10 Ways to Maximize Cash Flow & Profits in an Uncertain Economy
1) Start with the end in mind.
Understand how you will sell your book before you sell it. Have a sales plan and stick to it. Selling will be the number one problem in 2009. Clearly identify why anyone should buy your book. Distribution channel expansion is your number one job.
2) Know how to keep score.
What criteria will determine success or failure for your book? Focus more on profitability than sales growth.
3) Analyze your Balance Sheet.
The balance sheet is more important than the income statement during difficult times. Carefully manage your cash, inventory, Accounts Receivable, cash advances to authors and returns. Understand the hidden costs of the business—write-offs. Specifically, manage your inventory write-offs, your returns reserve write-offs and your royalty advance write-offs.
4) Print Fewer Copies.
Inventory is the number one expense for publishers. Print fewer books to keep inventory costs down.
5) Forecast Better; Print Smarter.
Be more conservative when forecasting how many books to print. Base your forecasting on sales of similar books. Package your books better before printing. Better packaging will help save printing costs. You will never fix a book after it's printed.
6) Reprint Smarter.
The hardest print run to forecast is the last one. It is inevitable that there will be books left over. Use Print-on=Demand technology to manage the print runs at the front end and the back end of a book's life cycle.
7) Ask for Terms.
Typically vendors pay accounts receivable in between 105-120 days. Demand faster payment. Ask your suppliers for terms—60 to 90 days. Suppliers may not agree on the first request. Keep asking. It may take up to 10 times before they agree. The, if they do agree, pay promptly on the 60th or 90th day.
8) Ship Fewer Books; Manage Returns.
Ship 60%-80% of what a vendor orders—based on return rates. For most publishers, returns are running around 35% of books shipped. Shipping fewer books may actually make you more money!
9) Collect What You Are Owed.
Control your accounts receivable. Run aging reports monthly. Alter payment terms to various vendors if they are slow to pay you.
10) Manage Your Marketing Budget.
During tough times, you'll read many consultants advising publishers to trim marketing budgets. If you've done a good job of forecasting (step 5), then you'll only need to manage your marketing budget, not reduce it.