Book publishing can be one of the most lucrative and easiest-entry side ventures readily available to the magazine publisher.

And for you, already a magazine executive, it's especially easy. Since you're already in the business of producing a publication product -- i.e., your magazine -- you have these distinct advantages:

--You own editorial material (articles) that can be repackaged into books.

--You have the know-how for processing editorial material.

--You know how to transform a manuscript into a printed page.

--You are in contact with good writers in your field (potential book writers).

--You have the insight into your market that comes from publishing a magazine.

--You have in your magazine's pages and mailing list a relatively inexpensive advertising medium for promoting the sale of books.

That's an impressive list of advantages. But how do you get started in book publishing?

Let's consider the most obvious problem: money.

Cash Flow Requirements

When you publish an issue of your magazine, expenses are usually paid in part from a pre-paid subscriptions account. In contrast, the publication of a book typically involves a number of up-front expenses -- art, photos, typesetting, and layout -- before any revenue is received. They're likely to be on a pay-as-you-go basis, and represent fixed pre-publication expenses. Printing, too, is an up-front expense. Most of your up-front expenses unfortunately can't be deferred, and will have to be recovered through sales.

Editorial expense is one category, however, where you may find some flexibility. If you can arrange to compensate an author through royalties (instead of buying a manuscript outright), the fixed editorial expense becomes a variable one, which accrues -- and can be paid -- as sales develop.

And the faster you get your book on the market, the sooner you'll begin to recover your up-front money.

How Long Does It Take?

Producing a book in the traditional manner can take anywhere from months to years. But you don't want to wait that long! Fortunately, there is a management technique called the "managed book", or "short-cycle" publishing. It works like this:

You arrive at a decision to publish a book (having considered such things as marketability, design, price, size, etc.) and you recruit an author. Then you plan the book. You draw up a detailed content outline, and establish the length of the book. Next, allocate a specific number of pages for each chapter. Assemble a storyboard of chapters, and set deadlines for the completion of each chapter or section.

If all that sounds like dealing with articles in a magazine, it should! The approach is similar. It allows a number of functions (editorial, typesetting, layout) to be performed in parallel (see Figure 1).

With short-cycle publishing, a new title can be on the market in as little as four to eight months' time.

Breaking Even

Before making the final decision to publish a book, you must figure out when you will break even. The longer it takes, the longer you will be waiting for your money -- and the higher your interest expense will be. (This is a real consideration, whether you've borrowed the money from a bank or from yourself.)

To do a break-even analysis, you'll have to forecast sales volume, set a price for the book, and identify what your expenses will be. Let's say a book has a projected average rate of sale of 500 copies per month and is retailing for $7 net. The author's royalty is $1 per book, allocation for advertising is $0.50 per copy, and the cost to process an order and ship the book is $2. That leaves you with $3.50 per book as the net margin on a sale.

From that money you start paying for the fixed expenses (see Figure 2). In the hypothetical case illustrated in Figure 2, the break-even point occurs after selling about half of your inventory (5,137 copies). With sales at the forecast rate of 500 copies per month, it will occur after 10 months. That isn't a bad bet.

If you had found that it would take selling 90 percent of your inventory to break even, watch out! That's a bad risk. But what do you do if that is exactly what your figures do tell you?

One solution would be to increase the price. Demand for a book tends to be somewhat inelastic, especially if the book has no direct competition. And even if some consumer resistance to price does develop, you could possibly make back your up-front money quicker by selling fewer copies at a higher price.

Other solutions, such as reducing the cost of printing materials and processes, or changing the format of the book, will be discussed later in this report.

Return on Investment

Another key financial indicator to look at is your return on investment. It is useful not only in making the decision to publish the book, but also in choosing among possible alternate ventures. It may also indicate if you'd do better to leave your money in the bank!

Using the forecast, costs and revenues from the previous example, we see $17,980 going into the venture. When all the printed inventory has been sold, the total net margin will be $35,000 ($3.50 X 10,000) or $17,020 above the up-front investment -- and not a bad return ($35,000 - $17,980 = $17,020)! (Of course, the actual picture wouldn't be quite that rosy, since we have not yet taken into account such mandatory expenses as overhead or taxes, nor have we considered the cost of direct mail promotion. The effect of these factors would be to reduce further the return on investment.)

Thus far, we've been constructing a financial model of a book. Now let's extend this modeling into the marketing realm. To plan for a viable finished product, we must also consider the forces of the marketplace.

How great is the demand? In what form will your book be best received by the consumers? Content, design, size, shape, color and price -- all should be considered with the perspective of the market in which the book will be sold.

Before committing resources and funds to the development of a book, some objective market reading should be obtained. Did the subject score high on your magazine's last readership survey? Are other survey data available?

Many times the idea for a book will come from important authors, from staff, or from your own judgment. Although each of these sources is a valid point of origin, be sure to test or verify the idea. If it were easy to know which books are destined to become bestsellers, there would be nothing but bestsellers on the market!

Positioning the product can have a great impact upon its market performance. When you have a topic for a book in mind, look around to see what's on the market already. Do you want to position your entry to go after market share against an established good seller? Or can you fill a void in existing literature, and make your money that way?

A Model Price

Price is both a financial and marketing factor in planning a new book. It has to produce the revenue to pay the bills. If the price is pleasantly low, it can increase the attractiveness of your book. Conversely, an exorbitant price may create buyer resistance. But don't price a book too low; a prospective buyer might assume the low price is an indicator of low value.

There are a number of rules of thumb for determining retail price from the manufacturing cost. Some say multiply by a factor of seven; others say five. And these multiplication factors can be a useful starting point.

Don't use them as hard and fast rules, however. There are some definite pitfalls. For example, the unit manufacturing cost when printing 50,000 copies will be quite different from that of the same book on a 5,000 press run. Using the seven-times rule, the retail price for the short-run version will be a lot higher than the long-run product. Is one worth more than the other when placed on the market? The consumer won't think so -- they both look alike.

Consider these factors when setting price:

1. Unit cost. Include all costs: manufacturing, editorial, production, cost of capital, allocation of overhead expense, etc.

2. Ballpark prices of competing or similar products.

3. Perceived value of your book.

4. Elasticity of demand: how much price resistance will there be in your market segment?

5. Discounts given off retail price: what will the average net revenue be from a sale?

Other Marketing Considerations

How many copies of your book should be printed? To make that decision, consider your sales forecast for the first year as your print order. For discussion, let's use a sales forecast of 30,000 copies per year.

You have a quote for web-offset printing of $18,602 for that quantity with an adjustment factor of $552.40/M for greater or lesser quantities. As an alternative, let's also consider meeting the demand forecast by making three printings of 10,000 each, costing $7,554 [$18,602 - ($552.40/M X 20M fewer copies)].

The total cost for one year's inventory using this approach would be $22,662 ($7,554 X 3 printings). That's $4,060 more than the cost of printing 30,000 copies at one time. Most of the extra expense is because you're now paying for three make-readies rather than one.

Obviously, if you print 30,000 copies at one time, you save $4,060. In addition, you won't risk a stock-out between printings. However, there are disadvantages to printing all 30,000 at one time. First of all, you'll have an unnecessarily large inventory if your forecast was overly optimistic. Second, you lose early opportunities to revise subject matter. And finally, your initial capital requirements are $11,048 higher.

Another factor to consider is the appropriateness of the equipment on which your book is to be printed. The web-offset quote used in the above example may be appropriate for the 30,000 press run, but not for 10,000 copies. A sheet-fed press, usually with lower make-ready costs, might do well here. The Cameron Belt press is also an interesting alternative for short-run book printing.

Although it has unfortunate limitations with regard to half-tone reproduction, its economy for short runs (as small as 2,500) is excellent.

Generally, the objective in setting a print quantity is to put the least amount of money into inventory while keeping in mind economies of scale, avoidance of a stock-out, availability of capital, and the timeliness of the content.

The quality (and therefore cost) of materials and processes that go into your book contribute to the book's perceived value. A book intended to sell for $3 can get away with using a pulpy, ground-wood sheet. Not so one retailing for $35! Try to match the aura of perceived value with the price tag.

Whether to go hardcover or softcover, to use multi-color printing or high-quality paper -- these questions must fit into the formula, too. The manufacturing materials and processes -- combined with the value of a book's contents -- will establish whether cost and perceived value are in consonance.

Valuable Contents

What is the best way to present the subject matter of your book? This is a question that must be carefully considered. Luckily, you have certain built-in advantages for source material.

There are certain types of books that naturally lend themselves to both publishing and marketing in a magazine environment. They can make your jump into book publishing painless and profitable. Here are a few examples:

The anthology is an obvious type of book for you, the magazine executive, to consider. It can be made up of a collection of articles that appeared originally in your own magazine. (You may even reuse the magazine mechanicals to keep editorial and production costs low.) These articles can also be augmented by new material to bring subject matter up-to-date and to fill in subject gaps.

An anthology appeals to your regular readers in that it provides a handy compendium of information on a popular subject. To non-subscribers, it's just like new information -- and might even serve to promote subscriptions.

Directories can be another avenue for exploiting your position in magazine publishing. Accurately-compiled and well-organized lists can make very successful publications. Consider information that might be extracted from your subscriber data or solicited via the pages of your magazine. Who's Who lists, resource people or services, lists with statistical data -- and the lists go on!

The executive report is an interesting alternative to the traditional book. When you have information aimed at a select audience (a profession, workers in an industry, or some other particular interest group), you might well have the makings of an executive or special report. These publications -- which often appear in loose-leaf or spiral binding -- provide timely, well-targeted information.

Usually, the executive report has a limited production run. Since economy of scale is not achieved from a relatively short printing run, unit manufacturing costs are high. But because of the exclusivity of content, such reports can sport high price tags.

Furthermore, the format for executive reports does offer two areas of savings: (1) Illustrations are used only as needed for content amplification -- not decoration. (2) It is acceptable to present text from a word processor rather than typeset copy.

A multimedia package can be produced by pairing a book and an audio cassette in a simple container. This technique can be very useful when there is an aural aspect to the subject, such as a cassette with bird calls to go with a birdwatchers' guide. Or, step-by-step instructions can be given on cassette for applications where it would be difficult to read and perform the instructions at the same time (e.g., photographic darkroom procedures). Similarly, an introduction to a subject can be presented by the voice of a well-known personality or expert. Chapter summaries and study questions can be recorded on cassette to convert a text into a self-study course.

Handbooks containing reference or how-to information are usually popular and, if revised periodically, can enjoy a long lifetime of sales. One-shot books, such as annuals containing year-in-review and introductory information about a field, lend well to opening new avenues of distribution, including newsstands, in some cases.

Try to get double or triple duty from a topic. Your subject may lend itself to presentation in more than a single type of book. For example, one technical publisher took a back-list standard text and revised it graphically to create a new appearance. At the same time, a second product was created by packaging the book together with an audio cassette for sale as a multi-media package. And finally, a third new product was created by assembling transcripts of the tape's chapter summaries into a handy pocket-book format.

In all three cases, the basic information was the same. The form of presentation was varied, however, to go after different market segments and to achieve economy in editorial expense.

Keep your options open to all the kinds of books you might publish. Hardbacks, paperbacks, audio books, books with fold-out charts or diagrams, or even ebooks. There's quite a range of lucrative possibilities from which you can choose.