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All right... I`m revamping a business plan I`d originally put together a couple years ago for a digital publication. The main difference is that my original plan was for a very tiny local publishing project, while the new one is for a project with national reach & 7 regional editions.

I`m adapting the business model of two very successful, national, digital publishing companies. One started up with $250k, the other with $200k; the first happened with friends-n-family money, the second with angel money.

Here`s the problem: my numbers are not reaching anything like those figures. I`ve added in every single thing I`d love to have that is not necessary, and I`m still coming up at least $100k less than these other ventures evidently required.

The only thing I can figure is that there are a few things I don`t need to buy:

• Advertising — the basis of my own marketing strategy is to make my subject matter a news story, and leverage numerous contacts I have with actual journalists as a result of my recent journalism undergrad work & previous history with the subject matter (I`m already a "known quantity" in the niche I`m targeting, at least to a degree). Advertising is nonexistent for the first couple of implementation phases.
  
• Web & bulk email development — I`m doing all this myself through the startup phase. Total cash outlay for the website will be about $36 for the first year; paid bulk email delivery will vary, but won`t happen for the first 6-9 months or so and will cost $5 + $.01 per recipient per weekly campaign.
  
• Original fine art illustration — also will do this myself. I`ve granted myself all the art supplies of my dreams but since I work in dry media it`s still less than $300.

Can advertising, website & bulk email development, and original artwork really add up to $100,000 - $150,000? Or am I totally missing the boat? I cannot understand what the heck these folks spent all this money on.

Also — if my media contacts, prior history, web development skills & illustration skills really are going to save me that much in startup costs, can I somehow record that as owner`s investment (or something like it) in my pro formas?

Any insight is much appreciated, thanks in advance.


Addendum: I`m also saving a boatload of money on rent & utilities by starting up from Nowheresville, PA, rather than New York City as these other two ventures did.

—paula

Gosh you can spend $25,000 on icons for a software product and another $25,000 on visual identity. Yes, $200/250k is quite spendable.

oHMygOd those better be some damn fine icons! Sheesh!

Paula,

$200,000 isn`t a lot of capital.

As a marketing budget, it`s a fairly small number for a publication with "national reach & 7 regional editions".

Also, it can`t include many people (salaries/compensation) for that total.

Since the trade off is often time vs capital - my question to you would be:

Do you have enough of resources to grow the company fast enough?

Robert

 

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Hi Robert. You`re always the man with a good response.

$200k isn`t a lot of capital I realize of course, but given the digital-viral nature of these companies` media products it is just really hard to wrap my head around what they bought that cost so much. (I was the "tech guy" for the second company during their earliest startup phases, and while there was much I was not privvy to, I do know their technology needs inside-out.)

Truth be told I am actually quite concerned that should growth happen faster than I`m planning it, I`ll be sunk. I am totally bootstrapping this and have extremely limited access to startup capital. My plan is to build up the company to a certain level and then start looking for funding -- which is why I wondered if I could include the savings as value somehow in my pro formas. It`s going to be a tightrope walk without a doubt and I am quite nervous about it. But I just simply can`t let the opportunity slip by.

—paula

One thing to consider. The costs of starting a business have fallen quite a lot in many areas. This could account for some of the discrepancy.

With respect to growth. Do you have any idea how much cash this business can generate and how often? Growth requires cash but it also requires good cash flow. If you`re worried about getting "sunk" from fast growth then you might try to establish a model where you get paid very regularly. ( Maybe you already have. Or maybe it just doesn`t fit. ) Including the "savings" in your pro forma seems odd - it`s not really money, it`s not even paper money.

Your plan - build the company to a certain level before seeking funding - is smart. However keep in mind one the first rules of finance: always raise money before you need it, not when you need it.

Still working on the scheduling part, but that`s a very good idea. I am still at the blackboard with all the numbers stuff so I will see if I can`t figure out a way to do that. There`s usually a way unless you`re trying to violate the laws of physics or something.

yeah I`m not sure how it would work, or even if it can. But it seems like there should be some way of putting a dollar value on what I`m bringing to the table... it really is the case that I have a much better chance of making this particular venture work than someone else. Possibly anyone else.

Well...... there have been very few days in my life when money wasn`t a huge crisis, even to the point of going hungry. the concept "before I need money" is almost purely academic; that requires having money first, which is the whole problem to begin with. "Money first" is not an option for me, which is why I need the company value first, so that the money might be able to at least come in second.

—paula

Hi Lisa, thanks for your input. I read your post last night and have been mulling it over to see how advertising can help me in the earliest phase of my business, but I really think it would do more harm than good ultimately.

The goal of my business is to commercialize something that has always been an activist movement. If I dive in with advertising straight off the bat it will ruin my credibility among the key activists — a few of whom I know personally, many of whom are familiar with me by reputation as a former activist myself — whose linkbacks and other public recommendations I will need if I am to gain real traction for my business over the first two years. I really cannot afford to gamble with their respect, at least not until I start meeting my business goals (and even then I would prefer not to lose their respect because they`re good folks and I like them).

The second reason I think it would be harmful is because phase 1 of my business is a simple informational blog which I intend to be a resource for consumers, activists, journalists, and anyone else who`s interested. The blog will serve many functions, but primarily I am charging full speed ahead to position it, and myself, as the premier expert source on the subject matter. I know from experience that buzz is far more effective than advertising at getting expertise recognition — especially among journalists, who have to walk a fine line between advertising and editorial every single day. If I have no advertising anywhere, it will free them to write about me & my efforts without having to tread lightly around their own advertisers.

Plus, a blog is not really something you advertise.

I plan to add additional elements to the blog site over time as I achieve traffic goals; when I reach a certain level of traffic consistently, the blog site will serve as a platform to launch the weekly digital publication. This is when I plan to implement advertising — both buying and selling — and by that time I will already have significant momentum. The purpose of the advertising will be to add to the existing momentum, and I won`t have to rely on it to build momentum from scratch out of nothing.

So, that is my marketing strategy in a nutshell. I am open to changing it if I`m overlooking something but given what I know of my target market — which is considerable — early-stage advertising just isn`t going to get me very far.

—paula

Lisa PR is right, let me see if I can break it down a bit more for you, from a photographer’s point of view.

Commercial (non stock images), copyright for an image for publication un-limited use can range from 5K to 10K per image, limited use can range from 1K to 5K. So if you want a ad built by a marketing company to be viewed nationally; say a simple ad of fine wine, here is a quick run up on the costs, the bottle of wine 250, models 350 each three needed, location expense 1,000. Rentals, fashion designer 350,  lighting and props 500.00  post production edits 250. I know I am missing a few here, but I think you can get the point.

A stock photographer is going to sell you limited use and re-sell the ad or image to as many people has he can to off set the costs, those can range from 250 to 500 each, or he will sell the image to a stock company based on use at .25 to 2.50 ( another version of the catch 22 everyone will have the same ad or image).

Kicking off a business and hitting the target market with targeted images and ads for just three to five ads can chew up 25K a month really fast, even if it’s done as much as you can by yourself, visual marketing is price driven, and very competitive.

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