CONSULTANTS’ CORNER (by ESP) – February 2016
This month’s tip comes from Jerry G. Guttman
Tips to More Accurately Forecast Revenue
Here are some tips to help with budgets:
1) Rely on historical data to predict subscription revenue.
Using one’s own publication, subscribers can be more reliable than other revenue sources. Budgeting has never been harder. And the only thing that can be predicted with any reasonable certainty is the subscription sales program you can use with your own historical data for new order response rates in direct mail and renewal rates for current subscribers. Then you can adjust them a little up or down based on your assessment of the economic climate, price sensitivity, etc. Typically, newsstand sales for certain magazines are tougher to predict, because they are very dependent on such variables as the economic mood in a given month, your cover designs and cover lines, your competitor’s covers and the competence of wholesale distributors and retailers.
2) Prepare for advertising sales being the most difficult to foretell.
This is because they are even more variable by the business conditions of your major advertising accounts, their ad budgets and the public’s demand for what they are advertising.
3) Focus on more predictable revenue from existing customers.
On the other hand, your current customers (subscribers and advertisers) continue to be your most predictable revenue sources. If you need to cut back on investment on new business and acquisition, resist cutting back on renewals, and maintain excellent relationships with your current advertisers.
4) Consider your facts.
Trust your facts, even if you don’t like the data. Don’t make predictions based on hope. Your reports and forecasts won’t be perfect, but they’re the best data you have, so you have to act on what they tell you to change.
5) Cut costs judiciously over time.
You’re not going to save money in one big swoop without potentially damaging your product offerings. One best practice is to make small cuts over time, keeping the brand in mind. Saving some percent on all your purchases over a long period of time will really add up. The key is to establish a culture where everyone is looking to save money for the company and your customers, even in a prosperous economy.
6) Evaluate expenditures carefully.
The best way to manage costs is to keep the lines of communication open. Weekly meetings and real-time tracking of expenditures usually work well.
7) Diversify and think proactively.
It is all about having more channels in play to drive revenue. Try working to bring new products to market so you have more opportunities to drive revenue. Along those lines, publishers should continue to take small risks to build the business and innovate while their competition is focusing on doing business in the same, old way. Pay particular attention to balancing print vs. digital strategies.
8) Custom products can build revenue while covering costs.
Look to create custom opportunities that do not require startup investments, but rather can be built from the ground up based upon the client’s goals and budget. These can be events, e-newsletters, custom print or digital products that pay their own way in incremental revenues.
9) Review advertiser markets for better forecasts.
Not all advertisements are alike. Look carefully at your ad categories and what the economic circumstances for their businesses are projected to be. Build your budget forecasts from the perspective of your customers. Be prepared to respond when advertisers claim that they no longer do print.
10) Evaluate quarterly trend that can better predict where you’re headed.
Most publishers are budgeting 2016 flat, but placing more of the 2016 revenue in online products and services. However, to spot the trend for your company, go to your accounting order system and see how much new business was sold comparatively in the last 3 years. Compare that to how much new business you have sold in the last year. If the trend is flat, it confirms that you have bottomed out, and you can feel comfortable that 2016 will be at least a flat year. If the trend is up, you are in a position to hope for a modest increase in 2016.
11) Have a business objective in mind before beginning any cuts.
With a goal in mind, publishers can know if they’ve reached where they want to be, instead of arbitrarily cutting to save costs.
12) Don’t cut what helps bring in money.
Be careful cutting expenses that relate to revenue generation, such as marketing. Most consider cuts as being mainly staff-related. Editorial and manufacturing costs are expense-related, and publishers can negotiate with vendors, use freelances and substitute stock photos for contract work. But circulation/readership and advertising have both expense and revenue components; trim those budgets with care. In fact, increase them, if at all possible. Cutting the promotion budget is like cutting your throat. Because that produces revenue.
13) Renegotiate printing contracts and/or shop around.
Unless you ow a lot of money to your printer, he can’t force you to stay with him. If a printing contract isn’t sustainable, ask for a steep discount, throwing out an example of 15 percent. Or put the project out to bid and see what the market offers.
14) Automate every aspect of circulation/fulfillment you can.
Relegate as much of the input responsibilities to the reader. To facilitate that, make online subscription activity mandatory or offer readers discounts for online subscriptions.
15) Come up with contingency plans.
An uncertain publishing economy calls for contingency planning, and various strategies to cope with each situation. Consider the worst-case scenario, a baseline scenario, and a best-case scenario. In general, the finance team should be spending more time providing more detail, better metrics and additional variables to factor in the discussion.
16) Include more details.
Operation managers have an expanded role right now, with more time on forecasting and scenario planning: Better collaboration between departments equalizes the varying degrees of conservative and optimistic approaches. You can also use different forecasting methods: a “Top Down” five-year plan that considers strategic, long-term goals, and a “Bottom Up” one-year plan which takes more immediate factors into consideration, such as paper pricing fluctuations, or advertising dips or spikes.
17) Place more emphasis on industry trends.
Always consider the stability of postal costs, paper pricing trends, the health of general advertising markets and newsstand dynamics when forecasting.