2. Planning a Budget
Why Budget?
An effective budget should:
1. Incorporate the budgeter's goals and aspirations as they relate to his or
her partnership with the company;
2. Reveal the budgeter's perception of the realities - money, people,
circumstances - that will facilitate or impede reaching those goals;
3. Propose a plan for using those realities to reach the objectives.
3. Planning a Budget
Steps in creating your budget
1. Review prior performance and numbers (if not
a launch)
2. Tie it to a plan-contributions from each dept
3. Create at least two “scenario” budgets, i.e.
realistic and stretch
4. Creative Budgeting
Too often efficient management is
identified with cost control. It is easy to
forget that the primary objective is not
to save money, but to make money.
This is particularly important when
magazines are under pressure, as they
are in today’s economy.
5. Creative Budgeting
The way to deal with difficult times is to
build more things that make money, not
to hack away at the fabric of the
company to deliver a temporary profit.
6. Creative Budgeting
There’s a major difference in attitude
between the publisher who sees his job
as reducing spending by 10% and the
publisher who sees his job as increasing
earnings by 10%.
7. Creative Budgeting
Budgets are frequently the principal
instrument for introducing control from
above. They are meant to be planning
tools relating vision to verity.
8. Creative Budgeting
An effective budget should:
Incorporate the budgeter’s goals and
aspirations
Reveal the budgeter’s perception of the
realities – money, people & circumstances
Propose a plan for using those realities to
reach the objectives. Numbers are
meaningless unless related to objectives
and circumstances.
9. Managing Your Budget
Managing expenses and increasing
revenues.
1. Monthly comparisons of actual performance against budget are
prepared.
2. Significant variances are reviewed and explained
3. Summaries are prepared and submitted for review.
4. Corrective actions are taken when necessary.
10. Managing Your Budget
Managing expenses and increasing
revenues.
Budget violations indicate a problem, and most problems are rooted in
one or more of five mistakes:
1. The budgeter's goals were unrealistic.
2. The budgeter overlooked or misunderstood the realities.
11. Managing Your Budget
Managing expenses and increasing
revenues.
Budget violations indicate a problem, and most problems are rooted in
one or more of five mistakes:
3. The budgeter's strategy for reaching the goals within the given realities
was defective.
4. The budgeter did not follow the intended strategy.
5. The realities changed in a way that was not foreseen.
12. Managing Your Budget
Key Drivers
Magazine Monthly/Issue Analysis
Operating Statistics
Advertising Statistics
Circulation Statistics
Editorial Statistics
Production & Distribution Statistics
13. Managing Your Budget
Sample Consumer Publication
Operating Ratios
Editorial 8.0%
Gen & Admin 8.0%
Advertising 18.0%
Circulation 14.0%
Manufacturing 30.0%
Ex.'s % of Rev. 78.0%
Net 22.0%
14. Managing Your Budget
Beware of Volume
The fallacy that big is better arises in every business, but it is
particularly prevalent in magazine publishing. Neither more
circulation nor more advertising is always a blessing. Volume is
dangerous both because it can look like success even when it is
a disaster and because the greater it gets the more difficult it is
to control. Theoretically, costs should go down as volume goes
up. Practically, volume tends to camouflage costs, particularly
in personnel, waste and overhead.
15. Characteristics of Healthy
publications
Fill an information need/how to
Strong readership base w/high renewals
Endemic & healthy advertising base
Higher frequency
Diversified revenue streams
Good quality of earnings
16. Characteristics of Healthy
Publications
Maintain tight ad/ed ratio
Positive growth trends
Margins healthy
Invest for growth at a profitable level
with editorial, design, advertising and
circulation
18. Cash Flow Projection &
Analysis
Difference between cash and profit
Difference between budget and cash
flow projection
19. Cash Flow Projection &
Analysis
How to make a cash flow projection
For each month in the future, make a projection of amounts of cash
inflow.
Cash received from subscribers,
Cash received from advertisers,
Cash received from single copy sales,
Cash received from the sale of services,
Cash received from bookstores, distributors, vendors, etc,.
Cash received from donors,
20. Cash Flow Projection &
Analysis
How to make a cash flow projection
For each month in the future, make a projection of amounts of cash
outflow.
Cash paid to suppliers, printers, etc.
Cash paid to employees,
Other forms of cash out.
22. Sabatier Consulting
Washington, DC / New York, NY
703.536.2635 / 212.213.1550
Louann@sabatierconsulting.com
Twitter: Louannsabatier
www.sabatierconsulting.com
