New Amazon Kindles in October
July 21, 2008
Crunch Gear reports that new Amazon Kindle models will be released this October. The models will be lighter, slimmer and have an improved user interface in addition to being available in multiple colors.
The article also reported that Citibank analyst Mark Mahaney estimated Amazon’s kindle sales at 10,000 to 30,000 to date and forecasts possible Kindle sales of $750 million by 2010.
Book Publishing Company Acquisitions
July 8, 2008
Acquiring another book publishing company is the fastest way to grow your own company. The acquirer will purchase the company and eliminate duplicate staff positions. This transforms a break-even or mildly profitable publishing operation into a highly profit venture.
Example:
Pre-acquisition company A has sales of $3M, a net profit of $200K, including payroll expense of $1M a year. A 6.7% profit margin.
The acquiring company takes over order processing, marketing, operations and finance. Leaving only the editorial staff untouched and reducing payroll expenses by $600,000.
Post acquistion the company has has sales of $3M, a net profit of $800,000K, a 26% profit margin and more than enough to pay the interest on the bank loan that financed the acquisition.
Of course, the economics only hold up if the acquirer can absorb these overhead functions without substantially increasing the size of their own staff.
In one real-life case the acquirer; a $3M book publisher acquired another $3M book & journals publisher.
First, they absorbed the order fulfillment functions of the acquired company without increasing their staff by implementing an EDI system. The EDI system allowed the publish to automate the processing of orders from their major business partners; Ingram, Baker & Taylor and Barnes & Nobles to send them orders electronically.
Then they consolidated the operations by eliminating duplicated CFO and accountant positions, the marketing department, the production department and the publisher position.
Salary related expense reductions totaled about one million dollars and the acquiring book publisher was able to pay-off the loan that financed the acquistion within four years while continuing to grow the acquired company.
Publishing Company Mergers 101
July 7, 2008
The key step of any publishing company acquistion is the consolidation of order processing. The merger of order processing operations will save you money. The faster that a book publisher can achieve this the better.
Step 1: Add the acquired company’s products to your order fulfillment system’s data base. This needs to be done before stock is transferred to your main warehouse.
Step 2: Transfer about 25% of the stock of each title to your primary warehouse. You need to have this stock in place so that when you stop processing orders at the acquired company you can immediately begin shipping orders from your new warehouse.
Step 3: Notify customers of the new contact information for their orders.
Step 4: Arrange with the phone company to transfer calls to the old customer number(s) to your main customer service number; after the stock has has arrived and been checked in at your main warehouse. You want to be in a position to start filling and shipping orders when the cut-over is made.
Step 5: The final step is to stop accepting new orders at your old location and seemslessly have orders, emails and phone calls transferred to the new location and ship the remaining stock to your new location.
Printer Book Distributor Service Advantages
June 12, 2008
Publishers may find that utilizing a pick, pack and ship distribution service provided by your printer can save you the cost of shipping books to your distributor. Read more
Royalty Contracts and Income Taxes
June 10, 2008
Many small and some medium sized book publishers overlook the income tax reporting reporting requirements of the Internal Revenue Service. Read more
Paperless Office
May 25, 2008
The hot new trend in business management is implementing a paperless office.
A paperless office means that;
1. Important papers; think royalty contracts, don’t get misplaced
2. Important papers are always accessible
3. Important records are backed up to secure storage media
Some publishing software solutions; such as MSLG’s Elan Royalty Software, IBS Bookmaster ERP solution and the Bradbury Phillips support the storage of scanned documents. Others; such as Cat’s Pajamas, don’t.
Standard accounting solutions have their own document management solutions or 3rd party add-ons that provide this functionality.
Increasingly, more publishers are storing scanned copies of their royalty contracts in PDF format.
Finance departments are storing copies of vendor invoices and finding that handing a CD of invoices to their outside accountants can save them from having their staff search through file cabinets to find invoices selected by outside auditors.
Book Expo America 2008
May 25, 2008
Book Expo America is one of the most important events for a publisher to attend.
Here a publisher can see the latest trends in book packaging and book releases. They can meet with rights buyers and sellers. Its seminars can provide a nugget or two of information that will help them penetrate new markets or reduce their costs.
More importantly, they can talk to vendors and discover new and better ways to market, sell and produce their titles.
Order Fulfillment Options
May 24, 2008
Should a publisher handle their own order fulfillment (ie storage, pick, pack and ship) or out source order fulfillment?
There is no one correct answer. If you are a publisher based in NYC you probably want to hire a fulfillment service due to the high cost of rent and labor. If you located in New Hampshire you might want to do it yourself due to the lower cost of land and labor and the greater control that this offers the publisher.
Quite often a publisher will start with their own warehouse in a garage, hire a fulfillment service as they grow, and then return to running their own warehouse operation when they grow large enough to see significant cost savings. If their growth continues they may once again return to using an outside fulfillment service or start a joint fulfillment operation in conjunction with other publishers.
What are the Pros and Cons
With an outside fulfillment service you can avoid the headaches and overhead associated with running a storage and shipping operation.
At the same time you do not have the same control over your inventory operations and if you run into financial squeeze you might find that your outside fulfillment service stops shipping stock until payment in received. Also, there is a slight chance that your fulfillment service can go bankrupt.
Fulfillment Services
A fullfillment service will pick, pack and ship orders that a publisher sends them. Many software packages can send an electronic file to these services and recieve a shipping confirmation file back. Fulfillment services that we recommend include;
- Biblio Distribution
- Bookmasters
- Maple Vail
- Publishers Shipping and Storage Corporation
- Ware-Pak
A more complete list can be found in the current edition of the Literary Market Place, at www.literarymarketplace.com, or at bookpublishingsoftware.com.
Ratio Analysis
May 24, 2008
Many managers look at the raw dollar numbers and miss important trends that can highlight growing problems in their operations.
Ratio analysis can identify trends before they have a chance to grow into major problems. Once you identify a problem you can investigate the cause and implement corrective actions.
Income Ratios
|
Qtr1
|
Qtr2
|
Qtr3
|
Qtr4
|
|
| Sales |
1.1M
|
1.0M
|
1.05M
|
1.2M
|
| Cost of Sales % |
45%
|
44%
|
48%
|
50%
|
| Gross Profit % |
55%
|
56%
|
52%
|
50%
|
| Net Profit % |
12%
|
13%
|
9%
|
8%
|
| Administrative Exp % |
12%
|
13%
|
14%
|
15%
|
The problem in the above example is that your gross margin is decreasing. You must investigate to find out why and take corrective actions. Is it caused by the pricing of your titles, excessive production costs, or increasing royalty expenses?
You should also investigate why administrative expenses are steadily increasing as a percentage of sales.
Balance Sheet Ratios
|
Qtr1
|
Qtr2
|
Qtr3
|
Qtr4
|
|
| Days of Inventory |
160
|
180
|
200
|
350
|
| Days of Sales Outstanding |
90
|
89
|
88
|
80
|
| Accounts Payable |
100
|
130
|
150
|
200
|
| Current Ratio |
1.6
|
1.5
|
1.2
|
1.1
|
Activity Statistics
|
Qtr1
|
Qtr2
|
Qtr3
|
Qtr4
|
|
| New Customers |
2400
|
2500
|
3000
|
2000
|
| New Titles |
5
|
4
|
0
|
10
|
| Sales per Employee |
200K
|
190K
|
170K
|
200K
|
A key statistic that we like is new customers per quarter. Ideally you want to see marketing acquiring a targeted number of new customers per quarter.
