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.

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Unknown said...

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