If turnover is vanity and profit sanity, then cash, in the current environment, is survival. All too many media owners expanded rapidly in the boom years, on the back of readily available debt. Since then, revenues have tumbled, valuations have fallen and debt has become difficult to renegotiate. For most publishers, radical cash conservation, combined with praying for an upturn, is the only solution.
But surely there’s a point of no return, when there are too few decent salespeople to generate the forecast revenues, the editorial team and contributors’ budget have been pared to such a level that they can no longer get magazines out on time and to a standard, issues are so thin that consumers no longer see value in your titles and marketing budgets are so miniscule that dwindling sales become inevitable?
The consultancy side of my business has undertaken several assignments on behalf of owner-managed and corporate publishers this year in which I, or one of my consultants, went in after rounds of internally-led savings were made, with local management insisting no further reductions were possible, and reduced the total cost line by a further 5 to 15%, with the clients agreeing that none of the proposed savings threatened revenue generation. We’ve done this in regional newspapers, consumer magazines, live events and online. And while the detail of the proposed solutions varied, some common threads have emerged. So, in the spirit of extending the cash conservation principle to readers of InPublishing, here are the top 10: free, gratis, and for nothing.
1. Study the invoices
I’ve listed this one first, because it’s where you should begin, if you’re not already doing it. Look for ‘extras’ charges, over-orders, default re-orders (it pains me to say it, but renewals of trade magazine subscriptions are a good example), non-essentials (does your office really need cleaning every night, or would once a week suffice?) and poor value. Often, a supplier wins a company’s business with a keen price, then raises its charges by inflation or more every year, despite market trends going the opposite way (especially of late). Don’t be slow to get competitive quotes elsewhere to benchmark current suppliers.
2. Avoid duplicated efforts
Two people doing overlapping work – or, worse, work that undermines each other’s – is a huge waste of money. It’s surprising how often it occurs in publishing. I’ll give you two examples: one from editorial, another from sales. In the former, many publishers still pay one person, a journalist, to write words, and another, a sub-editor, to cut them to length. Instead, have the journalist write directly to page. There will still be a need for a second pair of eyes to proof-read the piece for style, accuracy and libel – the quality point – but not to cut it.
In sales, I’ve seen classified and display staff both talking to the same client – sometimes competing with each other to win or retain their business – and two or more reps talking to the same agency for display business. Silo-based sales teams can also be disheartening for those working in them, restricting the spread of knowledge and best practice and limiting options for career progression. Restructuring, while painful for those who go, can therefore improve morale among those who remain.
3. Give someone a break
Reduce the number of people in a team and keep the workload constant and you risk resentment. Except, that is, if you present the additional duties as an opportunity to take on new challenges, gain new skills and enhance a curriculum vitae. Giving a bright, ambitious young person a shot at a bigger role on an ‘acting’ basis, for little or no extra pay, is a fair exchange provided they’re receiving value – in this case, the opportunity, and hopefully also guidance and support – in return for the discount on their labour.
The same goes for suppliers. While there’s undoubtedly merit in working with trusted partners, other businesses may be hungrier for your custom and prepared to cut great deals in return for an opportunity to show you what they can do. This applies to almost every line of external cost – print, paper, distribution, subs bureaux, mailing houses – but also to suppliers that are often not thought of as such, such as freelance contributors.
4. If you don’t ask, you don’t get
I doubt there’s a publisher reading this that can’t recall an ad manager coming to him or her in the early days of the downturn and being asked for guidance on how to handle offers from agencies and clients at comically low page yields and CPMs. Most started out by refusing rates that, today, they’d give their right arms for. My question is this: have you tested the price sensitivity of every one of your suppliers in the same way yet – and if not, why not?
We recently advised a regional newspaper publisher that was close to closing several titles. Our approach was to work out what every cost line had to be cut to for it to generate a 10% margin, then advised the relevant managers to go to the staff, freelancers, printer, paper mill and more with a challenge: get the cost down to this figure and the papers survive; otherwise, they’ll close. In some areas we had to work hard on changing the business model so the cost target could be made: for instance, the paper stock and print schedule had to change, as did the flatplan. But we got there, by setting cost generators an objective and giving them flexibility provided they achieved it.
5. It’s better to co-operate than compete
I’ll tread carefully here, mindful that the OFT takes a dim view of anti-competitive activities. But I’m sure I’m not the only one who notices paradoxes in pricing, product specification and promotion levels, especially within the many sectors and sub-sectors of consumer magazines. In some sectors, consumers pay £4-plus cover prices for 132-page, saddle-stitched publications, printed on thin, greying paper; in others, £2.50 buys a perfect-bound, high-gloss doorstep, often with a high perceived-value free covermount.
In some instances, these anomalies are driven by economies of scale and the size of the advertising prize that comes with achieving market leadership or a particular ABC threshold. But with ad revenues in the doldrums and recent changes in the dynamics of many sectors, there may be opportunities for step changes in the costs incurred by publishers – and, on occasion, their revenues – if the market leader is prepared to set the trend by being the first to move.
6. Consider frequency changes
In the good times, many monthly consumer magazines went to a four-weekly frequency, squeezing highly profitable 13th issues into the year; some even did awards-type specials to cram 14 into the period. With most circulation and ad markets being seasonal, it’s my bet that, on today’s reduced revenues, many profitable magazines now publish one or two loss-making editions in a year. So a quick way to boost the bottom line is to do double issues in the kipper season. Most subscriptions are for a given number of editions, rather than a period of time, and retailers don’t like issues with high unsolds, so there will be less resistance than you might fear.
The process is even more straightforward in B2B controlled circulation. If the reader isn’t paying for the publication, who’s to say you have to publish it to a loss-making frequency? Instead, set yourself a revenue target, then publish when you’ve hit it. Better this than close the title and risk someone else taking the market from you when conditions improve.
7. Try a fresh pair of eyes
It’s surprising how often people who’ve worked in a business for some while take things for granted that might be questioned by someone seeing it for the first time. It’s not complacency, merely familiarity. The best solution to this is to bring in a consultant, to get an independent view. This needn’t be expensive: we, for instance, will often work for nothing up front and just a percentage of the annualised savings identified.
Where this isn’t practical, consider a game of management musical chairs. When someone takes over a department for the first time, they notice things they might not have done in familiar surroundings.
8. Ask the staff
It’s surprising how many publishers haven’t fully exploited the potential of getting staff to identify cost savings. I advocate beginning the process in a group meeting, giving examples and setting parameters, then talking to people individually. Apart from anything else, nobody wants to be seen publicly offering up a colleague for redundancy, but in difficult times, many employees would rather highlight someone they feel they’re carrying than risk management imposing an arbitrary cut. Of course, it remains your duty to form your own view, but the process can sometimes be illuminating. Employees often also have a good handle on which suppliers are milking the company and whether there are any benefits they’d be prepared to sacrifice to avoid salary or headcount reductions.
9. Technology is your friend
At its worst, IT is another cost. At its best, it’s the key to unlocking savings by re-engineering working practises. For instance, I know a publisher that saved £200,000 a year by moving to smaller premises and having some of its staff work from home. Scared they’ll get hooked on daytime TV? No need – not only can managers measure their productivity by outputs (advertising revenue, editorial pages) but the IT director can compare their activity levels to their office-based peers in terms of emails sent, calls made and received and network log-on and log-off times. Best of all, the staff enjoy working from home and save on commuting, lunch and office clothing costs – so they agreed to take a salary reduction for the opportunity to do so.
10. Consider outsourcing
Medium-sized and large publishers like to be self-contained: they have every kind of specialist under one roof. But are they all essential? Could it be more cost-effective to buy in expertise in areas such as circulation, subscriptions, print / paper buying and HR? The answer may depend on the size and complexity of the company.
When they’re on the payroll, experts often cost more than you’d expect: they go on courses, attend conferences, subscribe to trade titles; after a time they lobby for the right to hire junior colleagues to do the work, while they ‘concentrate on the strategy’. I’m being facetious, but you’ll take my point: in tough times, publishers and other P&L managers may be able to do the work, hiring in consultants in these fields for their knowledge from time to time. And who’s to say that this expertise couldn’t come, on a retainer basis, from those you make redundant?