January 21, 2008
Nobody Likes Planning
Corporate planning is the butt of many jokes and the bane of many managers. But as folks in InterVarsity have said for years, "Aim at nothing and you are sure to hit it." Tom Woll offers 35 pages on planning in his book Publishing for Profit, a book on which I've been offering a serial review. Woll covers a lot of territory. Here are some highlights:
* Hiring Well Makes Any Plan Run Better. "In my experience, one of the most overlooked aspects of any personnel decision is to hire someone with common sense and drive. These two attributes can make up for a lot of inexperience" (pp. 49-50). What Woll calls "common sense and drive" I've always thought of as "being a self-starter," someone who has the ability to see what needs to be done (common sense) and does it (drive). As a manager, I'm ready and willing to give training, but I want people to dig in to the work on their own and readily come to me when they have questions or problems.
* "Don't Make Every Goal a Financial Goal" (p. 52). Woll suggests, for example, including educational goals for your staff. Publishers could also set goals for what periodicals they want their books reviewed in, the range of authors they want to sign, awards received for design or content, or other subjective criteria that are important to them.
* Build a Sales Budget Title by Title. "The first step in building a budget is to" project sales and income title by title. For years we at IVP projected income by putting a wet finger in the air: How much will the market generally go up (or down)? How much will we expand into new markets or channels? Any major new publications (or lack of them) that will have a significant effect? And then we would budget for 5 or 8 or 11 percent growth. Not surprisingly, we were often way off.
Then we began to project sales title by title, factored in average discount for different lines, front-loaded sales in the first months of a new book, planned price increases for the coming year--mapping the whole thing month by month. The head of sales and marketing would make projections for each title and so would I. We would compare and then agree on a final projection.
So now every one of our 1400 sale items gets a look. Maybe half the time we go with our computer projection, but we tweak the other half one at a time. It takes us each about five or six hours, so ten or twelve hours total. We've been much more accurate ever since.
* It's All About Cash Flow, Baby. "One common question . . . is how any publisher can make a profit and have positive cash flow throughout the process. The fact is, it's very difficult" (p. 68). The trick is to do both at the same time. Woll highlights what I've said before: success can be one of the most dangerous problems a publisher faces. As Woll so clearly explains, while printers and others expect to be paid in thirty to sixty days, the reality of the book publishing industry is that payments to publishers for book sales come in 90-120 days. That means a publisher's cash has to be able to cover an average of two months' worth of sales and a good chunk of inventory.
It's not a pretty picture. . . . Just when you think you should receive payment, don't be surprised if your accounts send you returns instead. . . . In effect, your company has become the bank for the account--financing its cash flow but receiving little in return. And you thought this was a "gentleman's business"! (pp. 59-60)
The irony is that the faster the growth, the further behind a publisher can fall in cash flow. The solutions are hard--reduce taxes, borrow, increase your profitablity, rein in your growth rate or some combination of the above. (Once during a period of negative cash flow we had a rather morose saying around the office: "For every million we grow, one of us has to go!" Fortunately we found several different ways to improve.)
* * *
Nobody likes planning, but everyone likes what planning can yield.