Start-ups: spend your money wisely; investing enough in ad sales is critical to getting a launch off to a sound beginning - column

Three years ago, someone came to me with an idea for a controlledcirculation consumer magazine. I looked at his business plan and said, "You must have a bigger budget for promoting ad sales, or you simply will not succeed." He had raised $1.5 million, but I told him"Don't start until you have $3 million."

One year later, he came back to my office. "You were right," he said. "I needed $3 million. Can you now help me get it?"

It would have been easier to raise $3 million with his prototype than it was to raise $1.5 million after a year of publishing thin issues. Because he had been out there trying to sell ad space without having invested sufficiently in sales support (salespeople, media kits, research, for example), he had seriously eroded his ability to make things happen.

This story is hardly unique. In fact, I have the unpleasant duty of telling 90 percent of the people who come to my office with a business plan for a new magazine that in some major area, they've failed to allocate enough resources. Smaller publishers are especially prone to this misjudgment.

Believe me, I'm not trying to discourage entrepreneurship. I know there are wonderful success stories of determined people who have launched publications on shoestrings. But the success rate for smaller publications is quite low. Half of all good magazine ideas will founder simply because of the failure to put the right resources behind them.

I'm not just talking about people who have never published a magazine, but about bona fide publishers with one or more modestly successful small publications, or struggling publishers trying to give their enterprise a lift. When these publishers try to launch a new magazine without giving themselves ample reserves, they will often deprive their existing properties of resources. Then everything is hurt. I've said in past columns that before starting something new, do everything possible to make your existing properties really solid. I admit that can be difficult when the very reason for a launch is that existing properties are not providing a good return on investment.

I don't profess to be a genius about this. Every magazine we ever started at Ziff-Davis had problems. I can't think of many that were instant successes and exceeded aB our expectations. But even when we were small, it didn't take more than one lesson for us to realize that we had better be able to dig deep into our pockets the next time we started a magazine.

Penny-wise, pound-foolish

Ad sales is the area most often neglected during a launch. I could name a dozen consumer magazine publishers in the past year whose launch budgets allocated enormous amounts to generate circulation, but provided for no market research and only one or two salespeople. They assumed that if the audience was there, advertisers would welcome them with open arms. Of course, there are just as many stories about the failure to test adequately in circulation, but it's the ad side that really gets shortchanged by most publishers,

Business publishers, of course, depend principally on advertising revenue -yet most of those publishers overlook essential research on market and audience, They don't invest enough in the barrage of promotional material and public relations that any launch needs. And sometimes they don't allow salespeople to go out of town to visit accounts. It's the classic penny-wise, pound-foolish approach. If you look at a typical Ziff-Davis, Hearst or Murdoch expense ledger, you will find dollars allocated to many items that smaller publishers certainly need to be careful about-but mistakenly assume they can't afford.

Most of the people who come to me with publications requiring additional funding staffed life on the editorial side. They had a great idea, executed it very well editorially- but shortchanged the advertising or sometimes the circulation efforts.

How much is enough to launch a magazine? You might try asking your friends in the business. (And don't worry about secrecy- nobody's going to steal your ideas.) Ask them to tell you what you're overlooking or failing to understand. It's all right to make mistakes -the key is to avoid making a big mistake.

Another way to size up what you'll need for a launch is to look at the new magazine as if it were an existing property you were about to acquire. Going through an acquisitions checklist of questions is a great way to spot the weaknesses in a new venture. For example: Is there an editorial need for the product? Is there a pool of advertising money to be spent in the market? What is the magazine's ad potential in that market?

In the early stages of Travel WeekIy, we underestimated the need to have person-to-person coverage far beyond the capabilities of our small sales staff. We developed a rep system that gave us coverage, but we still invested considerable funds in getting our own people out on the road. Eventually, we reorganized their efforts so that they could more directly supervise the sales representatives.

It's also important to supply salespeople with the proper arsenal of sales tools. Space buyers are more sophisticated than ever and require that you demonstrate the benefit of advertising in many ways. At Ziff-Davis, we understood the need to provide research and other sales support to our salespeople. In fact, we probably over-invested in support material, but its better to over-invest than under-invest.

Maximize what you have

A small number of publishers, during the development stages of a launch, are able to generate ancillary revenue through list rentals, calendars, posters, seminars and other services. But it's a rarity. Nine out of 10 publishers won't succeed in finding cashflow with ancillary products. I really have to caution people to stick to their knitting. I find it scary when publishers plan five or six projects without investing money to generate advertising or circulation revenue for the new publication.

It is possible, however, to develop ancillary revenue with minimal cost by using the pages and subscriber lists of existing magazines. Hotel & Travel Index, for example, owes a great deal of its early success to Ziff-Davis' willingness to run free hill-spread ads on a weekly basis in Travel Weekly. (Today, Hotel & Travel Index still runs these ads, but pays for them.) Working off Travel Weekly, we developed another hotel directory, a travel directory, and entered the meetings market as well.

I recently advised a publisher to test some newsletter ideas within his 80-page, controlled circulation magazine. With only 20 pages of advertising, a very healthy package of editorial could be 40 pages, leaving the remaining pages for presenting other ideas. While this publisher should also test using direct mail, the magazine gives him every possible chance to expose a newsletter or other products to the same market, or some segment of it, without costing him anything.

In the aviation field, Ziff-Davis began with one newsletter, "Aviation Daily," which spawned another newsletter"Aerospace Daily." These were followed by World Aviation Directory and Airline Management & Marketing, a monthly.

We used our lists, contacts and good will in that industry to seize all of these opportunities. Look at any major company-or even smaller ones -and you'll see that's the way it's done. You can look for other ideas, but make sure you are not leaving any g own market.

Prove it to me!

I'd like to hear from those entrepreneurs who successfully started a magazine on a shoestring and can honestly say they were happy they did it that way. But I tend to think there are many more entrepreneuers and small publishers who launched magazines with enough capital to overcome the kinds of problems that almost always seem to spring up and hit you in the face.

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