Financial Strategies for Coping with Recession
RICK LOZIER, UNIVERSITY OF MASSACHUSETTS PRESS
Each recession has its own peculiarities, and each press operates under its own set of circumstances. No single solution will work for every press, but decisions made before and during a recession will affect what happens to a particular press. The following are areas that managers should examine to find solutions that will work for their presses
A recession can be isolated to one industry (e.g., shoes), or it can affect the entire economy. The economy is sometimes measured through indices such as the Consumer Price Index and Leading Economic Indicators. Many indices are published in newspapers and can be consulted to see general trends. Another indicator is government spending. When state governments cut budgets, state and local agencies have to adjust to compensate. State university and college libraries may cut back on acquisitions. While a single state's cutbacks might not affect a press, retrenchment by a significant number of states would. It is wise for a press to examine the type of its markets and to diversify whenever possible.
State budget cuts will often be reflected in a decrease in institutional support for a press. The position of a press in the hierarchy of its university is a factor in what cuts will be made. Drastic state reductions will have a drastic effect on a press. For some presses, university support means their survival. Income and title subsidies are seldom enough, in themselves, to keep a press afloat, and in a recession, the cutting back of state support may mean the end of a press.
Next to the cost of manufacturing books, salaries and benefits for personnel are the largest expense to a press. If there is some flexibility in the work force, the press may be able to make some economies as required. Here are some different types of labor:
Permanent. These are the basic staff that includes everyone receiving benefits. Cutbacks here will have an impact on morale and usually should be a last resort. But sometimes changes in job duties can create greater work output. Not filling vacancies that arise through attrition is another way of reducing the costs of permanent employees. However, it is difficult to avoid some very uneven workloads when either method is used, which could lead to other problems.
Temporary. It is often possible to hire temporary staff during special periods, for example, at holiday and vacation periods, when some permanent staff are absent. Using temporary employees may be easier and offer the press more flexibility than hiring permanent staff.
Student. This source of labor is probably used by many presses, particularly smaller ones. If a press uses work-study students, it pays only a portion of the total wage. Pay rates should be comparable to those for other part-time student labor, should be uniform, and should include incentives. One disadvantage of depending upon student workers is that academic requirements are their first obligations, and during certain periods (like exams), all or most of the students are unavailable at the same time.
Freelance. Freelancers are used frequently in design and editing since specific projects can be assigned and completed by individuals. Many presses commonly use them to balance their in-house staff workloads, particularly when an influx of manuscripts overwhelms the permanent staff.
Other Sources. In many cases, there may be services that are free. Sometimes faculty or other university staff want to be involved with a specific project or can help in a more general way. At large universities, faculty may regularly volunteer to evaluate manuscripts because they are not allowed to receive compensation. Sometimes students want to work without pay as interns just for the experience. Volunteers might be available for a special project, such as a reading set up by a reading club.
Besides the labor aspect mentioned above, the space a press has will have a big impact on the direction it takes during a recession. For example, although a reduction of institutional support might be offset by increasing sales, if a press's warehouse is so limited that an increase in activity will cause a bottleneck, a new problem arises. The press can examine several alternatives. A lower print run, determined before repros are sent to the printer, is an option. Larger print runs have certain financial benefits, but they might result in excess stock, loss in wasted capital, and use of valuable space.
The flux in inventory varies with press to press. Large returns could create problems if a reprint has been ordered. Inventory reductions might be accomplished through special sales, remainders, and other measures, but there must be safeguards to assure that over-reduction does not put a title's inventory too low when reprinting is not feasible.
Locating new or additional space is another alternative. Building or renting more warehouse space is expensive, but the cost of space would be countered by the additional revenue that a larger list would generate. Presses have different methods of order fulfillment; sometimes it is done in-house and sometimes externally. If the fulfillment services are on campus, a press might explore with the central university administration what other space is available. Sometimes the university's long-term space plans will reveal an opportunity for a warehouse change.
There might be underutilized sources of cheaper services right on the campus, for example, duplicating, mailing/labeling services, trade (electrical, carpentry) services, phone (WATS) services. Some times another department will assist in a project. For example, graduate students in the English department might put on a poetry seminar in which university press poets/books are promoted. Surplus equipment might be available at the university. A press might secure title support from the author's institution/department (this might be possible even if the author is from another institution). Charging for copies of books instead of giving them free to the parent institution might be feasible, although the political ramifications of cutting costs in this way should be considered. It is a good idea to review the practice of sending out free copies and determine if the number of people or departments on the complimentary list could be modified.
Planning for the Future
The recession may offer opportunities for some presses. Presses should develop a reserve for leaner times. Once a recession hits a press, it is too late to develop contingency plans. The reserve could be cash or in another form of liquid asset, or it could be controlling inventory, so that space and capital are not used up before alternatives can be sought. If a press is able, a recession is a good time for capital investments, such as warehouse expansion if it is needed. Building costs are relatively cheap during such periods. Presses should develop short- and long-term goals, but that is another subject for discussion.