Publisher KPIs For Inflationary Times 

Excessive inflation is hard on everyone, but especially so on publishers. Publishers cannot resort to the tactics that other industries use in times like these. Raising prices is not an option in an industry where your customers are large and powerful like Amazon, and where consumers cannot easily tolerate price increases on an optional purchase like a book, when money is tight. 

With inflation raging at a stubborn 6% p.a. as at the time of writing, consider this example. If your pre-inflation budget was built on sales of $500K a week, you will now need sales of over $524K a week to make the numbers work, so clearly something needs to change. What can the typical publisher do other than accept lower margins? In this blog, we suggest answers to that question. 

Margins and Cash Flow 

Driving everything is the need to manage margins and conserve cash, and a revised budget is one of the first things to put in place. KPIs that allow you to forecast cashflow are important assets, and creating a new budget is first on the list of to-do’s. 

It would be nice to have a flexible budgeting system in place, so then it would be a simple matter of flexing everything down a notch, but if you don’t have it now, it is probably already too late to change. In that case, it is prudent to create a best-case and a worst-case budget so you can adjust quickly when needed. There is also a list of things NOT to do, and at the top of that list is to avoid extrapolating business plans from 2022 or even 2021, when the pandemic was in full flow and consumers were buying books to consume while confined. At least for now, those days are gone. 

It would also be important to identify any costs that can be flipped from fixed to variable, like outsourcing fulfillment, for example, but it is also possibly too late at this stage to take on big projects such as that unless they have a rapid return on investment. Investments in technology such as process automation and AI can often reduce costs and increase cash flow but demand capital investment. 

External and Internal KPIs

As the forces that caused inflation are apt to change swiftly, publishers need to reassess their financial warning systems by developing new Key Performance Indicators (KPIs). These KPIs fall into two groups. The first group includes national indicators that we cannot affect but need to watch. The second group comprises internal metrics that can identify a company-crisis in the making, that we MUST do something about. 

The national indicators help us understand which way inflation is moving and how quickly. When they are leading indicators such as PPI (Producer Price Index) and TIPS (Treasury Inflation Adjusted Securities), they can tell us how long manufacturers and investors think inflation will last. Monitoring other indices such as CPI (Consumer Price Index) and PCEPI (Personal Consumption Expenditures Price Index) allows us to assess how well the company is adjusting to past changes in prices. They are all valuable. 

It is the company KPIs that are the most valuable. These are the typical KPIs like gross margin, net working capital, return on assets and current ratios. Now, more than ever, publishers need to make sure that their products are both available and discoverable to customers, especially the high margin titles and formats that make the most contribution to profit. Focusing on inventory turns of “A” titles and formats will tell you a good deal. It is worth making sure in the revised budget plans that the performance of those items is reviewed regularly – and action taken accordingly. KPIs that monitor your book production schedule will help to identify the variances that matter, such as program budget and time overruns, and where external contributors are not meeting the plan. And make sure your metadata is continuously maintained to help discovery. 

Stay Lean 

Ensuring your operations are as lean as possible is increasingly important in protecting margins. In addition, a clear and consistent dialog with partners, distributors, direct customers, and vendors is necessary. It is important to conduct regular meetings in which partners can share their KPIs and the challenges they are facing, and how they will affect your company. Are there opportunities to lower unit purchase prices by negotiating longer-term contracts, for example? On the sales side, are there any places left where you can reduce special offers or programs to direct channel customers for example? Who are your most and least profitable customers? Your ERP system should be able to highlight the costs as well as the revenues of each customer. Realtime dashboards help to get the message across quickly. 

Other KPIs can help manage cash flows such as subtly enforcing payment terms, and where possible, matching receivables and payment terms, so you’re not paying for the difference.  And if late payments become a problem from certain customers (measured by traditional DSO metrics) then factoring receivables might be a not-so subtle answer. We add the word “subtle” in describing these moves because your partners (and staff) will certainly remember any changes you forced at this time, especially if they are harsh or poorly communicated. When you treat your partners with respect, they will also remember and act accordingly later. The same applies to your staff. Media coverage of high inflation, coupled with low unemployment and the strong jobs market all drive wages up, and so it is well to make sure that we keep our best people, and best partners, because it is going to cost much more to replace (and train) them in the future. It will mean embracing new KPIs on staff turnover, working arrangements like Work-From-Home, and measuring quality on-time deliveries from suppliers, as it is increasingly important to keep the best people and partners. 

It goes without saying that this is a challenging business climate for publishers, especially while supply chain issues from the pandemic are still evident. However, with the adoption of revised KPIs to measure the changed dynamic, followed by swift and appropriate action, publishers can make good business decisions on technology, operational costs, and human resources, and remain successful through it all.



Photos by Photo by Morgan Housel and CHUTTERSNAP on Unsplash.