The original business behind the Construction News and Report Group traces back to April, 1988. A bit more than three decades later, I’ve managed to acquire some grey hair and my business balance sheets hardly exude wealth.
Nevertheless we’re still very much alive. I enjoy good enough personal health to plan an extensive multi-nation bicycle tour next summer, a month after we execute a significant new product launch.
Could I dare outline some tips and explanations of how we managed to survive, in an industry (publishing) that has experienced more than its share of cutbacks and failures?
Debt can be useful, but can be deadly
I’ve seen many notices from trustees and receivers over the years as banks and creditors called in loans and pushed businesses to bankruptcy. Of course it can make more sense to borrow money than to give up equity to start or keep your business going, but it is helpful to ask: “What happens if the bank or creditor calls the debt today?”
Some years ago, I had a near miss — and feared the business would fail, and then (because of bank obligations) I would need to cash in registered retirement savings plans, facing huge tax liabilities and of course a much diminished retirement. And by business standards, my bank debt was quite low.
Keep a close eye on the cash flow
Again, during another near-death experience, the business for a few weeks reached the point where I was the only employee, but one, on staff. The other individual (who continues to work with us) spends one day a week on a vital task — collecting outstanding receivables. She’s really good at her job. Add to that, we have a truly unconventional “net” and “gross” billing policy, which dates back to the business’s earliest days, when I had no money to pay operating costs (I started the business with zero in capital.)
I offered advertisers a 25 per cent prepayment discount, collected the money, and paid the bills. Once we were able to receive trade credit, I changed the policy to invoicing on publication, with the 25 per cent saving (net price) available if the invoices are paid within 15 days.
We aren’t fussy if someone is late and pays at 30 or 40 days. But enough people pay the 25 per cent premium for being late that, when we calculate our bad debt write off, instead we actually add 2 to 3 per cent in income to our bottom line, representing a five-figure annual revenue boost.
How big do you really need to be?
I wish I could find the labor productivity study, but some research indicates that you have the highest revenue per employee at three employees. Productivity per employee declines until you have at least 10 people working for you, when the numbers stabilize.
This has some significant implications for a start-up. Three employees allows you to have enough focus and specialization in relevant areas (such as sales, production and administration) without workers stepping over each other — and with enough work diversity to keep things very interesting. If you have a business that can grow to more than 10 employees, you’ll overall achieve much less per-employee productivity, but still be viable. But crossing that productivity gap will be expensive and potentially painful. Maybe you don’t need to grow beyond three, which is where we are now.
Outsourcing can make plenty of sense
In addition to our three employees we work with an exceptionally talented (outside) graphic designer. The business also contracts with an offshore administrative assistant (in Romania) and a competent IT specialist (in Nigeria). Costs for the offshore labor are far lower than they would be domestically (we pay our designer fair North American rates).
These resources allow us to be professional and up-to-date, yet keep our operating costs at rock-bottom levels.
Stay aware of trends and technologies — without jumping for shiny new objects, seize the moment with progress
The publishing world has evolved from ink and paper to digital practices, and we’ve transformed our companies accordingly. Some years ago, I engaged with Alphabet/Google regarding that company’s ad serving program. Revenue from it continues to be tiny in the overall picture, but the Product Expert status has given me insights into technological trends and helped us overall adapt to the digital economy.
Almost always, a generous spirt will provide surprisingly positive returns
Of course, you don’t want to give away the store, but if you can treat everyone fairly, engage in community support activities and be helpful to employees, clients and the community, I think you’ll end up with a healthier long-game.
Marketing is a vital and constant challenge — but you don’t need to spend a fortune on it.
Our business is different than yours, most likely, because we are in the business of selling marketing-related services (advertising). This means we don’t usually need to purchase too much advertising ourselves — and often other marketing avenues (such as trade shows) will arrange trade-outs for equivalent value.
But that doesn’t mean we don’t spend resources on marketing — especially in engaging with relevant industry associations and contributing to community/public service projects. We may not spend a huge budget on advertising, but we dedicate significant resources to marketing and visibility. So should you.
There’s just a few of the basics for business survival. I welcome your thoughts and comments. You can email me at email@example.com or file a comment (if you can find the comment link!)