Publishing's grails and our unholy searches: Emma Barnes

Publishing's grails and our unholy searches: Emma Barnes

'Tis but a scratch, of course. Still, writes Bibliolcloud and Snowbooks' Emma Barnes, certain problems in publishing begin to appear Grail-shaped to us. She's talking about such issues as accurate sales forecasting, reconciling statutory and management accounts, and knowing how profitable one's ebooks are (run away). "An ability to manage data" is part of the answer, she tells us. Some might respond that one must have the data to manage it. Quest with her and see what you think. "It can't be beyond the wit of man." Right? Right?—Porter Anderson


'Ask me the questions, bridgekeeper. I am not afraid'

There are certain enigmas in publishing, certain problems that seem impossible to ever crack. Searching for their solutions is like a search for the Holy Grail. I’m talking about things like being able to forecast sales accurately, or knowing how profitable our ebooks are compared to other editions. Or finding happiness. “It can’t be beyond the wit of man”, you think, but, even so, year after year goes by without cracking the problems.

So, coconut halves at the ready, let’s go on a quest for some of these holy grails. 

Accurate sales forecasting

Successful publishing is a numbers game—money out vs. money in. If we knew in advance what our sales will be—if we could get our forecasts right—then everything else would be a doddle.

Obviously, that’s not going to happen, but we can at least try not to make fools of ourselves.

When you sum up all of the sales you made on the products you sold last year, how did that relate to the sum of all of the forecasts? Was it 20 percent higher? 50 percent? 50 percent lower? And how did that vary by imprint, subject, and format? Maybe you forecast 50 percent over on hardbacks and 50 percent under on paperbacks.

If someone presented you with this information, would it change your future behaviour? It should. If your hardback sales are on average half of your forecasts, then your future forecasts must be halved. “It’s just a flesh wound!”

Reconciling statutory and management accounts

The next quest is to do with actuals, rather than forecasts. Statutory accounts are the performance numbers you have to submit to Companies House and the Revenue in one form or another. They chart the movement of all the money in, and all the money out, of the business in a financial year, and they allow for the changing valuation of assets: things such as copies of books in the warehouse, your computers and the buildings you own. They usually give a helicopter view: one number is the total of all home-territory print book sales revenue, for example, and another all the rights sales. 

With management accounts, on the other hand, the clue’s in the name. These chart the movement of money for the purposes of managers being able to see what the dickens happened last year. The more detailed the management accounts, the more insight managers can get: title-level P&Ls are more useful than imprint-level P&Ls. 

A title-level P&L will record sales and costs for one particular title. Sales revenue, less returns, for the hardback, paperback and ebook. Rights revenue, less the author’s cut. Print costs, editorial origination costs (typesetting, proofreading and the like), trade spend and so on. 

Why should you be able to reconcile this low level of detail with the overview? So you can have confidence that all your numbers—which you’re using to make decisions about future business activity—are accurate. Why is it so hard? Because of overheads and aggregations. 

Overheads are costs that are not directly attributable to a single title. How much of your office electricity bill should you apportion to your title? How much of your in-house designer’s payroll cost—they did the cover, after all? And your retained PR agency—they just send in a monthly bill. How much should be allocated to each title? What about the cost of warehousing, sales commission? The cost of running the stand at Frankfurt? And so on. 

Aggregation is what distributors do when they helpfully send you a sales report that only gives you a fraction of the picture: “all ebook sales”, for example, or “all January sales”, or “all Waterstones sales”. What you really want is the lowest level of detail possible, so you can do what you want with it. But that’s not always forthcoming from OPS*.

It’s the different levels of resolution and categorisation in the available sales and costs data that make any reconciliation so difficult. And so, like Sir Galahad, you have to come up with an enforceable, meaningful philosophy. 

You could decide that you’re going to apportion costs based on the performance of a title. Bestselling title A produced 80 percent of this year’s revenue, and so it should shoulder 80 percent of the shared costs, right? Well, that’s penalising your bestseller for being so productive. The alternative is equally dividing your costs by the number of titles on your list. That seems the greater of two evils, so perhaps we should accept that the penalty of being a bestseller is that you have to pay for everything else. If you consciously recognise that reality, it should inform your decisions. You might decide not to be too generous with your volume escalator, for instance: it’ll negatively affect your other authors because that’s the pot of money needed to pay for less successful books. Harsh realities. 

For certain costs, it’s possible to apply a unit cost, or a percentage of sales cost, to the number of units sold. Sales commission, for instance, may be contractually agreed at 10 percent of net receipts. This is an easy line to include in the variable costs section of a title P&L. The trick here is having a system that lets you see what 10 percent of net receipts is at both a title and a company level, and then comparing that to the total of the supplier’s invoices for the same period. It’s possible, yet insanely boring and fiddly, to do it manually. It’s a good example of where programs can step in to help (and I’m not talking about Excel spreadsheets. Rant to follow at a later date). 

Knowing how profitable our ebooks are

Once you’ve solved the title-level P&L problem, you have to think about the product-level P&L. Which format should shoulder the burden of costs that affect them all, such as typesetting, or translation? The hardback, because it’s the first published?

Does the ebook P&L even contain any editorial origination costs, or do we treat these as sunk funds, spent already to bring the print products to market? Again, you need to come up with a philosophy, then adopt the systems to put it into practice. And you have to live or die by that decision. If you decide to spread the costs of editorial origination evenly over all the formats of a title, and that shows that the ebook is woefully unprofitable, you should rightfully stop publishing ebooks.

Does that sound right?

Think through the ramifications of your philosophy before you settle on it. 

Plenty of other publishing holy grails

  • “Make the data on Editorial and Production’s publishing planning spreadsheet match.”
  • “Know what rights we can sell.”
  • “Know what permissions we’ve cleared for which images.”
  • "Fit people's skills to the tasks at hand."
  • "Run our royalties without making a giant fuss."

Before you think "on second thoughts, let's not go to Camelot. It’s a silly place," the way to solve all these problems is the same: an ability to manage data, coupled with a clear philosophy and the drive to enforce compliance throughout the company. 

*Other People’s Systems. 


Emma Barnes speaks on 30th November on "What the Tools of the Trade Tell Us" at our inaugural Author Day event, a conference about the industry and its writers opening FutureBook Week. Early Bird pricing (save £30) continues to 30th October. Alliance of Independent Authors (ALLi) and Society of Authors members get special additional discounts. Full programme details for #AuthorDay are here

Emma Barnes can be reached at Bibliocloud and at Snowbooks.

Image - iStockphoto: hchjjl