Better Metrics for Crucial Decisions

July 2005
by Mike Shatzkin

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Too many publishers use metrics that lead to bad business decisions. Consider the three big decisions that you often sharpen your pencil to make:

1. whether to commit to publishing a book in the first place

2. where to set the retail price

3. how many copies to print

To maximize profits and, particularly, to make the best possible use of available cash, this is how I suggest approaching these decisions and others that you face as a publishing executive.

Recognize that publishers’ accounting systems are constructed primarily to enable bookkeeping that conforms to government regulations and to enable paying taxes. As a result, it is not at all odd that each copy manufactured carries a “unit cost” on the books, because, when it is sold, a charge for the cost of goods must be recorded. But costs are not actually incurred for each unit as it is sold; most of the costs are incurred when it is printed.Also recognize that overhead is, mostly, fixed. The practice of assigning the same overhead cost figure to each sale may be convenient for accounting, but in reality most overhead costs are entirely independent of what books are published, manufactured, or sold. You don’t pay more rent because you signed up one more title, and you usually can’t reduce your warehouse space just because you printed fewer books than you thought you would.Consider advance and prepress investments in each book sunk costs. It is meaningless to characteri…IBPA Members – Click here to view the full article (login required).

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