Business Musings: But I Can’t Afford…(Rethinking The Writing Business Part 15)
As I’ve worked my way through this series, I’ve panicked many of you. I’ve panicked myself. Switching your focus from being a writer of a few books to running a business based on licensing is a lot of work, not just mentally, but with time management and yes, with money management.
If you haven’t read the early parts of this series, start here and then click on the Business Musings tab and read your way through. I’m not going to reiterate everything that we’ve been doing since June.
When we went to the Global Licensing Expo [link] back in June, I realized that the Expo has a structure. The licensors, the people who have intellectual property (IP) to license, have booths, displays, or entire wings devoted to their IP.
The licensees, the people who want to use that IP for their gaming company or their karaoke bar, walk the floor, talking to the licensors. Making connections, looking at what the licensors have to offer, picking up flyers that show more of the IP, and thinking, spit balling, discussing. There’s a lot of creativity at the Expo, and much of it is geared toward taking existing IP and figuring out yet another way to make it work for the licensor…and the licensee.
Imagine if publishing worked the way that the rest of the licensing industry did. Here’s what the Global Publishing Expo would look like:
Writers would have booths with examples of their IP scattered around. Publishers would walk the floor, looking for a novel or a series that would expand their upcoming fall (spring) (summer) lists. The negotiations would start when the publisher approaches the writer, and the writer would decide if the publisher was worth working with.
It might take several visits, with the writer trying to figure out what the publisher could do that some other publisher couldn’t do…or that the writer couldn’t do herself. And the contact might end there. Or the negotiations would begin. And they would follow the terms in that deal memo I discussed at the end of the money section.
In no way would the writer beg a publisher to take her book. The publisher would have to convince the writer that the publisher’s vision was compatible with the writer’s.
When I realized, midway through the Expo, that the IP creators were in charge at this venue, I started seeing everything in a new light. I talked with Dean about that realization and he asked me, Should we get a booth next year?
Immediately I saw a lot of problems. I wasn’t going to man the booth. He didn’t want to either. But we’re the best ones to do so, because we understand contracts, negotiation, and the way to talk to a licensee. We could train staff to do that, but that would take even more time.
We could, we decided, get staff to man the booth and contact us when someone approached. Then we’d be walking back and forth along that floor, but it was better than being trapped at the booth.
I talked to one of the organizers about price. The cost of a booth was in five figures, as I expected, which puts everything in perspective.
Dean’s usual rule of thumb is: Can we recoup the amount we spend at the fair/festival/expo (or wherever we’re going) within the first 12 months after the expo.
We had no idea. But as I learned more and more about licensing, I realized that no, we probably couldn’t recoup within 12 months, particularly if we brought staff. But maybe within 5 years…
Which brought up the idea of sharing a booth. Some writers have discussed it, but that would be confusing: five or six different writers with hundreds of pieces of IP on the smallest size booth? Not really a good fit.
Another of our friends suggested a booth share, and that’s more likely, since we have wildly divergent businesses. It would be easy for the licensee to see who to do business with—that other company or the publishing company (us).
That suggestion is still on the table with the idea that we would split the cost of the person who mans the booth, and we would set up appointments there. The person at the booth wouldn’t be able to do more than set up more appointments.
We’ll have to make a decision soon, but it’s a heck of a financial outlay, and we have other things that need some of our capital. Outdated equipment, some new systems, and a bit of catch-up from the crises that hit in 2018 (me) and 2019 (Allyson).
Where to spend the money? If we even have the money.
Can we get something out of a booth at the Licensing Expo that would be worthwhile…in 2020?
I still don’t know. And once again, I’m not sure we’re ready. We’ll be having the discussion until early November, when we will make a final decision. That’ll be after the Business Master Class, which will have all three principles of our business in attendance, and we’ll make an informed decision after that.
We have a million-dollar business, and we’re still thinking about what we can afford and what we can’t.
And every business on the planet does the same thing. Even if a corporation looks like it’s rolling in dough, it probably isn’t. Somewhere the people in charge of the finances are comparing this idea to that idea, trying to figure out not just if the company can afford to do a thing, but should a company afford to do that thing.
Your company is no different.
Figuring out what you can afford and what you can’t is as important as time management, maybe more important.
I’ve seen far too many writers spend to the limits of their money and beyond on things they think they need now. When Dean and I ran our first publishing company in the early 1990s, we made that mistake. We put every single dime into the business and then, if someone said, Hey, you need to do X, we would borrow money to get X done, without questioning whether or not the time had come for X.
That analysis is pretty simple. You stop and take stock.
Someone we trust says we must do X. So let’s analyze whether or not that’s the case.
Here’s what X is.
Here’s how much X will cost us in money and in time. (Time is money, remember.)
Here’s how many resources we will expend to do X.
Here’s how much those resources will cost over and above X.
Here are the projects that won’t get done because of X.
Here’s how much estimated profit we will get out of X.
Here’s how much learning we will get out of X.
Here’s how much we will gain in intangibles if we spend time on X.
You compare the projected cost of X in time, money, and resources with the projected gains from X in time, money, resources, and general goodwill or learning.
If you can justify X or if you’ll make a significant profit or if you can’t run your business in 2019 without doing X, then you do X.
But if you can’t make a profit or you can run your business well without X, then maybe X isn’t essential after all.
Deep down, you all know how to do this. It’s the same decision-making process you go through in your household finances (or you should go through it).
You prioritize your expenditures, and include X. Sometimes X is in the top ten, and sometimes it’s in the top 50 and sometimes, it’s not even on the list.
Those are the no-brainers.
The argument differs when X has no quick and tangible profit, when you’re doing something that will take years as opposed to weeks, when what you might learn at X might be a negative. As in, Oh, hell, no. I don’t ever want to do that.
Let’s call this thing Y, instead of X, just for clarity’s sake.
When you look at Y, and you realize that you have years of learning or negotiation or networking to make Y work for you, then your decision is harder. Is it worth exploring Y…not just this year, but in future years as well? Is it worth expending the time and energy, not just the money, on Y?
That’s something only you can answer.
Even harder is this decision: You can afford Y, in time, resources, and money, but you have no idea what Y really is. Does it go up the priority list? Do you change your business focus for something that would be, in essence, an experiment for you?
That’s what we’re facing with the Licensing Expo with WMG.
Here’s what we did.
I went to the Expo by accident in 2018, to meet a friend for dinner, and realized that we could make a boatload of money…eventually…if we knew what we were doing here.
But I knew we weren’t capable of doing anything in 2018. I was just getting healthy. Dean was focused on moving us south.
So, I told WMG that Dean and Allyson needed to come to the Expo in 2019, to see if they agreed with me about the potentials of licensing.
This time, Allyson was too ill to come. So it was just me and Dean. And he agreed that licensing is important. Clearly, because we revamped our entire business model.
The cost of the conference was next to nothing in actual dollars. Dean and I got in for free (it’s free for anyone who doesn’t have a booth). We live in Las Vegas where the conference is held. We spent money on parking. That’s it.
But we also spent a lot of time on preparing, and about $200 getting flyers together that we ended up not using.
We learned a lot, and we’re still learning. And Dean and I decided, as did Allyson after hearing our report, that we are rethinking the writing/publishing business to be a licensing business.
But now, we’re analyzing 2020, and because this is a long-term thing, we haven’t figured out our best move yet.
As is common in business, we’re making decisions based on what we know now, not what someone with more experience and knowledge might believe is right. And would that person know what’s right for our company? I’m not sure. I doubt it.
It’s our decision to make, based on a whole bunch of factors, some of which are intangible.
The moment we pull an employee from their regular job to do something special like man a booth, we’re losing productivity. We’re also spending even more money than we normally would.
We’re not sure we’re at that stage yet.
So we’re doing a lot of thinking and number crunching, and examination of various options.
I think three of the most important words in any business are We Can’t Afford…
Because X or Y or whatever is on the horizon might be shiny or interesting or The Right Thing, according to the pundits, but it might not be right for you.
We Can’t Afford…isn’t just about money. We Can’t Afford is also about time. About productivity.
Sometimes you can afford to spend the money. Sometimes you can afford the time. Sometimes you can afford the lost productivity, particularly if whatever X or Y is will increase the productivity down the road.
It’s up to you as the business owner to analyze every opportunity that comes your way with those three words in mind.
We Can’t Afford…yet.
We ran our first publishing company with the wrong attitude about We Can’t Afford. We figured we couldn’t afford to miss a single opportunity. That attitude got in the way of a healthy analysis of the opportunities. We ran through money, we burned out our staff, and we eventually crashed.
When we started WMG, we held up We Can’t Afford to the standards I listed above.
Yeah, we should be doing more advertising, but we can’t afford the money, staff, and lost productivity to do it.
Yeah, we need to hire more employees, but we can’t afford the lost productivity (our main people would have to train them), and we aren’t sure if at the moment those new people will bring in as much as we would spend on them.
In fact, when it came to employees, we needed Allyson from Day One, but we promised her we wouldn’t hire her until we had one year of her salary in the bank. That took time. Time in which we needed her. Time in which we really couldn’t do without her.
But we couldn’t afford to lose her once we hired her, and if we couldn’t meet payroll, we would have.
So we banked the money and waited, and watched opportunity after opportunity go by.
I don’t even remember what those opportunities are anymore. Because waiting until we could afford to bring her in was one of the best decisions we ever made.
We Can’t Afford X until…some firm future date…is the best way to make decision.
Or decide it this way: we will re-examine our decision about X on some firm future date.
A lot of opportunities will go by the wayside. But a lot will become solid, and you will approach them with your best foot forward if you wait until you can afford it.
Yes, it’s hard. Yes, your business probably won’t grow as fast as you want. But it’ll grow in a healthy manner.
Healthy businesses last.
So as you look at all of this licensing stuff, remember, you have to manage your time as I mentioned in the earlier post. All of those time management questions apply to expenditure management as well.
Figure out what’s best for your company. Not what I tell you is best. Not what some guru who claims to be making 10K a month tells you is best. Not what you “heard” is best.
Crunch the numbers. Figure out how much you will gain…and how much you will lose.
Make your own decision, and stick to it.
We can all only do so much.
That’s a hard realization to make in business, but it’s the realization that will keep you afloat for decades, rather than a few brief years. It’ll prevent a crash like Dean and I experienced.
Learn to use the words We Can’t Afford To…
Those words are so much easier to say than no. Because they force you to analyze. And a habit of analysis will keep your business healthy too.
Remember to look at the long-term. Because short-term thinking creates long-term problems. And those will eat up more time and resources than you can ever imagine.
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“Business Musings: But I Can’t Afford…(Rethinking The Writing Business Part 15),” copyright © 2019 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / studiostoks.