Getting out of dire straits
Sudden shifts in market conditions, miscalculations or over-investments can cause financial difficulties for even the most promising of enterprises. If liquid reserves are running low, it may cause even profitable operations to stumble. Early in the game it’s easy to start over, but it’s also usually possible to salvage the situation and keep some of the investments and skills.
Biting off more than you can chew
A bunch of warnings and red text, but what are these really saying? And with practically no funds left, how do we turn this around?
Operating funds
This is a core concept of Mercatorio, and being short of it will usually have serious consequences. At the start of each turn, bids to buy inputs for the operation are automatically entered into the start-of-turn auction. All your operations (and those of other players) will enter their bids, reserving funds as they go, before the auction can start. This means that a significant amount of funds are getting tied up, and since selling happens in the same auction, revenue from sales in the same turn are not yet available.
For instance, 14.50 x 5 = 72.50 pence are required to enter the configured wrought iron bid. If these funds aren’t available during the auction, a smaller bid will be entered or none at all, causing a shortage of input materials.
If all operation accounts are linked to your main business account, this account needs to have funds available for all the bids at all the operations for things to go smoothly. If there’s a shortage, try to isolate troublesome operations by allotting separate funds to them.
Heavy operating funds users
Different production methods have different operating funds requirements. Our nail production requires both charcoal and wrought iron to be purchased in addition to the labour we provide ourselves. The positive value it promises is of little use if we don’t have the funds to operate.
Take a look at alternative production methods, and especially those with no inputs other than labour (or things you can supply yourself):
Disregarding the fact that “nail duty 1” isn’t even all that profitable, we’re also looking for something less heavy on operating funds (since we at the moment don’t have any…)
Given that we’re supplying the labour ourselves, this production method has zero need for operating funds and offers pure cashflow. Once we have regained our financial buffer, we can look into upgrading to more complex production.
Also take a look at the humble beginnings article which covers how to set up self-sufficient operations with minimal dependencies.
Note: when changing production methods at operations linked to a storehouse or warehouse, make sure the purchasing orders are updated so you don’t continue accumulating the inputs of the previous production method.
Postpone investments
In our example we also have an ongoing construction project, which has been consuming funds:
This is clearly not going to finish given our current financial situation. We started it because of a lucrative looking production method, but that’s no good for us yet. Also, it looks like we’re not able to get the bricks we need (at the price we’re offering). We’ve already sunk over 500 pence into this project, so we may not want to abandon it (especially if we’re still under church protection and don’t need to worry about the 5.00 / turn land tax), but it should be paused. A simple way to do that is to unlink the funding (and warehouse if applicable).
…or at least prioritize harder
As it turns out we also have a farmstead being constructed.
Here the calculus may be a bit different. We are much closer to completing it, and it doesn’t require those pesky bricks that we struggle to get hold of. And, farmsteads tend to be very lucrative buildings to have; outputting labour without requiring any inputs (or operating funds) to run. Perhaps we need to slow down the construction of the farmstead as well, but it should be a top priority to find the required products and funds to get this completed.
Freeing up funds
In addition to stopping the bleeding, we may be able to squeeze out some funds by selling down inventory. Sometimes inventory has grown due to over-production or sales orders set at too high prices.
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In a pinch, cashflow is more important than profit, so even selling at a loss may be good decision if it allows other profitable operations to run smoothly again.
Sustenance and prestige
Whether or not to completely sacrifice prestige depends on the specific situation. If it’s early in the game, it may be beneficial to let prestige fall (and re-enable church protection). If the situation is less severe and other moves are sufficient to recover, perhaps this isn’t necessary. Either way this is a binary choice, if you decide to temporarily give up on sustenance and prestige, make sure to complete disable it so you don’t drain resources for no gain.
Return of cashflow
With the income from our new household delivery duty production, reduction of nail holdings, and partial sales of timber production, things are running smoothly again.
We can even afford to let our timber reserves grow slightly, which will come in handy for completing the farmstead construction (which in turn will reduce our need to purchase labour from 14 to 4). And then we can go hunting for bricks and see if can’t get that brewery online.