Introduction

Over the years, I've worked with and studied hundreds of successful publishers. Most make a good profit. Some, organized as nonprofit corporations, define success not in dollars and cents, but in their ability to affect public policy or educate people. And still others look at their publications as a way to increase profits in a separate business, often consulting. No matter how these publishers define success, all have had to do the same two things to create a thriving, successful publication: Create a great product and build a solid business operation.

First, creating a quality publication will help to establish a bond with the readers and advertisers in your market. This is the creative side of publishing, the art of it. Creative publishers consistently deliver informative products that meet the needs of their readers and advertisers, even as those needs grow and change over time. This may sound easy, but it isn't. Besides the obvious communication skills that are involved, it takes a healthy dose of imagination to come up with ideas for products that are both innovative and useful.

Second, having created a great publication, a publisher must build an efficient business operation to keep the publication afloat. From increased competition to a shrinking market to a surge in paper prices, publishers face critical business decisions every day. A publisher needs to make long-term goals and strategies to guide business operations. And at the day-to-day level, a publication must be run efficiently, which means its publisher must get the most from every dollar spent. These considerations make up the business side of publishing, which often presents the most difficult challenges to new publishers.

Any publisher will succeed who can make a good product that is responsive to the needs of people in a growing market, and who also can organize an efficient business operation. Unfortunately, very few people master both the creative and the business sides of the publishing puzzle, which explains why it takes a team to win at publishing.

Underlying both the creative and business skills needed to run a publication is the ability to work with people. Publishing is by nature a collaborative enterprise. Every publisher has to organize a group of helpers -- vendors, employees, freelance contractors, editorial contributors, and the like -- to produce a good product consistently. The great majority of successful publishers, even those with tiny niche publications, are skillful with people and know how to inspire them.

Fortunately, you don't need to be skilled at every key publishing task, so long as you know your own limitations and get help in areas where you are weak. Throughout this book, I will suggest many creative ways publishers have developed to make the most of their own skills, get the best from their resources, and ultimately achieve success in a challenging periodical publishing market.

Three Publishing Options

There are many different ways to organize a publishing business. Some magazines target mass audiences, while most newsletters speak to a small number of carefully selected readers. Some publications are funded by billion-dollar publishing empires and others by the sweat equity and moderate savings of a few people. And many of the biggest, most popular publications are published by nonprofit organizations, including Sierra, published by the Sierra Club, and Modern Maturity, among the world's most widely read magazines, published by the American Association of Retired People.

To illustrate the diverse options available, I've somewhat artificially broken down the universe of publishers into three general models: the solo operator, the lean-team organization, and the full-house publisher. The fact that in real life these categories often overlap won't detract much from this discussion, since the great majority of publishers can be placed in one of these three categories. You may find that one of these models closely matches your own circumstances.

Solo-Operator Publications

Newsletters, "alternative" publications, and e-zines probably make up the majority of the publications in this category. These publishers often rely on a strategy called outsourcing -- concentrating their own efforts on the editorial vision or mission of the publication, and farming out all other tasks to independent contractors and vendors. Even with expert outsiders to help, though, a solo operator's success or failure usually depends almost entirely on the ability to find a good market niche, create a compelling publication, and manage business efficiently.

Passion is an important contributing factor. The desire to make a living is fine, but caring deeply about what you do and how you do it will be an important predictor of whether you'll succeed. The more you love your niche, the easier it will be for you to create a solid, long-term professional home for yourself.

You can start a solo-operator publishing business with very little money, which is surely one reason why thousands of these publications are founded every year. Commonly, the solo-operator publication is shrewdly used to enhance some other business -- for example, a copyright lawyer publishing a newsletter for clients, or a massage therapist publishing a nutrition and fitness newsletter for regular customers. Publishers in these situations are sometimes content just to break even, or even to lose a few dollars, as long as it helps their underlying businesses thrive.

Lean-Team Publishing Businesses

A lean-team publisher's staff is typically small (three to ten people), and may include lots of part-time and freelance workers. Like the solo operator, a small team will usually send much of its production and distribution work to outsiders. One of the key roles of the team members, then, is to manage these outsiders.

Human intelligence and effectiveness (rather than money) are still the primary resources in small companies, but the owner is no longer the sole decision maker. In this model, success depends both on the abilities of the publisher and on the quality of people involved. Problems are easier to solve with more minds working on them, as long as dedicated, creative people are on board.

This model is particularly popular among magazines and newsletters sponsored by nonprofits or other organizations, whose object is to communicate well, but at a minimal publishing expense. Examples of lean-team publications are everywhere. For instance, one full-time editor plus six part-time people publish the magazine Terrain, the quarterly publication of Berkeley's Ecology Center. Each issue of Terrain contains about 40 pages, including hard-hitting articles about the environment and national news for the ecology movement. The total publishing budget for Terrain is under $500,000, and the magazine generates much of that money from ad sales. You can start a lean-team publishing company -- and earn a comfortable living from it -- for less than $200,000, assuming that you find a solid niche and serve it well.

The Bark magazine is another lean team publishing success story. It was started in 1997 as a newsletter for dog owners in Berkeley, California -- and slowly expanded to a national magazine. The publishers kept their day jobs for many years, and volunteers helped them with key tasks, such as building a website and selling ads. They turned to the Independent Press Association (IPA) for help with newsstand distribution, which was limited at first to bookstores where the relatively high cover price of $4.95 was not a problem. Now, after a decade of slow, self-funded growth, Bark has moved beyond the IPA to a national distributor. The two founders are finally making a salary and have quit their day jobs, and some of the volunteers are also getting paid. Their business has expanded beyond the quarterly magazine to include a book, an annual sourcebook issue, and a lively webstore selling a line of goodies for dog lovers. The key to its survival, according to publisher Cameron Woo, is the slow pace of growth, which never went faster than he and his wife could handle with their own resources.

Full-House Publishers

Most monthly, special-interest consumer magazines like Parenting or Soap Opera Update, or newsletters like The Kiplinger Letter, employ a full complement of publishing professionals. For example, The Kiplinger Letter has over 350,000 subscribers and about 50 full-time employees. In a full-house magazine model, advertising often generates most of the revenues and nearly all of the profits. This means the publisher needs enough money and savvy to sustain two relationships -- one with readers and one with advertisers. Although the editorial and marketing issues are usually similar to what solo and lean-team operators face, management issues are far more complex. Specifically, a full-house publisher must manage a fairly complex business operation, so will need help from professional publishing people from the beginning. While the potential profits are high, so is the risk of substantial losses, which means it's not a business for amateurs. At a minimum, you need good financial reporting and analysis just to stay on course.

In the full-house model, the biggest single key to success is leadership: Can you get a group of key helpers, often with conflicting personal interests, to work together efficiently toward a common set of objectives? One step toward this is to provide good benefits and rewards to an experienced staff. At least as important will be your ability to inspire their excellent work. And of course, funding is more critical in this model than the others because to get started with a full-house publishing operation, you typically need at least $500,000 to $1 million, probably more.

No matter what type or size of publication you have, to succeed, you must establish lasting bonds within your market and build an efficient operation to manage those relationships over time. This is always true, even though different publications deal with these issues in different ways.

Finding Your Place in the Publishing World

Most hopeful publishers ask the same question: "How much money will it take to get stated?" To understand why the answer is more complicated than it should be, consider the same question applied to some other product, like cars. Do you know how much it costs to produce a car? Say, a Toyota Camry? The answer depends on who you are. If you are Joe Smith, building a Camry by hand in your backyard, it might cost you hundreds of thousands of dollars to build just one car. But if you are the Toyota motor company, you can build a Camry for $15,000 or so.

Believe it or not, the publishing business is actually very much like the auto industry or any other manufacturing business in one crucial respect: Magazines and newsletters are cheaper to produce if you make a lot of them. And a few very big companies dominate the business, just like the auto industry.

The Dominance of Megapublishers

In the United States, a handful of companies control most of the resources in the magazine publishing industry: Just 15 companies own 78% of the largest U.S. magazines. In March 2006, the Publishers Information Bureau measured $2.1 billion in advertising revenues among U.S. magazines, and these same 15 publishing companies captured 79% of that money. Time, Inc., alone grabbed more than one third of all advertising revenue in 2005.

Major Magazines and Websites Listed by Parent Company

Conde Nast

Magazines: Brides, GQ, Glamour, Gourmet, House & Garden, Lucky, The New Yorker, Vanity Fair, Vogue, Wired

Websites: www.brides.com, www.style.com

Hearst

Magazines: Cosmopolitan, Esquire, Good Housekeeping, Marie Claire, O-The Oprah Magazine, Seventeen, Smart Money

Websites: www.ivillage.com, www.hire.com

Primedia

Magazines: Gun Dog, Hot Rod, Motor Trend, Practical Horseman, Sail, Sew News, Shutterbug, Snowboarder, Soap Opera Digest, Surfer

Websites: www.about.com, www.channelone.com

Magazines: Backpacker, Best Life, Bicycling, Men's Health, Mountain Bike, Organic Gardening, Prevention, Runner's World, Women's Health

Websites: www.backpacker.com, www.bestlifeonline.com, www.bicycling.com, www.biggestloserclub.com, www.frenchwomendontgetfat.com, www.iyogalife.com, www.menshealth.com, www.mountainbike.com, www.organicgardening.com, www.prevention.com, www.rodalecustompublishing.com, www.rodalemusic.com, www.rodalestore.com, www.runnersworld.com, www.sugarsolutiononline.com, www.womenshealthmag.com

Time, Inc.

Magazines: Entertainment Weekly, Fortune, InStyle, Money, Parenting, People, Real Simple, Southern Living, Sports Illustrated, Time

Websites: www.aol.com, www.espn.com

Wenner Media

Magazines: Men's Journal, Rolling Stone, Us Weekly

Websites: www.mensjournal.com, www.rollingstone.com, www.usmagazine.com

Ziff Davis

Magazines: Computer Gaming World, Expert Gamer, PC Magazine, Play Station

Websites: www.baselinemag.com, www.channelinsider.com, www.cioinsight.com, www.desktoplinux.com, www.eseminarsalive.com, www.eweek.com, www.extremedap.com, www.extrememesh.com, www.extremenano.com, www.extremewimax.com, www.extremetech.com, www.extremeuwb.com, www.extremezigbee.com, www.linuxdevices.com, www.microsoft-watch.com, www.pcmag.com. www.pdfzone.com, www.publish.com, www.webbuyersguide.com, www.windowsfordevices.com

Each of these megapublishing companies owns several magazines and some own multiple websites. They wield tremendous power in the industry, even though their magazines represent less than 2% of the roughly 18,000 magazines currently published in this country. They lobby Congress for favorable postage rates. They pay rock-bottom prices for essential supplies like paper-some of them even own their own forests. They demand (and get) the best prices from printers, data processing companies, and other key publishing services. And they dominate all of the magazine distribution channels. Chances are better than 90% that any magazine you see in a grocery store checkout line belongs to one of these big companies. And you have almost no chance to get your magazine into a grocery store checkout pocket because the space is already sold out to these big players.

These big magazine companies earn most of their money from advertisers. For example, in addition to owning 150 magazines, Time, Inc., owns many businesses -- including America Online, several local cable systems, movie and video companies, television networks such as CNN, HBO, WB, and others, and several book companies which together placed about 69 titles on the New York Times bestseller list in 2005. The corporation employs approximately 88,000 people worldwide. Its publishing operations of books and magazines generated $5.8 billion in 2005 revenues and earned $1 billion in profits. Advertisers contributed $2.8 billion just to the Time, Inc., magazines, which earned $1.6 billion revenue from readers. In other words, for the magazines, advertisers contributed about $1.2 billion more than readers.

This dependence on advertisers is actually increasing among the largest magazines because of the Internet. According to the Interactive Advertising Bureau (www.iab.net), 98% of the estimated $12.5 billion that will be spent by advertisers on websites in 2006 will go to the 50 largest ones, many of them owned by these same media companies.

Competing With the Big Guys

So how do smaller publishers compete with the behemoths? If you take time to look beyond the big, mainstream magazines, there are plenty of other publishing models you can follow with great success. There are over 18,865 U.S. print magazines listed in the 2006 National Directory of Magazines, and roughly 10,700 professionally produced print newsletters in another publishing directory. That's a total of almost 30,000 publications besides the 300 or so that are owned by big publishing companies. This does not include Web-only or electronic publications, which are not currently tracked with accuracy.

These "other" publishers -- who are actually the majority of publishers by number if not by market clout and resources -- share some common strategies that you should know about and consider when developing your own publishing plans.

• Readers pay more. Without the huge advertising subsidies enjoyed by big magazines, smaller publishers need to get more revenue from their readers. Readers of small, independent magazines often pay as much as $4 or $5 per copy with a subscription, and $7 or $8 per copy in a retail store. Newsletters typically earn 100% of their income from readers because they have no advertising -- some charge readers as much as $25 or $40 per issue. And publishers develop all kinds of extra products or services they sell to readers, from books and how-to videos to T-shirts and coffee mugs.
• Distribution is more targeted. Smaller publishing companies cannot spend as much subscription marketing money as the big companies can. Instead, their retail distribution is carefully targeted: racks in sporting goods stores for surfing magazines, for example, or in sewing shops for crafts magazines. And smaller publishers often target their distribution geographically -- Brides in Atlanta, for example, instead of just Brides.
• Ad sales are targeted. Again, without the huge circulation numbers that national advertisers demand, smaller publications focus on selling ad space to very targeted companies -- surfboard and swimwear shops for Surfer, for example, not car makers or soft drink companies. Many smaller publications carry no ads at all. When they do have ads, the products are always closely linked to the subject of the magazine.

This book focuses on the publishing tactics and start-up resources that will be useful for backyard publishers, not the big companies. And it includes examples from alternative media, independent publishing companies, and niche magazines because these are the most realistic models for first-time publishers. Their low-budget strategies can be very effective, even if you aim to compete with the big players like Hearst, which spent about $20 million to launch Oprah's magazine, or Time, Inc., which spent about as much to launch Martha Stewart Living.

It's very hard, almost impossible, for backyard publishers like you and me to raise millions for a start-up publication. But there are other options. At the end of the day, the quickest way to understand how you are going to make money is to study how other publishers do it. If you're thinking about a magazine about mountain climbing, for example, then look at all the other mountain climbing magazines as well as other adventure sports magazines. And be sure to look at the companies with resources comparable to your own. Much of what you need to know is right there in the masthead or website. The rest is easy to see by looking through the pages. Let these small companies guide you. Take advantage of their experience and follow their leads.

Creating Relationships

From a reader's viewpoint, the relationship with a good periodical is a little like dining at a favorite restaurant: You know what to expect each time you visit. If the experience is a good one, you can repeat it often. Similarly, periodical publishers strive to establish a pleasant, comfortable relationship with readers based on familiarity. For example, the "Talk of the Town" section of The New Yorker magazine is always located in the same place and written in the same slightly irreverent tongue-in-cheek style readers have come to expect.

Having established a trusting relationship with readers, publishers can use that bond to build a healthy business by selling subscriptions and advertising space, or by creating new products that they can sell to their loyal customers. In other words, once the essential reader bond is firmly in place, many other profitable business opportunities become feasible for the publisher smart enough to efficiently exploit them.

Unfortunately, most new publications perish quickly because their publishers fail to master all the steps necessary to build a healthy and profitable reader relationship. Sometimes the expected audience doesn't exist in the first place. Sometimes it's there, but the publisher misunderstands its needs or wants. Surprisingly often, the publication itself is put together poorly. Occasionally, the publisher identifies a great audience and publishes a dynamite periodical to meet its needs, but the business is disorganized and inefficient. In short, establishing and profiting from a strong reader relationship is a trickier enterprise than most new publishers appreciate.

Building a solid relationship with readers is covered in detail in Chapter 2, but here is a summary of the three steps it takes: finding an audience, creating a product that meets its needs, and building a viable publishing business.

Finding the Right Audience

To find an audience, you have to understand what a group of potential readers want, figure out how to locate them at a reasonable cost, and determine how much they will pay for your publication. Depending on the scope and type of publication, carrying out these tasks can be quite different. Mass market publications, for example, must appeal to and locate lots of people -- as many people as possible. By contrast, niche products need a much smaller number of customers, but must develop a very loyal following within their target group.

In all the world, there is a finite amount of money available for starting publications. In recent years, start-up capital has become more and more concentrated in fewer hands, both for magazines and for newsletters. Therefore, most publishers have to forgo the mass audiences of the past -- because it simply costs too much to reach them -- and focus instead on a more targeted and less expensive audience. Also, many niche customers spend more money per capita than the general reading population, so they have the potential to support a much more profitable publishing business. It's also true that most advertisers like to reach readers who match a targeted demographic profile (accountants, librarians, or swimmers, for example), so niche publishers can usually charge higher per-reader advertising rates than can their mass market counterparts. For example, Architectural Digest has a more affluent audience than The National Enquirer, so it can charge much more for ad space.

Having identified an audience you understand, and one that can support your business, you must next figure out how to reach it efficiently. Traditionally, magazines and newsletters find readers by using direct mail. Some also put copies onto newsstands or in other retail outlets. Almost all print publications also have websites to promote circulation. All of these circulation strategies are designed to locate good prospects at an affordable cost. (That process is discussed in detail in the next two chapters.)

Creating a Good Product

All successful periodical publishers need to know what their audience wants to read, and how to package it appropriately and consistently so that readers will keep reading it, issue after issue. It almost goes without saying that if you want to make good publications, you also need to read them. I urge you to read closely the most popular periodicals in your niche, looking for the secrets to their popularity.

Knowing your direct competition is also essential when you're designing a new publication. The trick is usually to study your closest competitors carefully and then design around them. For example, offer features that your readers want, but that your competitors have ignored.

As you begin to design your product, you'll probably find yourself wishing you had endless resources to produce the publication of your dreams. No question, it's tough to create an appealing product that you can afford to produce on a regular basis, since the final package has to meet reader needs and your own bottom line at the same time. Success will require both a creative hand (usually the editor's) and a sound business mind (commonly the publisher's) working together.

Building a Viable Business

Short-lived relationships are rarely profitable. So even if a new publisher can find a good audience and create a product that grabs its attention, there is still a critical problem to solve: how to build a publishing business that will prosper well into the future. The trick is to build upon your initial successes until you have created solid, enduring relationships within your market.

In the very short term, most publications lose money, especially in their early years while they are working to find an audience and win its trust. Their initial losses can range from a few thousand to many millions of dollars, depending on the kind of publication.

Publishers start to make money only when they begin to transform their early connections in a market into lasting relationships by turning casual readers into regular customers, creating predictable relationships with advertisers, and developing new products that they can sell to their loyal customers. Although each of these activities is covered in detail later in this book, here's a brief introduction to what's normally involved.

Converting Casual Readers Into Regular Customers

Casual readers include people who buy your publication at a newsstand, buy a back issue from your website, or accept a free sample issue offer from your direct mail campaign. Sometimes casual readers get the publication free at trade shows and other venues. Whether or not readers pay for their copies, publishers rarely profit much from casual readers unless there is a rich pool of advertising money associated with the free distribution (like a local parenting magazine, for example), or the casual readers become regular paid subscribers. To make a profit on subscriptions alone, publishers "convert" as many casual readers as possible into full-fledged subscribers who will pay a full fare over an extended period. This is doubly true for publishers of newsletters, who depend almost exclusively on readers for income.

Establishing Relationships With Advertisers

Advertisers want to reach your readers. That is, once you've found an audience, you can usually find advertisers eager to reach the same people. Publishing a magazine or a newsletter is a bit like hosting a business conference. You set the agenda, create a congenial atmosphere, and invite all the most appropriate people. If your niche is broad or deep enough, advertisers who sell relevant products and services will want to address your readers.

In many situations, advertisers add to the publisher's relationship with readers -- just as they are welcome participants at many conferences -- since your readers will be actively shopping for products or services and may buy your periodical to see the ads.

In other situations, advertisers' presence is more challenging, and the publisher has to limit or control it to some degree. When the readers are young children or people with serious medical problems, publishers may try to restrict overly aggressive advertising by regulating it. For example, Sesame Street Magazine, which is written for preschoolers, excludes ads. But the magazine is bundled together with another one that is written for parents, and the parents' magazine is chock full of ads.

Occasionally, running ads in a publication would seriously compromise it or thwart its very purpose. Consumer Reports offers one example of an editorial mission that is incompatible with advertising.

It takes a lot of work to win the loyalty of most advertisers. And it can take three or four years to win advertiser support for a new magazine. Once they agree to use your publication, enduring advertiser support can be extremely profitable. (Chapter 5 will help you create long-term relationships with advertisers that will benefit your business and your readers, too.)

Developing New Products and Services

Once your readers are converted into loyal subscribers and advertisers are on board, you can increase your profits by selling ancillary products or services to the same customers. It's a similar idea to a popular lunch restaurant adding breakfast to its menu. Because new products and services grow out of the original publishing business, they will usually cost less to develop and promote, and therefore have a high potential to be profitable. Books, trade shows, and spin-off publications are common examples of ancillary products. Online databases, compact disks, and computer bulletin boards are newer versions of the same idea -- delivering your publication's contents, in a familiar style but a newer form, to a closely overlapping audience. (Chapter 6 covers the many ways publishers make money from ancillary products.)

Surviving Through Efficiency

Obviously, your ultimate goal is to capture publishing revenues that match or exceed expenses. Unfortunately, revenues can be elusive, especially for a new publication in an unexplored market niche. Since it's tough to accurately predict how much money you'll bring in the door, it's absolutely crucial to control what you spend.

Producing and distributing a periodical, even a small newsletter, is not cheap. Printing alone is a major expense, especially if the production quality is high or if the periodical is published weekly or daily. Pre-press expenses like desktop publishing and design add to the production bill. And of course, writers, editors, and artists must be paid for their work even for online publications with no printing bills. Finally, marketing the publication to readers and advertisers can be very expensive.

No publisher starts out with unlimited resources, no matter how rich you are. And bear in mind that if you discover a profitable niche, fierce competition from other publishers is inevitable. The toughest challenge for any new publisher is to make the most of limited funds by using them where they will have the greatest impact. For example, however large your subscription marketing budget, you still need to find as many subscribers as you possibly can with each dollar that you spend. You don't want to waste any of that money chasing after the wrong kind of subscribers or trying promotion gimmicks that don't pan out. Waste of any kind is your Number One enemy.

There are three kinds of waste that plague publishers: wasted effort, wasted resources, and wasted opportunities. All three are very common among inexperienced publishers.

Wasted Effort

Wasted effort can mean misspending your energy pursuing the wrong advertisers or following poor strategies to sell subscriptions to readers. For example, if you publish a magazine about marijuana, such as High Times, it would be a waste of effort to try to reach subscribers using direct mail, since most readers will be trying to keep their interest in this subject private. Far better to reach them at appropriate stores or newsstands, where they can purchase your publication anonymously.

Sometimes a market is so new that its membership hasn't coalesced into a readily identifiable group. If your publication is ahead of its time, your chances of wasting time and money are great as you try to develop the market to the point where your publication can support itself. To succeed, you must adopt a strategy that minimizes this waste. For example, even though there had never been a successful magazine about the health concerns of men, Men's Health is a successful magazine today because Rodale adopted a strategy of starting slowly. It published only a few issues per year at first, holding back resources until the idea took hold with advertisers. Readers were quick to jump on board, but it took five years to convince advertisers. Waiting was a brilliant strategy. If Rodale's publishers had tried to launch a monthly magazine right from the start, they would have had great trouble selling enough ads to pay their publishing expenses, and might well have bled themselves dry.

To avoid waste, subscribers have to want what you are trying to give them. Publishers can easily talk themselves into the idea that an audience needs the information they want to provide. Often, however, this proves not to be true. For instance, an engaged couple might buy information that will help them make wedding plans. But once the wedding is over, their interest drops to zero. That's why bridal magazines have had to learn to buck industry wisdom and sell short subscriptions (six months or less). Trying to sell long-term subscriptions would be wasted effort.

Subscribers must not only value what you publish, they must also have the money to pay for it. For example, many new parents are information-hungry but short on cash. A significant percentage of seniors face the same predicament. That's why subscription prices for publications aimed at these groups are generally low, and it would be a waste of time to try to sell most people in these groups a pricey magazine. On the other hand, because businesses stand to profit from what they learn, business owners will generally be willing to invest in useful information. So, publications aimed at businesspeople can often charge hundreds of dollars for a yearly subscription. Here the key to success is offering compelling editorial content. It's a waste of time to try to get people to subscribe to a business-oriented newsletter unless it has a real edge.

Wasted Resources

Wasted resources simply means spending more money than you need to spend. For example, a children's mystery story magazine that carries no ads doesn't need to spend the big bucks involved in four-color printing on heavy, coated paper. The colorful printing and glossy paper are expenses the readers probably won't support in the form of a higher subscription price. Other common ways that publishers waste money include hiring more employees than necessary, investing cash in technologies that soon become obsolete, and paying too much for outside services, especially printing. Sometimes the biggest publishing companies are the worst at wasting resources -- especially on new publications -- because they have forgotten how to avoid spending a bundle on overhead. Thus, when a big company comes out with a flop, it often loses far more money than even the most inexperienced start-up publisher would lose.

Wasted Opportunities

You waste an opportunity when you let others exploit the niche you've found or, even worse, let them take it away from you. Sometimes this happens because you don't have enough money to keep up with competitors. Other times, it happens because your imagination gives out and you can't figure out how to match a competitor's creativity. It is almost sure to happen to anyone who does not understand that as soon as a market shows itself to be profitable, competitors are certain to appear.

Example: Steve saw an opening in the mortgage market and created a newsletter about getting homeowners to refinance their loans -- a subject that had never been covered before. Steve spent two years developing his newsletter called Today's Refinancing Market, and finally started making money. Just then, Frank and Ellen both launched competing newsletters.

Because Steve had defined the market for them, Frank and Ellen got going much more quickly than Steve had. Mortgage brokers were already receptive to their sales promotions because they were familiar with Today's Refinancing Market. The new competitors developed strategies based on Steve's weaknesses: Frank hired more editors and outspent Steve by nearly three to one. Ellen was more aggressive, doggedly chasing down the best stories, interviewing the most interesting people, and selling her publication for less than Frank or Steve. All of a sudden, Steve's readers had three good newsletters from which to choose.

Although Steve started with a lead, his newsletter failed because he ignored his competitors and didn't react appropriately to them. For example, he never added any value to his product to compete with Frank's beefier writing staff, and he never changed his pricing strategy to deal with Ellen's lower prices.

After Steve's newsletter folded, Frank and Ellen competed head-on for the lead in their market, and within a couple of years, Ellen secured first place because she was able to publish more efficiently than Frank and make a profit, even at a lower price. After taking the lead, Ellen was free to make creative decisions such as how much editorial material to put in each issue, what kind of information to provide, and how much to charge for subscriptions without bowing to outside pressures. As the number-two publication, Frank had to match Ellen's editorial quality at the same prices or drop out of the game.

Efficient publishers establish themselves quickly and without wasting effort or resources. They are always looking for ways to get the best possible results from the smallest possible investment. This often means getting more products from the same staff, or more profits from the same customers. Smart publishers work hard to put money in their piggy banks to increase their flexibility and to help deal with new rivals, unexpected opportunities, or unforeseen obstacles.

Most people develop efficiency and eliminate waste through trial and error. Sometimes you can save time by studying what other publishers have done, but often there really is no model for what you're trying to do. Internet publishing (see Chapter 11) is a great example. Although you can't always escape wasting some of your time and resources while you're figuring out how to reach and serve your audience in a new market, you can always remember to make efficiency a primary goal.

The Publisher's Golden Rules

The job of a publisher is normally both demanding and intense, filled with seemingly endless details -- and the occasional big decision -- all vying for immediate attention. To keep from becoming overwhelmed, it helps to remind yourself of the basic, central tasks of any publishing business. Here are some tips to keep in mind as you consider, prepare for, and operate a publishing business.

Publish a Good Product

Your product is at the heart of your connection with readers. You can only succeed by making a product that your readers really want. It's better not to publish in the first place than to skimp in this area. Even if you identify a niche so golden that you initially succeed with a mediocre product, some competitor is almost sure to do a better overall job, possibly wiping out your business.

Good intentions are never enough. Your product has to be the best that you can make it. If others are already publishing in your market, study their products. If your publishing idea is unique, study good products in related fields. Look at what all successful publications do well and why their publications work for their readers. And once you do start publishing, communicate with your own readers to find out what they need and want. Again, providing valuable editorial (and in some cases advertising) content is the key to building and keeping reader loyalty. And gathering a loyal readership is the only way to make money.

Take Care of Your Customers

Publishing is a relationship carried out in an increasingly fickle world. In addition to putting out a good product, you must pay attention to and build good relationships with readers and advertisers in other ways. One key to doing this is to make sure your back-office services are good and efficient, even if you are a solo operator. This means you must process subscriptions quickly and mistake-free, and offer a full range of payment options. In today's world if you tell customers you don't take credit cards, you may lose them forever. And if you mess up their subscriptions, deliver time-dependent information too late to be useful, or print articles in an illegible typeface, you will immediately alienate them. Again, it comes down to seizing every opportunity to learn what your customers expect and making every reasonable effort to meet those expectations. For example, including a faxback or poll in your publication asking readers what types of editorial content or other services they like is money very well spent.

Don't Reinvent the Printing Press

Tens of thousands of other publishers are at this moment working hard to find the cheapest, most effective, and most profitable way to run a publishing business. Take advantage of all this research. Study what other publishers are doing or have done, and shamelessly borrow their best business ideas and innovations.

Many new services for publishers can help streamline the process, save money, and solve complicated publishing problems. For example, it is now relatively easy to sell ads on a small website through large networks that do almost all of the work for a small share of the income. (See Chapter 11 for more on this.)

The less you know, the harder you should work. This book includes many resources to help you learn the business quickly. You can also email me with simple questions, or check my website for FAQs from other readers. Always remind yourself "Somebody knows how to do this" whenever you run into a problem you don't know how to solve, and then go looking for that somebody.

Know Your Market

Publishing is intensely competitive. Almost as soon as a profitable new publication appears, imitators -- sometimes dozens of them -- will spring to life. You can best protect yourself by choosing a market you know, and then staying deeply involved with it. The fact is that your knowledge of your market will allow you to operate more efficiently and resonate more with your readers than competitors who know less than you do. Outsiders -- even the ones with lots of publishing experience -- will have more trouble identifying the best advertising prospects, for example, or finding loyal readers and engaging their attention.

Study the Results of Your Actions

You need to know how to watch and learn from what you're doing and respond appropriately. Are your efforts paying off or are you wasting lots of energy and resources? Do your decisions intermesh to allow you to carry out a sensible long-term plan or are you trying to move in too many directions at once? Chapter 12 discusses long-term strategies in general. Chapter 8 describes how to gather good financial and management information so you can be sure the sound and fury of your busy days adds up to a profitable publishing business.

Be Prepared for Change

One thing is sure: Your market will change. This change will come from many directions -- for example, after the dot.com advertisers came and went, some magazines dropped from 2,700 ad pages per year to less than 700 -- and many others simply folded. As your business moves from start-up to maturity, you will be under constant pressure to adjust to new realities, such as managing a larger staff or dealing with outside investors. Since change is practically the only thing you can be sure of, you need to train yourself to look for it, cope with its effects on your business, and take advantage of the new opportunities it regularly presents. Chapter 12 covers long-range planning and other strategies for dealing with change.

Smart Publishers -- Some Examples

Many of today's most prosperous publishing empires were started by one or two people with not much more than an idea that meant a lot to them. Some of those pioneering publishers lived on nothing but their own enthusiasm during the time it took for their idea to capture an audience. Similarly, as long as your publishing idea is a good one, your passion can help you survive and succeed. Not only will it help you attract readers, it will inspire other people to give you their support and best efforts. And if you're lucky, your true belief in what you are doing will help you squeeze that one brilliant idea out of your overtaxed brain that could make your business a big success.

Here are the stories of three passionate publishing entrepreneurs that should inspire you. There are plenty more great stories like these in the publishing industry. Reading about people who have made good lives in publishing can help you cope with the many start-up problems you're sure to face. At the very least, it's a help to know that many thousands of people have forged fulfilling careers for themselves publishing small magazines and newsletters. Most never build huge publishing empires, but a surprising number make money and have a good time.

The Kiplinger Letter

Willard M. Kiplinger launched one of the first modern newsletters, The Kiplinger Letter, in 1923. The weekly four-page bulletin, recently renamed The Kiplinger Letter, is still in print and also available online. It has been continuously published longer than any other newsletter in the United States.Written for businesspeople, it helps them to understand and predict the effect of government activity on their businesses. Kiplinger prided himself on the "insider" idea, and he is generally credited with inventing the style most of us associate with newsletters today-short, pointed items written in a plain-speaking, no-frills style by people with access to important information. Kiplinger's mission was to interpret the news, not just to report it, and he advised readers how to respond to and profit from events.

Today The Kiplinger Letter is the most widely circulated business-outlook letter in America. It costs $117 per year, which includes online access to a specialized website. His publishing company outlived Willard Kiplinger and grew far beyond the original newsletter. It currently publishes a number of successful newsletters, software, books, videos, and magazines, including Kiplinger's Personal Finance Magazine.

Reader's Digest

In February 1922, DeWitt and Lila Wallace, both children of ministers, founded Reader's Digest. They started out with about $5,000 of borrowed money in a basement office under a Greenwich Village bar, printing 5,000 copies of their first issue.

Their idea was simply to give people something decent to read. They reasoned that people generally lack the time to search out and absorb the most interesting material from the thousands of magazines and newsletters available to them. They determined to sift out the best articles and then condense them for easy reading. Their slogan was: "An article a day from leading magazines in condensed, permanent booklet form." The idea holds up, even today. Some think it is well suited for an electronic format, and Reader's Digest has developed a robust Web business. Look for its latest online offerings at www.rd.com.

The Wallaces were intent upon publishing according to their personal moral convictions. DeWitt explained: "Our overall emphasis has been a more or less conscious effort to find articles that promote a better America with a fuller life for all." Until 1955, the U.S. edition carried no advertising, and they still do not accept cigarette ads. DeWitt was once quoted as saying, "We do as we damn well please, and that's close to ideal."

In 1923, the Wallaces moved their offices 40 miles north of New York City to a friend's garage, which was both their living quarters and publishing office. Later, they expanded into a nearby pony shed, and eventually they built a home in the same neighborhood, editing the Digest from their study.

The Wallaces died without children many years ago, but even without heirs to carry on for them, their work survived. The Reader's Digest Association continues to employ more than 5,000 people today. And their little magazine now has over 10 million paid subscribers in the U.S. It sells more than 500,000 copies of each issue on newsstands. The company went public in 1990, trading under the stock symbol RDA. Revenues in 2005 were $2.4 billion and pretax profits were $176 million.

The magazine accounts for only a fraction of the Reader's Digest company's overall revenues each year. The rest comes from a host of books, tapes, and other products. To keep up with a changing audience, Reader's Digest is launching special issues aimed at selected audiences, reaching out to younger readers, and developing new ancillary products. Some Wall Street analysts argue that the company has reached its limits and can't grow significantly in the future. Others argue just the opposite -- that the basic publishing premise is still viable, even more so for today's readers than for their grandparents. Time will tell.

PC magazine

David Bunnell and I started PC magazine in his San Francisco dining room only two months after IBM announced its brand-new personal computer in 1981. We had financial backing from a New York software dealer who had put up about $150,000. With that money, David paid his own modest salary plus the salaries of a full-time editor, Jim Edlin, and a marketing director, me. I also owned a small equity stake in the magazine. In addition, David contracted a freelance art director, James McCaffrey, and a freelance production manager, Jackie Poitier, who was moonlighting from her day job at a California law magazine. Of the five of us, only David and Jackie had any previous magazine experience.

Even without any direct mail, subscriptions poured in because we were careful to place PC magazine wherever the IBM computer was being sold. Every IBM PC dealer in the country carried copies and sold them out quickly. In addition, whenever IBM took their PC to a trade show, PC magazine was there, too.

Our idea for the magazine was very simple: Since IBM wanted to sell computers to businesspeople who had never used them before, somebody would have to give IBM's customers impartial advice in plain English about how to use them. And, since the IBM PC was designed to let users pick their own add-on products (printers, monitors, modems, and the like) the makers of those products would need someplace to advertise them.

About a dozen magazines were launched at the same time as PC magazine, all designed to fill the same niche. Many of them looked like ham radio magazines, with dim black-and-white photographs of electronic equipment and articles you couldn't read without an engineering degree. We knew that we had to do something different, so from the start PC looked like a business magazine, with colorful images and elegantly designed articles printed on the best paper. The writing was very good, too, competitive with Time, Fortune, or Business Week.

Our other successful strategy was to stick close to IBM. Without giving up our editorial right to criticize their products, we befriended the engineers and marketing specialists in Boca Raton, Florida, who were behind the IBM PC. We were careful to collect feedback from our readers and advertisers, and to pass it along to IBM. Many times IBM listened to our suggestions about pricing and distribution and adapted its strategies. Our relationship with IBM helped us to match our growth strategies with theirs, and it gave our magazine a real edge against competitors.

Our troubles began less than six months after we published our first issue when David and I had a serious falling out with our financial backer. We wanted to beef up the staff because we feared that a competitor would wipe out the company if the magazine did not keep growing along with the explosively expanding PC market. The investor was scared, especially by the growth of our staff, which had already ballooned to 25 full-time and part-time people. He refused to put in any more cash, and his timidity forced us to operate very inefficiently. For example, we could not lease a fully functioning office without financial guarantees to the landlord, which our investor refused to provide. Without the means to house all of the employees under one roof, we had to find small and short-term spaces: a tax accountant's office that we could sublease for a few months, two converted apartments, and one converted retail space. Our phone system was a nightmare, we had no office equipment and employees often had to work at home because we couldn't give them a desk. We were telecommuting before anybody had personal computers or fax machines at home, so we had to hire a kid to run all over the city delivering mail and messages to our staff. We were young and having fun, but we also recognized that our chaotic organization was terribly wasteful and that ultimately it would kill the company.

We all began searching for a buyer. David and I wanted a new owner who had the resources to support our San Francisco group but who wouldn't overwhelm us. We began talking to several prospective buyers who matched our goals. Our original investor, on the other hand, had different goals. He wanted a buyer who would pay the highest possible price, with or without keeping me and David on board. Because he held a majority share in the company, the investor was able to cut a secret deal with Ziff-Davis, despite our express opposition. Ziff took over PC in November 1982 and moved the operation to New York City that Christmas.

Rather than negotiate with David and me and the other minority shareholders, Ziff took the position that our equity wasn't properly documented and claimed it had bought 100% of PC's shares from the New York investor. We sued, and at the same time, started PC World with new financial backing from an established computer magazine publisher. Ziff sued David and me, attempting to prevent us from using PC World to compete with PC magazine. The litigation was very messy and it lasted for nearly five years. When it was all settled, we were finally paid for our work on PC and our shares in the start-up company. My small stake earned a modest fortune, but I paid hefty legal fees to collect it.

Once Ziff took over, it worked fiercely to protect PCs leadership position, hiring expert publishing people to work on it. Their sales and marketing aggressiveness during PC magazine's early years are legendary among publishers. Because of that ferocity, and a significant investment of money and expertise, Ziff kept PC in first place, even though many strong competitors tried valiantly to displace it.

Meanwhile, we secured a solid second-place position for PC World by aggressively growing our circulation from zero to 300,000 within two years. We spent several millions of dollars in the process. Still, PC World reached profitability by the end of its third year and spawned a dozen very profitable foreign editions and spin-off products. We went on to create Macworld (1984) and Publish (1986) magazines as well as founding the Macworld Expos with largely the same team of people. Each of our subsequent publishing products was profitable, and while we were not equity holders in any of them, David and I were both able to retire comfortably from PC World after a few years.

Ten years after he bought it, Bill Ziff sold PC magazine, along with several spin-off products he had developed, for over $1 billion. The magazine has since been sold yet again for over $1.5 billion. Wounded by competition on the Web -- sometimes of its own making -- and hurting from the recession, PC magazine is less profitable now, but still going strong. Paid circulation in 2004 hit 1.2 million and has settled at 700,000 in 2005.

Today, PC still follows the basic publishing formula we designed in 1981, providing impartial information about PC-related products. And the technical information in PC is still presented stylishly. In many ways, the magazine set a new standard for all computer publishers and helped to bring personal computers out of the hobby shops and into corporate environments.