Today I wanted to go into detail my business, and follow the math used to determine my profit margin. To begin with, Inscription requires a large investment of time due to it's CD research system to find recipes. It also requires time spent farming herbs for pigments, which are then turned into inks, which are then added to npc parchment and finally crafted into product. All of this requires time = money factoring against profits.
So lets look at each step, I'll explain how I approach it.
Leveling Inscription, similar to any trade, requires an initial investment of time. Staring at a low level, you can add a lot of your costs into your task of gaining EXP as herbs are where you quest. You don't have to buy herbs if you inscribe/herbalism. Ultimately this model does not = the highest potential of profit per hour, but we'll get to that.
Researching recipes cannot be hurried until you reach 420 Inscription, and then only by large sums of money. You are guaranteed semi-exclusivity because the trade revolves around a cool down that picks at random what you can craft. Cool downs usually equal money in any trade skill.
As an scribe with access to Dalaran, you can exchange Ink of the Sea (which is the current max-level crafting Ink) for any lower ink derived from other plants. In unfarmed zones such as 30-50 level range, these herbs can become scarce on the AH. Supply vs. Demand means that these are sometimes prohibitively expensive. Since 50-75% of the server population lives in Northrend, level 70-80 herbs are the most common, prices for them normalize, and it can often be much cheaper to translate level 80 herbs down to level 20 ink, rather than farm or purchase the appropriate level pigments.
Parchment is an NPC material, so reputation can be used to reduce it's cost. Resilient parchment begins at 50 Silver at neutral faction, and as low as 40 Silver at Exalted. This it's worth earning one faction's standings to exalted on your crafting character.
One of the secrets of Inscription is that not everyone does it. Sure, anyone can go to wowhead and look up the ingredients to make the glyph they are looking for, purchase them on the AH (for previously stated inflated prices) and then spam /trade for a scribe that is willing to work for tips. The 4 step complexity is what usually deters such traders from doing so. Here's a perfect example of this logic in practice:
So production is where the money's at. This person had no problem paying gold so he didn't have to think about it. Now how do I make these activities profitable?
Well for starters, much like a supermarket, I buy my produce wholesale (remember I said we would get back to this). Scan your auction house, look for names that sell hundreds of auctions at the same time of the herbs you want. Send out whispers or polite in-game mail, asking for a business contract. Figure out in advance how much you're willing to pay per herb, and offer to buy out their stock regularly for a fixed price. Now your profits aren't tied down when the market is competitive, and your margins increase because you don't have to pay more when AH supply is low. I have four, maybe five regular suppliers that think being able to sell all of their herbs fast is better than waiting for lots to sell in a competitive AH.
So I pay maybe 50 Silver per herb, preferably less. Many herbs aren't used for cross-trade recipes, so their demand is lower. A stack of 5 herbs will produce 1.2 Inks of the Sea, which means 2 or 3 pigments. So lets go with 40 Silver per herb, considering milling that produces 3 is fairly regular, at least one in 5 times. On rare milling, it can produce Icy Pigment, which means Snowfall Inks, but it is nothing to bet on.
5 x 40 Silver = 2 Gold per Ink of the Sea. Add the price of parchment, and you get 2 Gold 40 Silver cost to produce each glyph. A stack of 20 herbs will become 5 glyphs. It's important to note that some glyphs require 2 Inks to craft, so price these accordingly.
What this ultimately means is that our cost to produce each Glyph hovers around 2.5 Gold each. Demand for rare Glyphs can increase the AH costs significantly, as I've sold Glyphs for over 50g each. That means you're making 2000% profit per Glyph sale. Of course, most of these sell for closer to 13-20 Gold on Doomhammer, but that still works out to 600-800% profit per glyph.
The trick to making money from this math is volume. I'll go over how I use modules to that effect next time :D
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