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President’s Report
How You Found Cash to Start and Grow Your Companies

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The breadth and depth of your answers to an emailed question in July blew me away. I asked PMA members, “How and where do you raise capital?” More than 40 publishers responded. It should have come as no surprise to learn that you are as creative financing books as you are designing them.

Most of your experiences fit into three categories:

Starting on a shoestring.

A small but impressive number of publishers have never borrowed a nickel. You tapped hard-earned personal savings and kept your day jobs. You found success cautiously, growing your companies by reinvesting revenue, working hard, planning carefully, and finding titles that sell.

Borrowing, selling, and allotting capital. Many found cash in conventional ways–bank loans and credit lines, mortgage loans, stock sales, IRA and 401K liquidations, presales, credit-card advances, gifts from family, inheritances.

Publishing on the edge. A few of you appear to be over your heads in debt, struggling to fulfill your dreams, perhaps weary of the effort, and somewhat discouraged. “I am going into debt big time and my heart is in my throat,” one publisher told me.

What You Said About Sources of Money

Loans and lines of credit. Loan officers at most banks don’t understand book publishing. Try explaining returns. Small loans can be more difficult to get than big ones, unless you find banks that specialize in small-business loans. Speaking of which, Small Business Administration loans are hard to get, despite the federal guarantee. Don’t be surprised if a lender wants you personally to guarantee repayment, even if you are structured as a corporation. (For more on financing tactics, see “Supporting and Surviving Your Success” by Marion Gropen, in this issue.)

Family and friends. Michael Sterns of Palm Harbor, FL, financed a 2,500-copy first printing of his novel Kokopelli and the Butterfly through personal presales. He promised family, friends, and a wide circle of acquaintances either autographed copies or their money back within six months. The receipts went into an escrow account.

“The bank watched the account grow to $6,000 in two months and loaned me the balance with a line of credit,” Michael reports. He and his company, Grasshopper Dream Productions, parlayed sales receipts and printer credit into four reprints, selling 27,500 copies. “I hope this inspires others,” Michael says.

Even Santa Barbara, CA, publishing guru Dan Poynter of Para Publishing played the family card in 1972 when he published his first book, Skydiving: The Parachutist’s Handbook, now in its eighth edition. At first, Dan remembers, “I could not even get an appointment with a loan officer at a bank.” So he borrowed $15,000 from his parents. “I paid back the money in a year with interest,” Dan notes.

Day jobs and self-financing. Fred and Elizabeth Crary of Seattle had put money aside for a new car in 1979 but instead published Elizabeth’s book, Without Spanking or Spoiling: A Practical Guide to Toddler and Preschool Guidance, which has now sold more than 230,000 copies, launching Parenting Press, which today has nearly 100 titles in its catalog.

The company grew slowly and cautiously, “financing its books, reprints, and operations solely from sales,” according to Carolyn Threadgill, publisher. Staffing and overhead expenses were kept lean. The owners were in no rush to quit their day jobs. (See “Rights and Special-Markets Sales Can Be Big Contributors to Success” by Linda Carlson, in this issue.)

Credit card advances. I was surprised by how many startups were launched with plastic. Publishers searched far and wide for the lowest interest rates. One of them was Kurt Florman, a partner in Metropolis Ink in Yarnell, AZ. Kurt received an offer to transfer a credit-card balance to a zero-percent-interest card with minimum payments until the transfer balance was paid off. It seemed too good to be true.

Reading the small print, Kurt learned that high monthly interest rates would be reapplied to the entire balance forevermore after the first time he charged to the card. Needless to say, he never used the credit card–and never has paid any interest.

“We transferred $10,000, pay $300 per month, and pay zero interest,” he says. “What a deal!”

Niche financing. Gordon Burgett of Communications Unlimited, author of Publishing to Niche Markets, uses print-on-demand to test-market by mail every title before making a major commitment. He figures the tests cost as little as $300. In the early going, Gordon test-marketed his first niche title, aimed at dentists. Armed with very impressive test results, he secured a no-collateral $100,000 line of credit from a company specializing in financing for new dental practices. Today, the Santa Maria, CA, company has about 50 titles. (See “Open Wider: A Success Story About Broadening a Tiny Niche,” PMA Newsletter, December 2003, p. 23; and “The Ping-Pong Marketing Program: Double Your Book’s Life and Income with a Digital Appendix” in this issue, both by Gordon Burgett.)

Windfalls. Linda Beattie of Kalama, WA, gets an award for originality. In October 1985 she and others in the cast of Please Don’t Drink the Water were in dress rehearsal for a community-theater play with a scene requiring gunfire. An off-duty police officer in charge of props–”just off duty after a very trying day,” according to Linda–forgot to unload his pistol. He fired his .38-caliber police revolver toward the stage, hitting Linda in the elbow.

Linda had emergency surgery to remove the bullet but sustained permanent nerve damage. Two years later, she used a portion of the settlement as seed money to co-publish a book with her best friend. That book, Making the Most of Your Llama, is now in a second edition.

Oh, by the way, “The play went on a day late to standing crowds,” Linda reports.

 

Thanks to all who shared experiences, especially those I was unable to mention individually. Contact me at gksturgis@earthlink.net with suggestions for future topics for columns and ideas for PMA.

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