Nine tricks niche publishers use to even-out cashflow
Sooner or later, most publishers face a cash flow problem. The company is profitable, growing, and money is coming in… but not fast enough to cover costs.
In other words, they have a timing problem.Â
We designed the Publisher Cash Flow calculator to help any publisher anticipate risk in about 5 minutes using data their accountant already has, then plan ahead using these Nine Tricks to Even Out Cash Flow. All were contributed by other working publishers.
Some of these ideas are elegant. Some are a little scrappy. However, they go beyond dragging out payables to help entrepreneurial publishers face economic uncertainty:
1. Discount large customers for payment in advance.
One of the oldest tricks in publishing is simply to call your best customers – not necessarily your biggest customers, but your best customers. Offer them something simple:
“If you’d like to renew early and pay upfront, we’ll give you 10% off.”
It is one way to immediately convert future receivables into current cash. The customer gets a discount. The publisher buys some breathing room.
Everyone wins.
2. Anticipate, then negotiate terms with the largest creditors in advance
For print publishers, printing and rent are often the largest bills that can be negotiated.
Printers can be surprisingly flexible when approached early. The worst time to negotiate is after the bill or rent is already late.
A printer change can even be useful, since being positioned to make a change creates leverage. Sometimes you can extend payments with the old printer while negotiating better terms with the new one.
3. Consider not Selling to Large but Slow-Paying Businesses
Not all revenue is created equal. Some agency business effectively pays in 90 to 120 days. Think of it this way: What if 25% of your business is agency business and pays in 120 days?
For every $100,000 of annual agency revenue at 120-day terms:
- Average receivable balance = about $33,000
- Profit at 15% margin = $15,000
So the company is actually carrying more than two years’ worth of profit on that revenue stream, just waiting to get paid. That’s why many publishers discover that a seemingly profitable agency account is actually consuming a tremendous amount of working capital. Are you now actually in the publishing business or the banking business, financing your customers’ cash flow with your own balance sheet, and the more agencies buy, the greater the cash float required.
Cashflow math and P&L math are different. Sometimes, a discount for early payment creates a healthier business.
4. Move Expenses onto Credit Cards
This isn’t a permanent solution; it’s a timing solution, but it can also let you travel for free if more expenses are on a company card. Some cards also offer a free “plus one” option for travelers. So it’s a great money saver or perk.
If a major expense can sit on a card for 30–45 days without interest, you’ve effectively created additional working capital. Used carefully, it can smooth temporary gaps. Access to additional borrowing accrues, available for emergencies.
Point of note: Used recklessly, it becomes next year’s problem.
5. Initiate a custom publishing division with payment up front
Custom publishing is not especially sexy, but for print publishers is generating big numbers. One city publisher does $1 million plus in custom publishing every year in a mid-sized market. Another local group of specialty magazines now has five contracts that are a significant contribution to financial stability.
6. Move large annual initiatives into the cash gap
These major revenue earners – especially those that are paid upfront – can be timed to cover a cash shortage in Q2, for example, rather than to coincide with an already strong Q4 sales period.
Events can often rake in large amounts of cash, and they are typically paid up front, so many publishers use them to cover projected gaps. Similarly, other publishers’ time the Faces Magazine and Best of Contest – which can generate and extra $400,000 to $1 million in revenues in a single month – to cover the cash flow slow season.
7. Create Recurring Revenue on Credit Cards
One of my favorite examples comes from a Fishing Tackle Retailer. Instead of constantly reselling advertising, create annual participation packages. This adds a steady, non-fluctuating source of revenue. Then consider timing all renewals to hit in the month/s that have the largest cash flow problem, regardless of when the subscription started.
In the case of Fishing Tackle Retailer, $1,000 per year per corporate sponsor gives them newsletter inclusion. However, they could also add Directory listings and other kinds of Ongoing visibility.
Now you’re collecting chunks of cash upfront while reducing future sales effort, and evening out the cash flow.
Here are some ideas that allow for uncontested rate increases that could also be timed to move customers on to a credit card during the off months.
- Video
- Lead generation
- Newsletter placement
- Research access
- Category exclusivity
Then increase the price. Customers tend to focus on what was added rather than what changed.
8. Receivables Financing
This isn’t free money, but it can be useful in a pinch, where the money “is coming,” but expenses have to be paid now.
Many business banks will lend against receivables, and if a large percentage of your customers reliably pays, AR financing can bridge temporary gaps.
The trick is making sure you’re solving a timing problem—or buying time to address a broken business model.
Lessons learned
Having a high margin helps, but the publishers who survive tough periods aren’t necessarily the most profitable; they are the ones that have a reserve developed earlier and who actively anticipate and manage the cash, along with the profits.
If you have a trick we haven’t uncovered, drop us a line at alisa@nichepublisher.biz
