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5 Simple Tips to consider when developing a Circulation Budget.

Peter A. Sangiorgio is the former CFO of Metropolis Magazine. He holds a B.S. in Accounting
and an M.B.A in Controllership from St. John’s University. He is a member of the
Institute of Management Accountants (IMA) and is currently pursuing a Certified Management Accountant (CMA) credential.  Contact Peter at pacs@erols.com

Most of us who have spent any time in publishing know the importance of a good circulation budget. That cannot be overemphasized. Whether you have an in-house circulation director or if you outsource it to a circulation consultant, the final goal is always the same: To develop a realistic circulation forecast based upon current economic, industry, and company conditions. If you don’t take all of these issues into account, you will just waste everyone’s time and you might as well use the budget as a liner for your birdcage. Because that will be the best use for it! Remember that any budget is a mere tool to assist management in reaching its stated annual goals. As with any tool, if it is not used correctly, you will not be successful in meeting your objectives.

The circulation director must be an integral part of the development of the circulation budget. The involvement of the circulation manager represents a commitment from the circulation department as well as an understanding of how circulation fits within the company’s overall game plan. It also makes the circulation manager accountable for its content. Publishers should not hold the circulation manager accountable unless they are a true partner in the process.  Unfortunately circulation managers are often not given enough credit for a good operational budget and are given too much blame for budgets that are unrealistic. 

1) Submit a Timely Budget:

As a general guideline, the circulation budget should be finalized sometime in the quarter before the company’s next fiscal year 1st quarter. For example, if your fiscal year begins in January, the circulation budget needs to be signed off sometime between October-December. A planning meeting should be scheduled by the end of September to make the assumptions which will be the foundation of the circulation budget.  Ideally you would want to have a first budget draft ready for review sometime in October. This will allow enough time to assess and analyze the assumptions made and make adjustments as necessary. The number of budget drafts will be dictated by history and experience of all involved in the process. After a few tweaks, the circulation operational budget needs to be finalized, approved, and signed off by the Publisher along with the circulation manager by the end of December. Try to give yourself a good 90 days for the entire process to be carried out.

2) Make Realistic Assumptions:

When developing your assumptions, it is important to be realistic. For example, if your newsstand sell- through percentage has historically been in the 30% range, it will not be realistic to use a rate of 60% in your estimates. So, keep both revenue and cost estimates as realistic as possible. This is where a good circulation professional‘s talents come into play. Publishers need to be challenged. What do I mean by that? I am simply referring to the fact that publishers sometimes have too broad of a view when it relates to circulation. Publishers and other executives have high expectations and set very lofty goals. They want to do or try everything in sight. But sometimes they do not take into account if current conditions warrant the extra expenses involved.  They need to listen and rely more on what their circulation people are saying about conditions as they truly exist at that moment and in the near future.   The circulation professionals are the ones on the front line. They are exposed to and are up to date on modern circulation techniques and tools. They are hired because they have the expertise to know what may or may not work in a certain industry or in the current situation. I believe that the circulation professional has to be confident enough in their abilities to say it like it is and be ready to debate the issues with executive management.  A good circulation manager should never just be a “yes man” or “yes woman”.  Speaking as a CFO, I always appreciated a circulation manager who had the courage of their convictions as well as someone who projected assuredness. When you are confident in your position, then publishers and other company executives will be too.

3) Create a well-designed budget format

I tend to think that financial professionals sometimes focus too much on the actual numbers and not enough on whether the report format is well designed so these numbers can make sense to anyone viewing the budget.  A well designed budget format is as equally important as the numbers on the page. The actual budget format can vary but it should contain a Summary section as well as a section with supporting schedules as necessary showing certain information in greater detail. This should include your assumptions clearly being listed and will include items such as the quantities, rates and prices used for corresponding accounts. The viewer of the budget needs to be able to follow how calculations were made throughout the entire budget as simply as possible. When the budget is properly designed and easy to read, it will have more of a positive response over one that is hard to follow. So please take some time to create your own computer based spreadsheet that can make instantaneous calculations. This will be especially useful when you will adjust your variable factors such as rates and quantities in various “what-if scenarios”.  If you don’t have the time or the energy to create your own spreadsheets, you can find budget templates already created on the web.  Here is a link to one site to help you get started.  http://office.microsoft.com/en-us/templates/CT010117232.aspx

4) Foster good communication

Every circulation professional not only has to have the required experience and skills to know what the job is all about and how to perform it, but also how to express themselves effectively and clearly. You need to take the “language” of circulation and translate it into terms and concepts that everyone across the organization can understand. The circulation manager must be able to articulate his or her knowledge, recommendations, and advice so publishers and other company executives will be in a better position to evaluate their options and ultimately develop a successful strategy. 

5) Shop around for suppliers and services:

Whether you are a new business just starting out or an established company with some history, it is always prudent to shop around for suppliers and services who can provide quality at the best available prices. Don’t ever be comfortable with the status quo. There are always companies willing to provide you with similar services at much better prices.  This is one way to cut costs without having to cut programs.  Companies you have dealt with will be willing to match lower costs with a competitor in order to keep your business. Use any leverage available to maximize the capital allocated to the circulation dept.

I will leave you with some parting thoughts. Creating your circulation budget does not have to be a confusing process. It can actually be a productive exercise in gaining a better understanding of your circulation issues when you can see your thoughts in writing.  If you follow these basic tips outlined above and keep a systematic approach in mind, you will give yourself a good start in achieving your circulation
goals. If you need some help along the way, be sure to ask your CFO and other colleagues for their input.  So good luck and get to it!