[Editor’s note: This “spooky” piece was initially published as a Halloween special. Turns out media budget mistakes, especially start-ups, are frightening all year around].
Few things are as frightening for journalists as a budget. But they are invaluable tools for planning and allocating people and time. Media start-ups, in particular, need to avoid mistakes and make sure they have the resources to grow.
Having gone through several hundred budgets as a manager or advisor, I’ve seen my fair share of common pitfalls affecting many across the media industry. Here are 5 of the most persistent issues with media financial planning.
1. Revenues grow, expenses stay flat
Arguably the single biggest – and most consistent – problem with journalist budgets is that they ignore the old saying that “you have to spend money to make money.”
Put differently, most budgets have rising revenues while expenses stay fairly stable.
This can mean one of two things: either current staff are wasting most of their day, or we plan to add new duties on top of existing ones, pushing utilisation past 100%.
The latter seems to be the more common problem. Most media jobs have an intangible quality to them, which makes it hard to say they take 15 minutes or 3 hours consistently. As a result, managers often assume that they can be done quicker, or new obligations can be prioritised.
At best, this works as a one-off. Over a longer period, you will burn out your employees and/or damage your main product.
If you don’t want to be running a horde of undead – plan new staff to take care of new business lines.
2. Budget does not account for internal costs
This is related to the previous. In short, managers don’t really allocate the time of their staff to the cost of new products. But in addition to potentially burning out employees, this increases the risk that you might be pushing new products that are, at their core, unprofitable.
Say you want to launch a newsletter or open a telegram account. If you need to pull off an experienced editor for a day a week (you want this to be a quality product after all), it might carry an internal cost of several hundred euros – not just the value of that person’s salary, but also the revenues made off of that person’s work.
Fine, you might say, that new channel/ newsletter will help convert subscribers. Internal costs can tell you if the expected benefits are worth investing your/ your team’s time.
Consistently getting it right means you keep allocating resources to the most promising projects. Get it wrong and your lost profits will haunt you.
3. There is no concept of prioritisation
Its rare that media find one source of revenue that allows them to survive. As a result, most media have at least 3 or 4 revenues streams, including ads, events, membership, donations.
Many new media feel like they need to quickly build revenues, don’t know which ones are most likely to succeed, and so end up throwing everything against the wall to see what sticks.
In general experimentation is welcome in the entrepreneurial world. But efforts need to be prioritised to give them a fighting chance to succeed.
This doesn’t necessarily mean taking the easiest first. On the contrary, it’s probably better to focus on the high value opportunities. If something can deliver 70% of the revenues you need, getting to 20% of that amount is better than getting halfway to something that can cover 15%.
This also goes for day to day operations. Media managers often get bogged down in trivial tasks, rather than constantly prioritising the biggest opportunities, losing a sense of direction like a headless rider.
More from The Fix: Building a modern and sustainable news outlet is easier than ever
4. Under-pricing our services.
New media are always nervous about prices. The logic is that if you don’t get big numbers immediately, your product was a failure.
The problem is that low prices are sticky – once you show a low price raising it becomes more difficult. Targeted discounts and coupons are rarely considered.
Segmentation is also an unexplored tool. Most other industries survive on price discrimination – charging different groups of customers different prices based on willingness to pay. Airlines are one of the best examples.
Because media transparently advertise their prices, they often feel they cannot discriminate (or simply think that’s unfair). But that isn’t the case.
Media can offer different bundles of products to help identify those customers willing to pay more, or find ways to identify those who are price sensitive (e.g., take a survey before receiving the discount code).
Setting higher prices need not be so frightening.
5. Too much focus on silver bullets, not enough on continuous improvement
This wasn’t something that came up in the accelerator’s P&L statements, as a general observation about the broader pursuit of new revenue models.
So often we hear about some new innovation, try it, and then complain that it only delivers 20% of the solution.
But silver bullets – 100% solutions to a problem – are the exception, not the rule.
A look at other industries that have had to survive the digital transformation is that focused testing and refinement are the only ways to make new models work. Facebook took years to become profitable, Uber and many other firms are still not there. The important thing is to keep improving.
Rather than getting down from a disappointing result, we should be spending more time on getting 10% better, and then 10% better again.
Silver bullets might work for werewolves, not for media companies.