Mine Your Own Business

Mine Your Own Business
By Brian Jud

How do you plan for the future? How many books should you print? What income might you anticipate in the next year? From which customers will this revenue be derived? Wouldn’t it be great to know the answers before you commit to a print run, calculate your annual budget or plan your marketing strategies? Proper forecasting can help you resolve these issues and run a more profitable publishing company.

Unfortunately, books do not lend themselves to forecasting. Semi-annual selling periods typically lead to a short life cycle. It may also take six months to get a new title through the channels of distribution. Furthermore, each new title faces unique challenges, yielding little history upon which to base future demand. In addition, shoppers can easily compare competitive titles and prices while browsing bookstore shelves or the Internet. Finally, book sales are dependent on promotion, which in turn is affected by unplanned events as any author who has been bumped for a late-breaking story can attest.

Despite these challenges there is ample justification for calculating your sales potential before your sales efforts begin. Predicting sales can help you better control your inventory costs, time the introduction of new titles, exploit areas of opportunity, decide when to harvest ailing titles, predict the timing and amount of cash flow, control your expenditures and adapt with new marketing strategies.

Now there is a forecasting system you can use to capitalize on these benefits. This technique not only points out the number of books you may sell, but it shows you the customers most likely to buy them in existing and new markets. And if you perform these calculations quarterly you will have a more accurate picture of the timing of your cash flow so you can adjust your plans and forecast. Here are step-by-step directions for creating a practical estimate of future sales.

Step One: Begin by determining the source of existing sales for a given period. Calculate total sales purchased by each of your customers. (Hint: Set this up as an Excel file to easily add the rows and columns, and convert the dollars to percentages and then to Desktop icons and unit sales.)

Some publishers might stop the forecasting process here and begin making their new marketing plans. For example, in the table above they might increase their bookstore promotion for Title C as they decrease its support in library markets. They might also decide to take Title F out of print. These same publishers may even create next period’s forecast simply by increasing last period’s total sales by a given percentage, and then allocating that figure among the remaining titles and customers. However, if you add two steps to the process you may see a different, and perhaps more profitable picture.Step Three: Discover new sources of revenue. This next step adds a fresh dimension to your forecasting. Instead of trying to market your existing titles to the same people you did last year, evaluate new markets in which your titles may be sold. Creatively search for other prospective customers who could possibly use the information in your books. (Use the creative techniques described in last month’s article to devise new markets.)

For example, you may think that the best places to sell books are in bookstores – either traditional stores or online. But did you know that half of all book sales are made outside of these segments? Perhaps you could double your sales by selling to libraries, associations, government agencies, book clubs, museums or catalogs. You might sell your job-search books to prison libraries, your mystery books in hospital gift shops or your children’s books to nannies. Are your titles of interest to business travelers? Then sell your books in hotel gift shops or airport stores.

Use the same process you did in Step One to estimate the likely sales in each quadrant. If this is your first entrée into special-sales marketing, avoid the temptation to be overly optimistic. Many of these markets take months, if not years, to develop. The beauty of non-bookstore marketing is that your backlist gains new strength as many potential customers seek valid information regardless of the year of publication, and frontlist titles with little potential in bookstores may create a new source of revenue.

Step Four: Determine your new sales forecast. If this is your first time through this process, you will find the term “accurate forecasting” an oxymoron. Foretelling sales is more an art than a science, a skill honed through trial and error. But you have to start somewhere. In this case the publisher is doubling its total sales while reducing its reliance on sales through bookstores.Your forecast may be more accurate if you prepare a series of monthly or quarterly plans, and then add these together to calculate the total number of books you expect to sell in a year. Make sure you factor in a percentage for returned books, particularly among bookstores. In general, be conservative in your sales estimate since it is better to be pleasantly surprised than it is to be discouraged by an overly optimistic approximation.

This forecast points out a different set of circumstances. Title F, which earlier was a candidate for deletion, now appears to be a strong contender in special-sales markets. It might even be the case that Title F has good content, but its price or cover design is not conducive to bookstore sales. Title B seems to be destined for sales only through bookstores, and your earlier decision to put more promotion behind Title C is reinforced.This analysis also points out that even though some niches might be good for increased sales (such as gift shops or book clubs), some potential customers may be more deserving of your marketing support than others. There are other benefits to creating a strategy that includes non-bookstore markets: a broader sales base, reduced returns, increased profitability and a shorter period for accounts receivable. In addition, more detailed scrutiny can lead to adjusting your marketing strategies.

Forecasting should not be done in a vacuum and it is important to confer with your distribution partners about your plans. Discuss your marketing tactics with them, and talk about how you can best promote your titles. Work with them to prepare a suitable forecast and agree on how you can best support their sales efforts.

Forecasting must be congruous with marketing planning. An aggressive forecast demands equally vigorous promotion. Customers in special-sales markets may demand a different product format, such as booklets, an audio program or spiral binding. They may require pricing incentives or promotional tactics that are new to you. Use your sales figures to create a cash-flow analysis to determine if you have the funds available to support the marketing efforts necessary for success.

There must also be a system for accountability, or your forecast becomes an exercise in futility.
Fortunately, this can be easily done. Set up a spreadsheet to compare your actual performance to your forecast and track your progress quarterly. Here is a sample template you could use to track your sales on a quarterly basis (1Q = First Quarter). It can easily be adapted to a monthly system.