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Introduction:
The purpose of this document is to codify some general rules and framework for mercantilism in Therra. This document is designed primarily to cater to PCs who wish to occasionally engage in trade of commodities and other bulk goods over an extended period of time. It is not designed to be an intricate model of economics in a fantasy world.
The base aim of the system presented is to provide players who invest in the proper skills and make the proper efforts with an appropriate monetary reward with some financial risks. The overall aim of the system is not to replace adventuring as the main source of funds of the PCs. Adventuring should generally garner more wealth because it involves a much higher risk factor.
System:
The system assumes, in general, that certain goods are bought in one place for one price, transported to another place, and then sold for another price. The system only purports to deal with the actual buying and selling prices. Other factors are important and should be taken into account, such as guild fees, transportation costs, market fees, local taxes, bribes, payoffs to the thieves' guild, etc. Since these other factors are too numerous and variable to codify, the DM is going to have to develop these.
The basic assumption of this system is that the normal return on a well-invested commodity is 20%. This assumes that transport fees, taxes, etc. will eat up another 10%-15% leaving a profit margin of 5%. While this may not seem like a lot, given a merchant who spends some initial time reinvesting his profits, it can grow quite large over time.
Let us assume a humble merchant gathers 1,000 gp and invests it. Let us also say it takes 1 month to turn over his inventory. After a year of investing and reinvesting the profit into the business, he will be netting 90 gp per month take home coinage. According to the DMG, 90 gp per month will put someone squarely into the middle class.
Now assume some adventurer make a haul and take out 10,000 gp. By investing it at a net 5% return after a year this adventurer will be pulling in 900 gp per month, enough to live in high style at a level that would make many nobles envious.
A street merchant selling 100 gp of goods per month will pull in 9 gp per month, which still puts him at a comfortable living level according to the DMG.
Circumstances:
Many things can affect the buying and selling price of a product. Some of these are listed below:
· Scarcity of the item
· Demand for the item
· Contacts and selling skill of the seller
· Contacts and selling skill of the buyer
· Natural disasters
· Natural spoilage
When taking these variables into account, it is possible to make a profit of more than 5%, and it is also possible to lose money.
Taking 10 and 20:
One cannot take 10 or 20 with any of the skill checks in this system. Trading and mercantile activities are highly variable and cannot be relied upon with the certainty that comes with taking 10 or 20.
Mechanics:
The base return on an investment is equal to the gross profit less selling and transport costs. Gross profit is the selling price minus the buying price.
Gross profit is reflected as a percentage of the buying price. A gross profit of 15% on a purchase of 1,000 gp is a gross profit of 150 gp.
In all cases, gross profit is based on the assumption that the PCs are buying the commodity in the normal marketplace. If the PCs have acquired goods by way of adventuring or gifts or the like, then the DM should adjust the actual profit accordingly.
To determine gross profit, roll a d% on the following table:
01-03 = disastrous circumstances,
loss of (1D4+6) x 10% (i.e. 50-100% loss)
04-10 = terrible circumstances, loss of (1D4+1) x 10% (i.e. 20-50%
loss)
11-20 = bad circumstances, loss of 1D20%
21-35 = flat market, gross profit of 1D10%
36-65 = normal market, gross profit of 3D10%
66-80 = nice market, gross profit of 2D10 + 20% (i.e. 22-40% profit)
81-90 = good market, gross profit of 2D10 + 30% (i.e. 32-50% profit)
91-97 = great market, gross profit of 3D10 + 50% (i.e. 53-80%
profit)
98+ = boom market, gross profit of 1D20 + 80% (i.e. 81-100% profit)
Mean and median results are 19.5% gross profit. It is reasonable to assume 14.5% of sales expenses, netting a profit for the seller of 5%.
Various items can modify the results. Some of these are merely adjustments to die rolls. Others are adjustments to the category. A category is one of the results on the table above. If one were to adjust a result one category worse, that would mean reading one line higher on the above table (for example, changing a normal market to a flat market).
Modifiers:
Skill:
The base DC roll for selling is a Profession (merchant or trader) check with a DC of 15. This is the expected result of rolling a 10 for a modestly experienced merchant with a modified skill of +5 (assumed to be 4 ranks at 1st level plus an ability bonus of +1).
This profession roll has two possible synergy bonuses, depending upon the nature of the selling. For a merchant who wishes to simply bargain and schmooze his way into the market, 5 ranks of Diplomacy will provide a +2 synergy bonus to one's Profession (merchant or trader) check. For a merchant who wishes to fast talk and exaggerate and do a little flim-flam, 5 ranks of Bluff will provide a +2 synergy bonus to one's Profession (merchant or trader) check.
The Appraise skill also provides a synergy bonus of +2. A Craft (item) skill that is related to the goods being traded can be used instead of Appraise.
Someone trading without the Profession (merchant or trader) skill will simply make a Wisdom check.
Add the difference between the skill check and the DC of 15 to the gross profit roll.
For example, Marco, with no Profession (merchant or trader) skill but with 5 ranks of Diplomacy and a Wisdom of 12 attempts to sell some silk that he has purchased for 400 gp. His modified Wis check is +3. He rolls a 5 +3 = 8. 8 is 7 less than the DC of 15, so he would subtract 7 from his percentile roll on the gross profit table. That means if he rolled a 38 on the gross profit table, it would be modified to a 31 result, turning a normal market into a flat market.
Market Scarcity:
Items are rated on the following chart:
Impossible to find (25)
Extremely rare (20)
Rare (15)
Somewhat rare (10)
Uncommon (5)
Normally available (0)
Common (-5)
Very common (-10)
Glutted (-20)
Subtract the number in parentheses for the buying scarcity and add for the selling scarcity.
Events Beyond One's Control:
There are no guarantees in business. Even the most skilled merchant can lose money, albeit more and more rarely. Even an extremely rare good being marketed by a master trader with 25 ranks of Diplomacy and 25 ranks of Profession (merchant) cannot elude "Acts of God" or unforeseen market collapses. As such, there must be a chance for anyone to suffer the worst results on the chart, though this should be rarer for the more experienced merchant who will have access to more reliable transport and be wiser about the weather and local conditions.
The base chance for an event beyond control is 20%. For every rank of Profession (merchant or trader) this chance is reduced by 1%. However, it may never drop below 5% under any circumstances.
If an Event is indicated, roll 3D6 and consult the following chart:
3 = Worsen category by 1d8 categories
(but not more than zero)
4 = Worsen category by 1d8-1 categories (but not more than zero)
5 = Worsen category by 1d8-2 categories (but not more than zero)
6 = Worsen category by 1d8-3 categories (but not more than zero)
7 = Worsen category by 1d8-4 categories (but not more than zero)
8-15 = no effect
16 = Improve category by 1
17 = Improve category by 2
18 = Improve category by 3
Other Modifiers:
Other things can and should affect the Gross Profit Table. For example, if the seller is a member of a powerful guild, then while the guild may collect a percentage of the Gross Profit, it may also provide favoured market stalls and guarantee the goods such that a bonus (+5 is reasonable) to the Gross Profit Table is gained.
Spoilage and Inventorying:
Nothing says a seller has to sell to a poor market. If the seller doesn't like the market, he can refuse to take the gross profit roll and hold onto his inventory, or sell any portion of it at the rolled gross profit and keep the rest. However, if items are subject to spoilage, they may go bad if held onto too long. In addition, durable items will need to be inventoried, usually at some expense. The details of these are left to the DM, but the structure of inventory should be such that a merchant cannot wait forever to unload goods into a good marketplace. Inventorying items should involve costs (rental of warehouse, guards, etc.) and risk (loss due to theft, fire, et al).
While inventoried, the DM should check periodically for a Force Majeure result to reflect the chance of something happening to the goods in storage.
Force Majeure:
Force Majeure is a French term used in business that means "Acts of God". This could range from theft, warehouse fires, loss in transport, weevils, fungus, etc.
While it may seem that Force Majeure should not be tied at all to skill levels, it is still a fact that experienced merchants will know how to minimize their exposure to such calamities, whether by knowing the best weather or season to trade, the times when bandits or monsters are most active, which transport companies are the most reliable, and which warehouses are the safest.
Before a roll is made for a market on the Gross Profit Table, a Force Majeure check should be made. In addition, if goods are inventoried for a time, then a periodic check should be made as well, possibly with separate checks for goods that are inventoried separately.
The chance of possibly encountering a Force Majeure is equal to 5%. If one is indicated, roll on the following chart:
01-25 = disastrous circumstances,
loss of (1D4+6) x 10% (i.e. 50-100% loss)
26-45 = terrible circumstances, loss of (1D4+1) x 10% (i.e. 20-50%
loss)
46-60 = bad circumstances, loss of 1D20%
61-00 = no Force Majeure
This roll is modified by the amount by which a Profession skill check exceeds a DC of 15 (results below 15 result in a penalty). In all cases, a natural roll of 01-05 on the Force Majeure Table is treated as result of disastrous circumstance.
Force Majeure results, unlike adverse results on the Gross Profit Table, cannot be avoided or inventoried. They are simply lost. Any goods remaining may then be sold via the Gross Profit Table as normal.
Quantity of Goods Acquired:
People cannot simply get their hands on as much of a good as they like. There are a variety of reasons for this, including overall scarcity, exclusivity contracts, priority given to others, limit to shipping space, simple limit on the number of buyers a single person can negotiate with in a month, etc. Of course…money talks, and this can be overcome somewhat by paying more (bribes, or simply a premium).
A merchant can acquire 3 gp worth of goods times the result of a Profession check times his ranks in Profession (merchant or trader, treat no ranks as 1/2 rank). He also gains +2 synergy bonuses for Gather Information, Knowledge (local [the region of purchase]), and Diplomacy. Subtract the scarcity rating from the roll (i.e. add negative ratings).
If a merchant wants to purchase more than that in a given period, he can, but he suffers a -5% to the Gross Profit Table for each such multiple to reflect having to pay higher prices.
This acquisition limit represents the entire amount of goods purchasable, not simply the amount of a single good. If goods purchased have varying scarcity ratings, then use a weighted average. It will be necessary for over-acquired goods that are inventoried to be tracked so that the -5% penalty is retained throughout the life of the goods. When it comes time to sell, those goods should use the same Gross Profit Table roll but the profit should be calculated separately for the penalized goods using the penalty to the roll.
Of course, merchants can hire other merchants to procure goods, as brokers or employees. This allows larger and larger acquisitions, but with an increase in overhead and selling costs.
Example:
Joe wants to purchase an uncommon good. He has 6 ranks of Profession (merchant). His DC roll is a 16 and he adds his +13 for a total of 29. He subtracts 5 for uncommon scarcity netting him a 24. He can purchase 432 gp worth of stuff that month. For every multiple above that that he purchases, he suffers a -5% to the Gross Profit Table to reflect having to pay higher prices.
If Joe decides to buy 600 gp to inventory those goods, and next month he buys 100 gp more, the DM must record that 600 gp of those goods retain a -10% penalty while 100 gp do not. When Joe takes all of these goods to market and rolls a modified 43 on the Gross Profit Table, he will sell 100 gp of the goods at normal market prices and 600 gp at flat market prices.
Periods:
This system mentions periods, but never really defines it. This is left to the DM to decide. In general each period should be a month long. If, for some reason, a trading stint lasts for a whole year, the DM is welcome to either roll out 12 periods (or 13 in Therra), or to roll a single year-long period and then multiply some of the items (such as acquisition of goods) by twelve (or thirteen if playing in Therra!).
Comments:
This system is not designed to be an intricate playing out of business transactions. It is instead designed to run in the background of a gaming session and to be resolvable with a few die rolls, so as to not dominate the lion's share of the gaming session. It is up to the DM to closely regulate the system and to design simple schemes or adjudicate costs of selling, such as hiring guards, joining guilds, paying for transport, etc. If the DM wants to simplify this procedure, he can assume a baseline of 15% of overhead and then adjust from that as the circumstance warrant.
In addition, these rules are not meant to handle large trading companies run by a variety of merchants. In such situations, the DM can declare a given trader to be actively running the operation and allow a reasonable number of lieutenants to attempt to give aid to any Profession checks.
Integrated Example:
Joe Trader is a slightly experience merchant. He is a 3rd level Expert with a Wis of 14 and 6 ranks in Profession (trader). He also has taken the feat Skill Focus (trader). He has 5 ranks in Diplomacy.
Joe wants to trade Gerilongi silk. He wants to purchase 250 square yards of average Gerilongi silk. Gerilongi silk's base price is 10 gp per square yard (as per the DMG). Joe wants to spend 2,500 gp on silk.
Gerilongi silk is Normally Available in Gerilong and somewhat uncommon in the Far Coast. That results in no scarcity modifier for the purchase and a +5 modifier for the sale.
The DM assumes transport and selling costs in this case are the standard 14.5%.
First, Joe determines how much he can buy. He rolls a Profession check and the result is a 14. He adds +13 [+6 for ranks, +2 for synergy, +2 for Wis, +3 for Skill Focus] for a total of 27. The total amount of silk he can buy is equal to 486 gp. This is far less than he wants, but he doesn't want to pay the bribes necessary or to take second rate silk or pay a premium on first rate silk to secure more.
Next, he takes the silk to market. Joe first rolls for a Force Majeure check and rolls a 23. No Force Majeure will occur.
Joe then rolls a Profession check and the result is a 12. He adds +13 [+6 for ranks, +2 for synergy, +2 for Wis, +3 for Skill Focus] for his skill check and ends up with a 25, which means a +10 to the Gross Profit Table.
Joe now rolls on the Gross Profit Table and rolls an 86. Adding +5 for net scarcity and +10 for his skill check results in a 101!
Next Joe rolls for an Event. His chance is 20% less his 6 ranks of Profession for a total of 14%. Joe rolls a 36 and so no Event occurs.
Finally, Joe consults the Gross Profit Table and rolls 1D20+80%. He rolls a 19 and so makes a 99% Gross Profit. From this 14.5% is subtracted, resulting in Joe pocketing 411 gp. Nice job Joe!
So, what is Joe's average Return?
There are a lot of variable to consider, but…
At a +13 Joe's average skill roll will be a 24…adding 9% to the Gross Profit Table. Assuming an average scarcity modifier of +5, the total add to the table will be 14%.
That means Joe's average result is a 64% or a normal market (3-30% profit). After sales expenses, Joe will net -12-18% profit.
The chance of an Event occurring is only 14%, and if it occurs, the chance of a category drop is only 6% while the chance of an increase is 2.7% resulting in roughly a 2% chance of an average drop of 3 categories or a 6% chance of an average drop of 1 category. Overall then, there is a 14% chance of an event resulting in a 6% chance of a 1 category drop or a net subtraction of about 1% from average gross profit. Force Majeure will occur about 2% of the time, and result in a average loss of about 35%, for a net reduction of about 0.6%.
Thus, Joe's average net profit will be -13-17% or 2%.
On an investment of 300 gp, Joe will pocket, on average, 6 gp. However, Joe is on the cusp (2%) of gaining a nice market on average, so if Joe stores his goods and waits for markets to rise (i.e. he rolls 2% better than average), his average profit will increase to roughly 15%! This will allow Joe to live relatively nicely, though he likely has other overhead, such as employees, rent on a shop, stabling costs for animals, payment of guards, etc. Of course, Joe is a better than average merchant and has devoted a feat to his profession.
Final Thoughts:
No simple system is bullet proof.
There are likely many ways to take advantages of loopholes in
the above system, and it is likely to break down if the level
of trading is too intense or a player dumps all of his skill points
into Profession (trader). As such, the DM should always make it
clear to the player that this system may be deviated from at any
time by the DM, if he feels it is not working. Players should
understand this system as a merest outline or guideline for resolving
trading, and they any attempts to over exploit the system will
result in its modification.