Game in the Brain

This is how I calculate margins:

Step 1: get your total-cost-of-ownership of one years’ operation
Step 2: get how much it costs to upgrade to stay relevant for the next year
Step 3: get how many services/deliverable you can provide in a year based on your capabilities and market forecasts. Create a metric by which you can provide services.
Step 4: now divide your Savings Goals + TCO of Ops by the these services/deliverables that is reasonable.

Notes:
“by relevant” can mean many things. Running in place is relevant, but who wants to Run in Place. Anything biz where you are running in place, and for see running in place in the future is not any biz where you can expect to grow. So every company will have their own aribtrary measure of what capitalization they need to grow.

Some companies have world domination in mind, hence the very very high Capitalization Goals, some have None seeking to exit the market as profitably as possible. Then there are those who are so busy and know the business enough to plan at least 3-4 years ahead.
 
Unfortunately any PROFIT past cost is Taxed. this is a contentious subject, because some companies sees these valuable savings as their life blood for the future. they need to accumilate enough to make them selves grow and relevant and corporate taxes of 40% is very painful for hard-won biz.

One can always borrow instead of save, pushing the cost forward in time. It works similar to saving up for an upgrade but now you have the lender to contend to, although you will ‘saving up’ to in the form of paying the loan off.

One way to “save” it to implement the money ASAP in upgrades that have a small cost but long turn-around time. This is the typical method of upgrading, that way it is charged as an expense in the books. Unfortunately this keeps your liquid assets tied up in “improvements” instead of having a rainy day fund. Funny how the rainy day fund is taxed… unless your great with finance and manipulating the system to create a kind of “expense” that protects that money and acts like a rainy day fund/insurance when you need the cash to throw money at some problems.

My Traveller Players should know this and keep it in mind when I send a sample Traveller Biz/Case Study for the Game I plan to run.