of the value added came from Fletching. The other 90% came from flax picking, bow string Crafting, Woodcutting, Mining and Runecrafting—those are the real moneymakers. Fletching yew longbows makes you a bit of money, but not much—in fact, less than you could make in any of the other activities just mentioned.

I’m picking on Fletching a bit here, but it’s far from the only skill that in fact loses money when you train it, because the value of its inputs is higher than that of its outputs. Unfortunately, a lot of players don’t realize this, because they don’t look at value added, and especially because they buy into what I call the myth of the free input.

A typical example of this myth in action would be someone claiming that he makes a ton of money from Herblore, by making and selling prayer potions. I might point out that ranarr weeds usually cost more than prayer potions, plus there is the cost of vials and snape grass, so the player really loses money from the skill. And then the same old response comes: “Wrong, I make tons of money from Herblore because I get all the supplies myself, so they’re free!”

Well, no, those items aren’t free, unless there’s a way to get ranarr weeds and snape grass and vials to magically appear in one’s bank! The person had to either get these items as drops, collect them, grow them or buy them. And more to the point, the value of these inputs is what it is, regardless of how they were obtained, because the inputs themselves can easily be sold.

Based on current prices, this is the real value added analysis for making prayer potions:

1. Get ranarr as a drop (ignoring combat costs for the moment): +5,527 gp.
   
   
2. Collect snape grass: +374 gp.
   
   
3. Get or make water-filled vial: +97 gp.
   
   
4. Make prayer potion from these ingredients (G.E. price 5,145): -853 gp.

While there may be other reasons to make your own prayer potions, earning money is not one of them.

The Truth About Moneymaking with Skills - Understanding Inputs, Outputs, Profit and Loss Moneymaking Analysis of RuneScape Non-Combat Skills