Monday, January 17, 2011

My first business model

I had never thought that I could ever have enough financial resources to start publishing all by myself. However by 1986 I had reached the point that I could not see how I could stay true to my passion without going all the way. Walter Johnson gave me a tutorial on why I did not need any capital to publish my first books. He explained that as I already had a job I was credit worthy and I could use a letter from my bank to open a 30 day credit account with a printer. My academic colleagues were willing to provide their books in Camera Ready Copy (CRC) using early day laser printers. My job was to design the cover, fill some bibliographic forms and take the CRC to the printers with a promissory note to pay them after 30 days.

Ablex was willing to purchase 300 copies of my books as a co-edition and that was enough income to pay the whole printing bill. Any more copies I sold outside the US would contribute to my limited over head costs. I made an agreement for non-US distribution with Blackwell Scientific Publications (BSP) who were jointly publishing my journal, Artificial Intelligence Review. They were willing to market and distribute my books but unlike Ablex were not willing to make any firm commitment to purchasing a fixed number of books. I began by publishing 3 hardback books in 1987 and 4 the following year.

I was finally a publisher in the sense that I could decide what topics and at what price the books would be sold. However, the rest of the tasks where done by other who were experts in distribution and marketing based on their own long term heritage. I had learnt that I could leverage the skills as well as financial resources of my suppliers to create my own operation with my creativity instead of finance.

In 1987 I did not know what a business model was. I was not aware of cash flow or commitment accounting but I had started in business any way! I was given a crash course in cash flow management when after 30 days I was chased by my printers while Ablex's payment had not yet materialised. My panic call to Ablex was dealt calmly by the reply - No one actually pays after 30 days! You wait till they chase you, then you say 'cheque's in the post'. So what is the average time it takes to be paid? Between 60-90 days. Only salaries are paid after 30 days!

I set myself the target of not exceeding 60 days credit and be open about that with my suppliers. Some didn't like it but were grateful that I was being honest. I needed 60 days because the average time I could get paid was over 60 days. My aim has been to contribute to reducing the average time it takes to get paid and pay.

It is clear to me that we are part of a big chain of suppliers funding producers by their cash flow terms.

Wednesday, January 5, 2011

Joining Walter J Johnson at Ablex publishing

In 1984 I met a legendary academic publisher, the late Walter J Johnson.

He had launched Academic Press and sold it off with a handsome profit. Some time later he decided to come out of retirement and established Ablex in New Jersey to cover new subject areas of communication studies, Cognitive Science and Artificial Intelligence.

He explained to me that he had chosen Ablex as the name for his new venture so that in alphabetical listings it would appear before his former project, Academic Press.

I joined Ablex as an editorial advisor seeking for Walter authors and editors in Europe among my own community of academic colleagues.

Walter had a passion for books and having been born into a publishing dynasty gave him a good sense of what would and would not be successful. Although he was financially astute, his publishing decisions on individual projects were not based on profit but on the merit of each project based on the advice of academic advisers such as me. He trusted my judgment and he had a business model which made sure his company overall was handsomely profitable even if some individual projects were not.

From my time at Ablex I learnt the importance of streamlined operations with a very clear business model that works like clockworks.

Ablex published expensive hardback books aimed primarily at 300 libraries with whom it had established a trusting relationship. The librarians trusted Walter Johnson''s publishing choices and had enough budgets to buy his output almost automatically. He would accept libraries returning unwanted books for full refund even if the books were used.

My publishing time at Ablex was a happy one. I had the freedom to choose what books got published without the worry of how they would be funded. However, gradually I began to notice that my authors were unhappy with the prices that Ablex charged for their books, about $60 in those days. Ablex had no interest in lowering the prices as its purchasers were not making their decision on price but the quality of service they got and security that they could return unwanted books for full refund, something I was told hardly ever happened in reality.

The authors felt that they would get a wider readership if the prices were low enough that individual academics could make a personal purchase instead of going via their librarian.

On day I gathered my courage to confront Walter Johnson with this dilemma. Walter explained to me that authors' works were so specialist and the areas of research so new that lower prices would not create enough revenue to keep his business profitable.

In a surprise move Walter invited me to prove him wrong by publishing the books under my own company's imprint Intellect!

How could I manage the financial burden? I had already used up all Intellect's initial share capital on a few experiments in running academic seminars and the launch of my journal Artificial Intelligence Review. For all intents and purposes Intellect had been the editor's expenses account for that journal. There was only £90 left in the bank, not enough for the launch of a new imprint, I thought. Walter Johnson assured me that I was wrong in that assumption. He had started Academic Press with $10 and maybe I could do the same if I got my business model right.