Business Plan for New Publishers

I started my publishing company without writing out a business plan, but I'd been involved in publishing for years as a trade author and had failed in a previous attempt at publishing in the old offset press model, so I had a pretty good idea what I was about. Every once and a while I hear from somebody at government agency (on the local level) or from a volunteer in a business incubator asking me to help out with a business plan for a client they are advising. I try to be helpful, and have had a few interesting phone conversations as a result, but I don't think they buy into my basic message about the need for a marketing platform. Finding customers for books is just a very different business than opening a storefront or bidding on contracts, and competition is on a global rather on a local level.

But I can give new publishers a good starting point for a business plan: Make a profit on every book that you sell. That may sound like a no brainer, but I've had experiences in publishing where I lost several hundred dollars apiece selling $20 books. It's called wasted advertising. If you lump your marketing expenses into on bundle for the lifetime of your business and amortize them against all of your book sales, it might look cheap enough, but I believe in linking a marketing campaign directly to the results. Another way to lose hundreds of dollars per book sold is to print a lot of books and only sell of few of them. I know some people would argue that printing the book only cost a couple dollars and they sold it direct to a customer for over $20 (or into distribution for less than $10), but if you had to order thousands of books to get that printing price and you never sold a hundred, it was a bad piece of business. Been there, done that.

But in talking with these business advisors to aspiring publishers, I find they want to focus the business plan on exactly the wrong points. I think it has to do with wanting to define the things that can be "easily" defined, such as design costs, printing, computer equipment and software, and advertising campaigns, not to mention professional services for accounting and legal issues. I've seen such business plans, and I'm sure they're a lot of fun to write. After all, anytime somebody can open up their old college textbook and see a black and white plan for success, it's comforting. Too comforting I believe, and I hate hearing failed businessmen complain that they failed, despite "doing everything right." I do understand the problem new publishers and their advisors are faced with in drawing up a plan for the business. It's tough get it all down on paper when you don't really know what you're doing:-)

Instead of giving a framework for new publishers to fill in the blanks and go broke, I'm going to give a brief list of things you really need to start, and things that are easy enough to find, and things you can add or change as the business progresses. The primary thing you need to start is a marketing platform. It could be your public speaking, a byline in you journalism, a website, a media presence, or any number of other existing platforms that will guarantee your titles eyeballs or ears. The key here is that the marketing platform should be in place before you start publishing. Another thing you need to start is a manuscript or manuscripts that fit your marketing platform. If you're a TV personality, you can probably push whatever book you want, but if you make your living teaching people job hunting skills at seminars, I'd recommend that your first title has something to do with career planning. The same goes for the owners of a chain of garden shops - stick with gardening books at the start.

Another thing you absolutely need is a market. I don't care if you have the best book ever written about roof thatching in sixth century Italy, the market is way too limited to build a business plan around it. You learn about your market by doing market research, looking at competing titles and title sales within the genre. If you can't find any competition, it's more likely fool's gold than the motherload. The last thing you really need to get started is a modest amount of time and money, a few months and a few thousand dollars can do it. You can substitute a few hundred hours for a few months if you're going to go at it part-time, but you need time to do your homework and market research at the start and to make changes in accordance. You can't do market research and work on your platform or write a book at the same time, the market research has to come first. Unfortunately for most self publishers, the manuscript usually comes first and everything else ends up depending on luck.

The things that I call easy enough to find are services like editing, proofreading, cover and interior design. Again, you can have a great deal of fun studying up on postal rates for books, visiting UPS and FedEx, signing up to have an infrastructure in place for all eventualities, but it's a big waste of time for a publisher who has yet to sell their first book. When you start out, it doesn't matter if you get the best bulk price on your first dozen padded envelopes, what matters is that people are actually ordering your books. Don't rush out and buy fancy accounting software when all you have is expenses, the IRS has its own notions as to what does and doesn't constitute a legitimate business expenses, especially for a business that hasn't made any money yet. Nobody needs filing cabinets when they start, nor postage machines, nor office furniture. Publishing is an ideal laptop business. What you need is regular back-ups!

Things you can add or change as the business progresses include printing, warehousing and business banking services. We used to have merchant credit card processing when we were printing on offset, I suppose we still have the swiper, but it never paid for itself. My personal feeling is that the majority of new publishers who don't need offset printing quality are best of starting out with Lightning Source to do print-on-demand printing and order fulfillment into distribution, all hands-off for the publisher. If you need a ton of low cost books for a flood of bookstore orders, you can always get them printed in a week or two. As a new publisher, don't get caught up thinking in terms of building business relationships, it will be strictly a one sided process. The companies you deal with when you are starting out are going to treat you as a cash-and-carry customer. Your plans for the future don't carry any currency in an industry where success is rare.

Translations and International Relations

I just sold the Chinese (Simplified) rights to my publishing book to an academic press in China for $1000. I've written in the past that selling foreign rights is a risky proposition for self publishers, but my main motivation for agreeing was to have a Chinese copy of the book to send to my friend from graduate school, who loaded me down with gifts brought from China some 15 years ago. I ate the chocolate, I don't think I ever worked my way through the green tea, and I learned quite a bit about how Americans relate to Chinese waiters through him. He is a brilliant man who maintained a 4.0 in Physics with a limited command of English (though he had read "The Godfather") and who now runs a hedge fund.

All of this came to mind tonight as I sat in my favorite Jazz Bar in Jerusalem, the only full schedule Jazz club in Israel that I know of, where I wrote the creative bits of the last two books I published. On some nights, I sit at the bar writing on scrap paper, in other instances, it's more a question of carrot and stick. In any case, tonight the band is playing Oriental influenced Jazz, the sax reminiscent of a snake charmer is backed by the piano and the drummer plays something that looks like a 20 gallon gourd, backed by the bass. It could be a studio recording, these guys are so good.

The cook, who studies biology in university and translates films to Hebrew in his spare time, brings me a bowl of soup to try on the cuff. After I eat two spoons, the barman says, "Morris, what's this" and takes two spoons for himself. The barman is part of the Russian/Israeli culture. Although he was born in Israel, his cultural norms are Russian, and Russians are constantly sharing food and eating utensils. For me, it was the first time in my life I can remember that I ended up using a spoon another man had eaten from, but I'm trying to learn some Russian, so it's par for the course.

The waitress is a beautiful Czech girl who is studying art restoration in Czechoslovakian graduate school, but taking some time off to learn Hebrew in Israeli Ulpan. She may be the only person in the place who couldn't order a beer in Russian because she's young enough to have opted to learn Slovak in public school. We're in a conversation about how you say "Check" in various languages, and ignoring the irony, I throw a monkey wrench in the works by pointing out in America we run a bar tab. This reminds me of an oddity I noticed in reading an Anthony Trollope novel (mid 1850's) this week, in which the game Tic-Tac-Toe was referred to as Tit-Tat-Toe. The cook suggests that this may be where the expression "Tit for Tat" comes from, which suggests he's worth more than the $50 for the first one and a half hours plus $10 for each additional ten minutes he gets for the films he translates to Hebrew. Of course, he gets another $30 for synchronizing the subtitles with the speech.

There's something Celtic about the music, and an American sits next to me and strikes up a conversation because I'm speaking English with the Czech waitress and the Israeli cook, as it's the best language we have in common. He's studying religion at a quasi Orthodox institute that tries to reconcile science with God. I wish him luck. When he calls the barman to pay his tab, it turns out that he didn't understand that there was a 20 shekel cover charge (about $5) for the band who would have commanded $40 or $50 a head in a quarter-decent NY club. "I asked you what language you wanted to speak" the exasperated barman says to him in Hebrew. "I understood" my American neighbor replies in Hebrew, "But I thought it was buy a beer OR pay the cover charge." In other words, he didn't understand.

Music may be the international language, but it doesn't always fare well in translation. Last year I saw a Chinese film about a musician who believed he was John Lennon's son, though I missed the beginning and was a little lost throughout. The translation of the lyrics that preoccupied the protagonist showed up in the subtitles as "It's only natural, it's only natural." It wasn't until the end of the film when they brought up the music that I realized it was the chorus to "Let it be, let it be." My book is full of American references that won't translate into Chinese even if the translator is an expert. What could they make of my salad inspired joke, "I wouldn't bet the ranch dressing"?

I don't view translation or international relations as part of my business model, but I try to hold up the side. When I cashed out my tab, I told the barman to add the cover charge for the American who had sat next to me. He asked why, and I told him I wanted to write it up when I got home. "But Morris," he told me, "You don't actually have to pay for him in order to write it up." True, but it wouldn't have been the same. The barman is in his last year of the five year Bezalel art school program, and next year, will start studying to be a film director.

The Bottom Line On Publisher Discounts off the Cover Price

Authors without any trade experience who decide to try their luck at self publishing are often shocked to learn that the standard discount at which books are sold by publishers into distribution is over 50%. Trade authors learn about discounts the hard way when they read the first royalty statement from their publisher and find that their percentage of net is a percentage of something less than half of the cover price of the book. Unfortunately, I've heard from a few self publishers over the years who have gone as far as getting books printed, with the retail price embedded in the cover design and barcode, only to find that they'd be losing money on every sale through distribution. Self publishers and small presses who work with exclusive distributors (ie, distributors who insist on becoming the sole source for distribution sales) can find themselves selling returnable books to that distributor at 65% to 70% off the cover price.

Lets look at a 200 page trade paperback, the standard 6x9 size, with a cover price of $20. The net to the publisher at a 70% discount is (20x0.3) = $6.00. The net to the publisher at the standard (trade) discount of 55% is (20x0.45) = $9.00. On the short discount POD model, using the lowest discount of 25%, the net is (20x0.75) = $15.00. Now lets take the printing cost into account. A 200 page trade paperback on offset can get down to about $1.00 for around 5,000 copies. That doesn't count shipping or the cost of money (you have to come up with the $5,000) but it's a decent ballpark figure. The same title printed by Lightning Source and supplied by them into distribution would cost ((200x0.013)+0.90) = $3.50

The publisher using the exclusive distributor and offset printing could net $6.00 - $1.00 = $5.00 on distribution sales. The publisher using standard distribution would net $9.00 - $1.00 = $8.00 with offset or $9.00 - $3.40 = $5.60 with on demand printing. The short discount publisher (me) would earn $15.00 - $3.50 = $11.50 on distribution sales. So, the publisher taking the biggest gamble, laying out $5,000 for printing before selling a single book, nets $5.00 per book, and the publisher using short discount POD nets $11.60 a book, more than twice as much. The publisher using the exclusive distributor will have to sell more than twice as many books to make the same bottom line. Why does that sound unfair?

The answer depends on how much that exclusive distributor does to get your books onto brick-and-mortar store shelves. Because selling books is hard and because some self publishers have built a business around an exclusive distributor and live to tell about it, many new publishers think it's the only way to go. Ten years ago that may have been true, but today the world's biggest bookstore is Amazon. I know some self publishers who have gone the exclusive distributor route and who are very happy with the results. However, when I've poked and prodded for information, I'll be darned (like a sock) if I can figure out just what they think the exclusive distributor is accomplishiing for them, other than acting as a very expensive middleman. I suppose I'm also biased because two of the exclusive distributors who have approached me over the years about distributing my self published titles have gone bust. I'm not saying the exclusive distributors don't work for their money, I'm suggesting the model they represent is obsolete and expensive for today's web savvy self publisher.

Author and Publisher Websites

The Publishers Weekly newsletter on Monday quoted some study findings with the headline "One Fifth of Readers Visit Publisher or Author Websites." The small print showed that this was reader-side survey, and didn't associate the visits with buying behavior. The Spier advertising agency survey found "18% of readers have been to a publisher's Web site, while 23% of readers polled have visited an author's site." Hooray for authors, though I suspect the results are skewed by reader perceptions and memories. Many may believe they've visited an author website just because they are always looking things up on the web and seem to recall looking for their favorite author at one time, but it doesn't mean they actually got to the author's website, or would know if they ended up at a tribute site rather than one owned by the author.

The story motivated me to look at my year-to-date Amazon Associate stats, which showed that this website has generated a little under 1900 sales so far in 2006, of which about two thirds are books I've written or published. The highest sell-through efficiency varies between about 5% and 15%, depending on the title and the type of linking used, but buyer behavior studies suggest that the final sales attributable to the site would be appreciably higher. Most buyers, even on the Internet, tend to like shopping around, maybe check their local store pricing, sleep on it, so by the time they buy the books somewhere, the tracking is lost. My unsupported rule of thumb based on the sales trajectories of my books in their early days when they had no benefits from Amazon placements was that for every Associates sale my site records, it creates another sale through another Amazon session or a different retail source. In addition, the site generates direct sales, though I've intentionally structured pricing to encourage customers to buy through Amazon or retailers instead.

Since I don't advertise my website anywhere, the out-of-pocket expense for maintaining it is the $10/month hosting fee. The time expense of maintaining the site is what I'm doing now, writing. Websites are very much like real estate in that they can go to ruin over time if you don't keep up with repairs and improvements. I'd rather invest my time and effort into my own website then spend it competing for attention elsewhere on the web, but it's not necessarily the most efficient approach to selling the maximum number of books. If your main focus is selling books today, you're best bet is to take advantage of the publicity tools Amazon allows authors to use, everything from Listmania and Wikis to AmazonConnect. Aside from two Listmania lists I did year ago out of curiosity to see how they work, I've stayed away from these Amazon promotion vehicles, so at least I can provide some friends with a baseline for comparing approaches:-)

There are other benefits to concentrating on your own website rather than looking for publicity elsewhere. One mixed blessing is that a website gives you a higher profile outside of the bookstores, proving people find your site authoritative enough to link to you. Every couple months I'll hear from mainstream media looking for answers about the publishing industry, which is both fun and frustrating. It's fun to be consulted as an expert by somebody from the Wall Street Journal or the Associated Press, but some of the journalists who contact me are literally so in the dark about the stories they are trying to write that they don't know what questions to ask. It's a funny thing about publishing journalism, it's just not an active enough beat to have provided a living for any full time columnists, so the journalists who contact me about self publishing, industry book sales, POD or e-books, have usually been assigned by a desk editor to "get the story" when none of them even know what the story is.

I used to perk up and do a lot of extra leg work for journalists who contacted me, now I measure my response by how much homework they've done. And, while I certainly advocate getting kids experience in the workforce as interns, I find that being interviewed by an intern brings with it a high likelihood of being misquoted. Finally, journalists often bring agendas or preconceptions to the table, meaning they may only be looking for a supporting quote or agreement on background. As I mentioned in a correspondence with a writer last night, I'm just not interested in being "The POD Guru" for the next X years. I put it in quotes because the main turn-off for me is correspondence with people who haven't done their homework, and want me to walk them through a process that I've written over 100,000 words about in this blog alone. I'm always happy to offer constructive help where I can, and I learn tremendously from some of the questions and reports of different experiences that writers and publishers send me.

The bottom line is that my website is working even better than I'd hoped when I first started writing about websites for authors back in the mid-1990's, and it's also become a valuable asset in my business, probably worth more at auction than my titles themselves. But as magnet for drawing interesting correspondence about publishing, it casts the net a little too wide. When I get an e-mail these days loaded with Publishing 101 questions, I tend to give pretty short answers and recommend they read Dan Poynter's book, Self Publishing, in it's 15th edition. While I've never read the book myself, I'm told it offers a nice counterweight to the approach I advocate on my website, and it should scare off the authors who want to start a publishing company without spending any money.

The Stupid Publisher Cancelled My Book!

Over a year and a half to write, over 100,000 words of wisdom. Sure, I came in a little high on the word count, we'd sort of envisioned something around 50,000 words, but the editor loved it! In fact, we went through the whole process without any indication the book was in trouble. Editing, proofreading, even got a special cover design. Then, while I was reviewing the final proof, the axe fell:

"Dear Morris,

We're sorry, but we've decided that your title "The Publishing Blog" isn't a good match for our list at this time. We apologize for any inconvenience this causes, and wish you luck placing the title with another publisher should you decide to pursue that course."

I can read between the lines as well as the next guy. The note might as well have read:

"Dear Morris,

We're sorry, but we've decided that your title "The Publishing Blog" isn't any good, you should take a match to it. We apologize for not being taken in, and wish you luck placing the title with another publisher so you shouldn't pursue legal action."

If I wasn't sitting in a cafe in Jerusalem drinking a beer, I'd be on the next flight to NYC to punch that stupid publisher out, but for one thing.

He happens to be me:-)

I wrote over a year ago that one of the most critical jobs for a self publisher is acting as an acquisitions editor. Well, I fell down on the job. I acquired my book for all the wrong reason, i.e., it was already written, it was free, and I wanted to publish something so the year wouldn't look like a complete waste of time. If I followed that course with other authors' books, I'd be publishing thousands of memoirs a month. When I got the final proof and had to sit and read the thing, I was forced to put on my publisher hat and ask whether it was worth publishing.

My answer was -Nyet-, and since I don't want to end up in a mental hospital, I'm not going to argue with myself about it. My main reason is that I'm an old fashioned publisher who likes books that have a beginning, a middle and an end. Books that take the reader through a process or an approach to doing something in a logical and coherent manner. Even after I cut twenty or thirty thousand words out of my blog, there were still a lot of unrelated and sometimes off-the-wall posts that applied only to such specific circumstances that they would have left plenty of readers scratching their heads.

I suspect if I cut the book all the way down to 40,000 or so words, throwing away 65% or so of the original content, I'd have something that, with a lot of work, I could turn into a book worth publishing. But I've already written one publishing book and I'm not in a hurry to do all that work to publish another one that says substantially the same things. The only thing I regret about it was a couple of the posts really made me laugh, and I'm always happy when something I don't even remember writing makes me laugh. It's a good thing I have a bad memory.

My Publishing Model?

I was gratified to get an e-mail this week from an author who's read a good chunk of my website and thought that an "expert" who was pitching him services may have gotten his publishing model out of my book. First, a special disclaimer if this post contains more than my usual half-dozen typos, I'm working by candlelight in a Jerusalem cafe because I don't have Internet access at home yet. Next, a general disclaimer. I didn't invent short discount print-on-demand, I'm not the first trade author to give up the trades for self publishing, and I may be the world's worst cover designer. If I can take credit for being one of the pioneers of the new publishing landscape, it would be for my early adoption of publishing books on the Internet and for figuring out that getting a lot of books printed can be death for an author.

Back in 1996, I turned down a couple trade contracts and put the full draft of my first nonfiction book online. I didn't turn down those contracts because I was confident in what I was doing, I turned them down because they were offering peanuts that wouldn't have made a difference in my financial situation, which was bad. The website traffic took off, I tried another round of trade publishers, and took an offer that was equal to about half my yearly income at the time. As I've written before, it was the worst mistake I've made in publishing, but I had failed in my attempts at self publishing in 1995 because the infrastructure that's in place now for money processing and order generation didn't exist then.

When I finally got on board with Lightning Source in 2002, I was a "successful" trade author, but I was convinced that my technique of posting draft copies of books online was superior to the marketing any trade could do for me, and I wanted to try my publishing wings again. What I found was that with short-discount POD, I could price a book at $14.95 and earn half of the cover price, hands-off. No inventory, no capital investment for a print run, just monthly transfers to my bank account. As a trade author, my 10% to 15% of the net amounted to about 5% to 7.5% of the cover price, and Amazon was the second biggest seller of my books. When I started earning 50% of the cover price as a publisher, I realized that I didn't need to sell a fraction as many books as I did as a trade author to earn the same living. In fact, somewhere between an eight and a tenth as many does the trick.

An added benefit is that I get to manage the lifecycle of my books. No remainders, no mountains of used copies selling cheaply on Amazon with no benefit to the author, this was really a good deal. And what drove it all was simply posting large excerpts or draft copies of my books on my website and letting organic growth bring me new visitors. Sure, there's a learning curve involved in presenting books in an Internet friendly manner, but it has almost nothing to do with artistic ability or programming skills, as you can easily see from my site.

Just like that guy who "bought the company", I was so happy with the publishing model that I published a book about it. I might have been the first publisher to advocate the short discount model in a book, but it's become pretty popular and has been refined by other publishers, as in Aaron Shepard's Aiming at Amazon, to focus on specific strategies. I remain an advocate of my original model, of building a web presence and using it to find those customers who will really benefit from my books, rather than a hard marketing approach where they buy a pig in a poke.
It also gives me more flexibility in terms of my business partnerships, because in the end, as long as I see a day-in, day-out demand for my books, I can always maintain some level of sales through different retail and printing options.

I'd have like to come up with a funny ending for this post, but the battery is running down, so I gotta go:-)