My opinion piece on the recent SpaceX success is up at AOL News.
23 thoughts on “A Side Helping Of Crow”
Well said, although foes of free enterprise deserve to have their faces rubbed into the one percent fact in as many ways as can be devised.
One penny of the government taxpayer dollar. SpaceX has two rockets, and a low cost path to a third heavy, two launch facilities, several new engines, they produce almost everything in house with almost a thousand employees in a fast growing company that has shown a profit for the last three years.
Before any crew flies on a SpaceX Dragon vehicle it will have flown 17 times and be available years earlier.
The government has a paper rocket which will have little flight history before a crew risks it’s life in it derived from a system that has already killed and can’t be shut off once lit.
Who are the amateurs?
Sorry, I’m a techie, not a business guy. Can somebody explain to me how SpaceX can show “profit” for the last three years when they aren’t even providing any services yet? Do they just mean that money in > money out? Becuase to me, that’s not profit. That’s just giving the investors back the leftover money SpaceX didn’t use. I thought profit = revenue – costs. They don’t have any real revenue yet, though, right? I know they’re booked into the future, but they haven’t begun to fulfill those contracts yet.
Hundreds of SpaceXs are exactly what will get us a permanent foothold in space. And I don’t mean LEO.
Well, first of all they have already made several paid orbital flights. So they do have real income. Here are the working definitions of a few helpful business terms:
profitable: This means that your income exceeds your costs. More specifically, investment activity is left out – getting investment dollars is not included in income, purchasing equipment is not included in cost. Amortization of equipment and facilities is. The matching funds from NASA are probably counted as income, however – it’s not like NASA is getting shares in return.
cash-flow-positive: This means that all cash in exceeds all cash out, which is probably what you were thinking of. Everything is counted – the easiest measure is to subtract the starting bank account cash balance from the ending one.
In business, cash-flow-positive means that your doors will stay open. Profitable means that your investors are happy.
@David
Thianks. So if I understand you correctly, SpaceX has positive cash flow. Their profits, however, may yet be a bit specious if most of the surplus is actually either private capital or money NASA threw at them. And that’s where I’m still a bit skeptical, I guess. Sure, NASA can throw money at a company and make them seem “profitable”, but is that really the kind of books private space enthusiasts want to cook? Real profit, it seems to me, comes from revenues booked as a result of fulfilling customer’s contracts. I know NASA is a customer, but who else is out there? I’m getting familiar with some of the companies that are vying to provide commercial space services, but who (specifically, not speculatively) waiting in line to buy those services?
“Real profit, it seems to me, comes from revenues booked as a result of fulfilling customer’s contracts.”
I don’t know the exact details for how the payment process works for satellite launch but I do know that when Loral, Astrium, Orbcomm, etc. book a flight, some part of their down payment can be non-refundable. This certainly counts as income for SpaceX. I suspect that even the refundable part can go down as income as well as long as the obligation to refund is properly accounted for. There can also be subsequent payments as the launch approaches. So SpaceX is getting income from its satellite launch business beyond the payment for the one Malaysian satellite that it launched.
I may have found an answer to my question:
Officials have been careful not to say their commercial crew plan relies on a market beyond NASA, but for now, Bigelow appears to be the only non-NASA buyer for commercial crew services.
“Nobody,” Mr. Bigelow said of competition he sees on the horizon.
I hope this commercial thing works out, I’m just a bit skeptical about the business case still.
Guys, there are two methods of accounting, cash and accrual. Non accountants seem to only understand the cash method, but most businesses operate on the accrual method.
SpaceX was profitable before a single launch occurred. This is because they have a launch manifest and accounts receivable. Even if no cash changes hands they can count booked orders as income. This can also explain why a billionaire has no cash.
Eventually, they will not only be profitable, but will be able to show the cash for it as well when accounts payable get paid (that’s not a precise statement, but good enough for explanation here.)
Excuse me, acct. payable should have been acct. receivable above.
Actually, from the customers perspective, theirs would be an account payable.
“Every astronaut we have come in here just says, ‘Wow,’ ” said Robert T. Bigelow, the company founder. “They can’t believe the size of this thing.”
That’s looking at the Sundancer, the BA330 is almost twice as large.
I’m just a bit skeptical about the business case still
NASA money will be almost nothing when compared to money that will be exchanged between businesses. Bigelow isn’t building these things for nothing. He already knows he has customers waiting to buy them. What he’s waiting for is transportation services to and from orbit that doesn’t demand a six month vacation in Russia.
Things are going to start happening much faster in the next decade than they have in the whole history of space flight. Five years from now it will start to become obvious.
He already knows he has customers waiting to buy them.
I’m not so sure, from the article. It sounds like he has a plan to offer a LEO presence to countries that can’t afford their own space program, but I didn’t see any indication that he already has commercial customers lined up.
And it will require more than NASA and Bigelow to keep a competitive launch industry up and running. Who else is out there clamoring for cheap access to space? I keep reading these nebulous promises but I don’t see any hard news about specific customers lining up to blast into LEO or beyond.
…it will require more than NASA and Bigelow to keep a competitive launch industry up and running
Absolutely. Bigelow has a problem yet to be solved. Why would anybody buy a location that they can’t get to? But it will be solved. Not only will SpaceX have a seven passenger vehicle in about three years, but a number of other companies will focus on passenger vehicles launched on existing rockets.
Then what? With dozens of orbital habitats run by various companies (and one by NASA) and perhaps half a dozen companies buying launches on Delta, Atlas and F9 (not just with Dragons anymore) business will be booming.
Then bases are establish and transportation companies will come into being… perhaps they buy used SpaceX upper stages already in orbit and a Bigelow habitat to put together a lunar transport bus. Later, a few companies build a real spaceship on a government contract to supply the mars base which has a few dozen people living permanently there.
With dozens of orbital habitats run by various companies (and one by NASA) and perhaps half a dozen companies buying launches on Delta, Atlas and F9 (not just with Dragons anymore) business will be booming.
It’s awfully expensive to maintain a presence in LEO, commercial or not. What incredibly profitable use would “various companies” have for a LEO presence? I just don’t see the point; is there some product or service that can only be offered by putting employees into orbit?
Another point Simberg tries to make is that SpaceX spent 1 percent of what Ares 1/Orion was supposed to cost. Big deal. That was just to get to where they are now. They haven’t lifted people yet
He didn’t try to make it, he made it. Your argument is soooo much stronger (no people yet) it will probably cost them two percent, so there!
What incredibly profitable use would “various companies” have for a LEO presence?
Bigelow intends to make profit by selling his modules (not, so much, operating them.)
Some of those buyers will be countries that intend to profit from the experience of having their own space station (at a much lower cost than the I.S.S.)
Some of those buyers may be commercial and intend to profit by hosting guests.
Some companies already profit now and will profit more in the future by providing transportation of people and supplies to and from orbit to these stations.
Everything has an expense. Collecting more in revenue than you expend is profit. Don’t confuse high expense with no profit. Profit should increase as costs come down, but the really good news is we are already at the point where profits can be made.
I neglected to mention, some would like a place to do manufacturing research in zero G. Research is costly, but often results in profit as well.
“Guys, there are two methods of accounting, cash and accrual…”
Yes, that is important to point out. It is clearly how SpaceX can claim profitability so early in the game. However, suppliers and a thousand employees must be paid today with cash and not with future income. My point was just that substantial cash is in fact obtained from a satellite owner before the launch and not just in one big payment after the satellite is in orbit.
how SpaceX can claim profitability
They can claim profitability for only one reason, they are profitable. It’s not smoke and mirrors. It’s financial reality.
That reality changes over time.
“SpaceX has two rockets, and a low cost path to a third heavy, two launch facilities, several new engines…”
Point of order, Mr. Anthony, sir. Three launch facilities. As far as I’m aware, SpaceX still has SLC-3W at Vandenberg…
SpaceX still has SLC-3W at Vandenberg… and all the bureaucratic BS that goes with it.
I stand corrected.
Y’know, I suspect that the Vandenberg authorities might be a little more… accommodating to SpaceX now. It’s more difficult to push around a successful billion-dollar launch company than it is a tiny startup that hasn’t launched a single nut or bolt…
Well said, although foes of free enterprise deserve to have their faces rubbed into the one percent fact in as many ways as can be devised.
One penny of the government taxpayer dollar. SpaceX has two rockets, and a low cost path to a third heavy, two launch facilities, several new engines, they produce almost everything in house with almost a thousand employees in a fast growing company that has shown a profit for the last three years.
Before any crew flies on a SpaceX Dragon vehicle it will have flown 17 times and be available years earlier.
The government has a paper rocket which will have little flight history before a crew risks it’s life in it derived from a system that has already killed and can’t be shut off once lit.
Who are the amateurs?
Sorry, I’m a techie, not a business guy. Can somebody explain to me how SpaceX can show “profit” for the last three years when they aren’t even providing any services yet? Do they just mean that money in > money out? Becuase to me, that’s not profit. That’s just giving the investors back the leftover money SpaceX didn’t use. I thought profit = revenue – costs. They don’t have any real revenue yet, though, right? I know they’re booked into the future, but they haven’t begun to fulfill those contracts yet.
Hundreds of SpaceXs are exactly what will get us a permanent foothold in space. And I don’t mean LEO.
Well, first of all they have already made several paid orbital flights. So they do have real income. Here are the working definitions of a few helpful business terms:
profitable: This means that your income exceeds your costs. More specifically, investment activity is left out – getting investment dollars is not included in income, purchasing equipment is not included in cost. Amortization of equipment and facilities is. The matching funds from NASA are probably counted as income, however – it’s not like NASA is getting shares in return.
cash-flow-positive: This means that all cash in exceeds all cash out, which is probably what you were thinking of. Everything is counted – the easiest measure is to subtract the starting bank account cash balance from the ending one.
In business, cash-flow-positive means that your doors will stay open. Profitable means that your investors are happy.
@David
Thianks. So if I understand you correctly, SpaceX has positive cash flow. Their profits, however, may yet be a bit specious if most of the surplus is actually either private capital or money NASA threw at them. And that’s where I’m still a bit skeptical, I guess. Sure, NASA can throw money at a company and make them seem “profitable”, but is that really the kind of books private space enthusiasts want to cook? Real profit, it seems to me, comes from revenues booked as a result of fulfilling customer’s contracts. I know NASA is a customer, but who else is out there? I’m getting familiar with some of the companies that are vying to provide commercial space services, but who (specifically, not speculatively) waiting in line to buy those services?
“Real profit, it seems to me, comes from revenues booked as a result of fulfilling customer’s contracts.”
I don’t know the exact details for how the payment process works for satellite launch but I do know that when Loral, Astrium, Orbcomm, etc. book a flight, some part of their down payment can be non-refundable. This certainly counts as income for SpaceX. I suspect that even the refundable part can go down as income as well as long as the obligation to refund is properly accounted for. There can also be subsequent payments as the launch approaches. So SpaceX is getting income from its satellite launch business beyond the payment for the one Malaysian satellite that it launched.
I may have found an answer to my question:
http://www.nytimes.com/2010/06/08/science/space/08space.html
I hope this commercial thing works out, I’m just a bit skeptical about the business case still.
Guys, there are two methods of accounting, cash and accrual. Non accountants seem to only understand the cash method, but most businesses operate on the accrual method.
SpaceX was profitable before a single launch occurred. This is because they have a launch manifest and accounts receivable. Even if no cash changes hands they can count booked orders as income. This can also explain why a billionaire has no cash.
Eventually, they will not only be profitable, but will be able to show the cash for it as well when accounts payable get paid (that’s not a precise statement, but good enough for explanation here.)
Excuse me, acct. payable should have been acct. receivable above.
Actually, from the customers perspective, theirs would be an account payable.
“Every astronaut we have come in here just says, ‘Wow,’ ” said Robert T. Bigelow, the company founder. “They can’t believe the size of this thing.”
That’s looking at the Sundancer, the BA330 is almost twice as large.
I’m just a bit skeptical about the business case still
NASA money will be almost nothing when compared to money that will be exchanged between businesses. Bigelow isn’t building these things for nothing. He already knows he has customers waiting to buy them. What he’s waiting for is transportation services to and from orbit that doesn’t demand a six month vacation in Russia.
Things are going to start happening much faster in the next decade than they have in the whole history of space flight. Five years from now it will start to become obvious.
I’m not so sure, from the article. It sounds like he has a plan to offer a LEO presence to countries that can’t afford their own space program, but I didn’t see any indication that he already has commercial customers lined up.
And it will require more than NASA and Bigelow to keep a competitive launch industry up and running. Who else is out there clamoring for cheap access to space? I keep reading these nebulous promises but I don’t see any hard news about specific customers lining up to blast into LEO or beyond.
…it will require more than NASA and Bigelow to keep a competitive launch industry up and running
Absolutely. Bigelow has a problem yet to be solved. Why would anybody buy a location that they can’t get to? But it will be solved. Not only will SpaceX have a seven passenger vehicle in about three years, but a number of other companies will focus on passenger vehicles launched on existing rockets.
Then what? With dozens of orbital habitats run by various companies (and one by NASA) and perhaps half a dozen companies buying launches on Delta, Atlas and F9 (not just with Dragons anymore) business will be booming.
Then bases are establish and transportation companies will come into being… perhaps they buy used SpaceX upper stages already in orbit and a Bigelow habitat to put together a lunar transport bus. Later, a few companies build a real spaceship on a government contract to supply the mars base which has a few dozen people living permanently there.
It’s awfully expensive to maintain a presence in LEO, commercial or not. What incredibly profitable use would “various companies” have for a LEO presence? I just don’t see the point; is there some product or service that can only be offered by putting employees into orbit?
Theres a response to the AOL piece here
http://nasaengineer.com/?p=198
Another point Simberg tries to make is that SpaceX spent 1 percent of what Ares 1/Orion was supposed to cost. Big deal. That was just to get to where they are now. They haven’t lifted people yet
He didn’t try to make it, he made it. Your argument is soooo much stronger (no people yet) it will probably cost them two percent, so there!
What incredibly profitable use would “various companies” have for a LEO presence?
Bigelow intends to make profit by selling his modules (not, so much, operating them.)
Some of those buyers will be countries that intend to profit from the experience of having their own space station (at a much lower cost than the I.S.S.)
Some of those buyers may be commercial and intend to profit by hosting guests.
Some companies already profit now and will profit more in the future by providing transportation of people and supplies to and from orbit to these stations.
Everything has an expense. Collecting more in revenue than you expend is profit. Don’t confuse high expense with no profit. Profit should increase as costs come down, but the really good news is we are already at the point where profits can be made.
I neglected to mention, some would like a place to do manufacturing research in zero G. Research is costly, but often results in profit as well.
“Guys, there are two methods of accounting, cash and accrual…”
Yes, that is important to point out. It is clearly how SpaceX can claim profitability so early in the game. However, suppliers and a thousand employees must be paid today with cash and not with future income. My point was just that substantial cash is in fact obtained from a satellite owner before the launch and not just in one big payment after the satellite is in orbit.
how SpaceX can claim profitability
They can claim profitability for only one reason, they are profitable. It’s not smoke and mirrors. It’s financial reality.
That reality changes over time.
“SpaceX has two rockets, and a low cost path to a third heavy, two launch facilities, several new engines…”
Point of order, Mr. Anthony, sir. Three launch facilities. As far as I’m aware, SpaceX still has SLC-3W at Vandenberg…
SpaceX still has SLC-3W at Vandenberg… and all the bureaucratic BS that goes with it.
I stand corrected.
Y’know, I suspect that the Vandenberg authorities might be a little more… accommodating to SpaceX now. It’s more difficult to push around a successful billion-dollar launch company than it is a tiny startup that hasn’t launched a single nut or bolt…