Small publishers need to diversify in order to survive

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Even though small publishers can enjoy a dominant share in niche markets for years, they must now look to diversify their revenue streams in order to survive in the future. Ten years ago, ancillary revenue typically accounted for approximately 10% of the total revenue of a small publishing company, but today many small publishers derive 25% of their income from ancillary revenue, and other companies have a stated goal of boosting ancillary revenue to 50% of total revenue. As ancillary revenue becomes a larger percentage of total revenue, profit margins will increase dramatically!

Larger publishing companies have taken the lead in diversification of revenue, and smaller publishing companies need to move as fast as possible in the development of these ancillary areas: trade shows/conferences/seminars and high-end buyer/seller events; electronic newsletters/Web sites/search engines/publications; rich data/research/information; consulting; custom publishing; and book publishing.

Moreover, integrated media packages are a wave of the future, and all publishing companies, large and small, need to develop integrated media packages in order to maximize top-line revenue and, in turn, bottom line margins.

Small publishers tend to be family-owned enterprises. In order to survive, they need to professionalize their management team with non-family executives and outside board members. In order to survive to the next generation, small publishers need to spend a significant amount of time not only transitioning leadership responsibility to the next generation but also on the financial side of succession planning. Not many family-owned enterprises make it to the second generation, let alone the third, fourth and fifth generations. Professional advisors play an important role in helping small publishers plan for the future.

As you go forward in the family business succession-planning process, you will become familiar with the following terms: family partnerships and preferred partnership freezes, grantor-retained annuity trusts, comparison of estate freeze techniques, valuation of the family business, buy/sell agreements, a tax favor technique for planning ownership succession, incentive plans for key employees, avoiding problems with other stakeholders and possibly splitting the business. Other issues that inevitably arise are fairness versus equality and, in some cases, blended family issues. You'll find numerous seminars and printed materials on these topics. Meanwhile, American Business Media will help you grow your media business.

Speaking of ABM, I had the pleasure of serving as chairman of the organization this past year-my term ended on July 1, 2004. More than ever, I believe my company's success is partly due to what I've learned from many of you. The relationships I've developed and the insights I've gained as a member and officer of ABM have been invaluable. One thing I love about the b-to-b media industry is that we're much freer to share knowledge and information with each other, since many of us don't compete with each other at all. The exchange of ideas, especially within an association such as ABM, has made my company-and, I believe, our industry-much stronger.

For us, one of the key benefits of ABM membership is the exchange of ideas that happens at the committee level. Right now, there are Watt Publishing employees on nine of ABM's committees and councils, and we're looking to add more people all the time. There's no better way to network with your peers, hear what's happening in the industry and get ideas about how to improve your business.

I can't say enough about ABM's efforts in Washington. As the owner of a smaller publishing company, I'm comforted that the Governmental Affairs Committee and ABM's Washington representatives are tirelessly fighting on my behalf. We are waging the battle on many fronts-fax advertising, e-mail marketing, First Amendment issues, intellectual property protection and, of course, postal rates.

I look forward to seeing all of you at ABM's Top Management Meeting in mid-November. You'll see me in the audience, taking notes and learning from the best minds in the business. M

James Watt is chairman-CEO of Watt Publishing Co. He can be reached at [email protected]

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