What is the purpose of a forecast? The idea is to project in advance your annual revenue. You need to do this for a variety of reasons: manage cash flow, adjust spending, communicate your plans to your governing body. Useful to remember that a forecast is not intended as a prediction of the future. You’re saying essentially, “here’s what I think will happen, but I can’t guarantee it.” Important to call out particular risks and opportunities, such as: We have a big trade book. Expect big advances followed by big returns Or sales of our bestselling backlist titles appear to be slipping. We can’t expect them to earn what they did last year. Or, monograph sales continue to decline. We thought last year that we’d sell 400 copies of the average monograph in the first year. In many cases, that number has dropped to something like 250. You can make these qualifying statements because you’ve studied the sales patterns. You aren’t speculating about the market; you’re reporting what you actually see.
I think it’s important to do title-by-title forecasting and it’s really not as complex as it sounds. We look at price and print run (assuming that first printing will cover three years of sales in most cases) at our internal editorial board meeting and again at launch. These numbers are loaded into preliminary financial projections in our database. So I can export them into Excel, tweak the price and print run to adjust for reality, and start getting some useful information. I find it particularly useful to forecast second year sales of the previous year’s frontlist because I have to study what has already happened. For example we might have expected to advance 750 copies of a particular title in the first year. By studying the sales I might discover that we advanced only 500 copies and the month-by-month sales velocity is looking more sluggish than we first expected. That will definitely impact how I forecast sales in the second year.
So we do our forecasts at least six months prior to the fiscal year are forecasting. We forecast FY09 in January 08. During that period we also had a chance to reforecast FY08. We do this every year. The reforecast allows us to take a pulse at the year’s midpoint and identify to management and the university any patterns that would suggest that we’ll miss our revenue targets by a significant amount. As we start working on the forthcoming fiscal year, the fall list is pretty solid, but the spring list can be a work of fiction. We export all the firm and tentative titles on both lists, then have the editor-in-chief remove from the list anything he knows won’t be delivered. Like most presses, we push late books into subsequent seasons just to keep them off a current list. Often the new season has no bearing in reality. So I forecast revenue net of returns. Allow 5% slippage for the fall list and 30% slippage for the spring list.
Forecasting the entire list is a huge process, so I break it down into small tasks, each of which is tackled separately. I’ll do a season/day on the frontlist and recent backlist. Then a day or two on backlist bestsellers. For deep backlist I burn incense, sacrifice a goat, and deliver incantations to whatever deity can stand listening to me say one more time: “how am I supposed to know what’s going to happen?” It can get very confusing. Generally, we look at overall backlist contribution year after year and assume that we’re going to get some backlist growth out of certain new titles.
So here’s a sample of what I do for the fall list. I import the titles into Excel, then fiddle with price, first printing, and first year sales. This is a time when I study what is happening with similar books published recently. Our editors tend to offer comparable titles that are several years old, and it’s important to consider what has changed since then. Generally speaking I keep reinforcing the fact that overall sales volume is down, used book sales are up, and it’s unlikely that we’ll be able to duplicate the sales volume that was possible in the market of the past.
When forecasting spring titles, it’s important to keep in mind the end of the fiscal year, which for us is June 30. So our first-year sales may not all fit into the fiscal year we are projecting. (You’d want to adjust fall titles in similar fashion if your FY ends December 31).
So I’ve told Excel to pull the totals from the frontlist worksheets into this one. And I’ve used the 5% and 30% slippage allowances to adjust the totals.
I do title-by-title forecasting for about 200-300 backlist bestsellers. Again, this forces me to face reality by studying the sales patterns. Are course adoptions drying up? Is a bestselling consumer health title losing velocity because it’s more than five years old? It’s impossible to justify a forecast of 25,000 units/year if the previous 2-3 years are showing 20K, then 18K, then 16K. This is really important because we can find ourselves overstating the dollar value of particular backlist titles and/or thinking that top sales volume will be sustained forever.
Again, you plug into the summary sheet your formula for grabbing totals from the other spreadsheets. We also plug numbers in for sales of non-owned titles, electronic projects, ebooks, bulk sales, and remainders.
I always review the frontlist forecast with our sales director and with our editor in chief. It’s really important to get a reality check when you are working with so much data. Plus having others invested in the forecast gives you allies when you need to defend your conclusion. Forecasting can get a bit complicated when the numbers you’ve assembled don’t reflect press goals such as 5% annual revenue growth. This can lead to awkward conversations with directors who are under pressure from provosts and advisory boards. I try to stay dispassionate during this process. If I have any reservations about adjustments to the forecast, I document them in writing, but I don’t make a federal case about it. I’m happy to report that my caution has, in several cases, been proven wrong. That said, I believe it’s important to avoid the trap of magical thinking. If the numbers indicate that you’ll end the year far shorter than you had hoped, it’s important to look at that. What are the particular factors contributing to your projected outcome? Lack of books? Market decline? You can’t work miracles to fill the shortfalls, but you are obliged to defend your assumptions and methodology and it’s also important that you be willing to examine your own blind spots.
I find the forecasting process to be as instructive as the numbers. Doing a sales forecast forces me to study patterns: how are books advancing? Are monograph sales still declining? What kind of returns should we expect from a trade book? Why are returns from course adoption titles so high? I find that I absorb these numbers and sales patterns, and that is useful for debunking the kinds of myths we all face: “no one will buy a course book if it’s priced over $18.95” or “titles in medieval history always sell at least 1000 copies.” If you study the data enough, you start to carry it in your bones. It helps you set better first printings, it helps with reprint decisions, and it helps you anticipate the need for new editions, even new titles. I have learned a lot from being wrong. I’ve been bullish about the wrong books and skeptical about the wrong books. On a few occasions, I’ve been right! The bottom line for me is this: sales forecasting isn’t just about aiming for a number for year end, it’s about understanding your business.
AAUP 2008: Sales Projections (B. Clark)
<ul><li>Sales Forecasting </li></ul><ul><li>Not a science, but a black art </li></ul><ul><li>Important to consider your methodology </li></ul><ul><li>Articulate your assumptions in a cover memo </li></ul><ul><li>Call out risks, areas of uncertainty </li></ul><ul><li>Study sales patterns of similar books </li></ul><ul><li>Be conservative </li></ul>Johns Hopkins University Press
<ul><li>My approach </li></ul><ul><li>Title-by-title forecasting on the frontlist, recent backlist, and backlist bestsellers </li></ul><ul><li>Tedious, but it forces you to study sales patterns and absorb facts </li></ul><ul><li>Forecasting deep backlist is a real shot in the dark </li></ul>Johns Hopkins University Press
<ul><li>Frontlist Forecasting </li></ul><ul><li>FY09: We forecast in January 08 for FY beginning June </li></ul><ul><li>Fall (08) season is pretty solid </li></ul><ul><li>Spring (09) season can be pretty wobbly so we build in slippage </li></ul><ul><li>Import data from preliminary financial projections approved by internal and external committees </li></ul>Johns Hopkins University Press
<ul><li>The Process </li></ul><ul><li>Break the forecast into a series of small forecasts, then roll it up </li></ul>Johns Hopkins University Press
<ul><li>Closing Thoughts </li></ul><ul><li>What to do if the numbers don’t add up? </li></ul><ul><li>What kind of story is your press trying to tell? Growth? Contraction? Decline? </li></ul><ul><li>The lure of magical thinking </li></ul><ul><li>Review your forecast with a trusted colleague before calling it final </li></ul><ul><li>Give yourself a day or two to let unwarranted enthusiasm dissipate </li></ul>Johns Hopkins University Press
<ul><li>And remember…. </li></ul><ul><li>You’ll get some of it right </li></ul><ul><li>You’ll get some of it wrong </li></ul><ul><li>You will be pleasantly surprised </li></ul><ul><li>You will be unpleasantly dismayed </li></ul><ul><li>The process is instructive, both short-term and long-term </li></ul>Johns Hopkins University Press