11/03/2014

BLOG: When to Reinvest Early Profits

Starting out there was never any plan about what we’d do if we made some money. In the publishing industry it’s almost a bit of a novelty to make any at all.

For us, the nature of cash flow and invoicing means that money comes and goes in dribs and drabs. Seeing as we haven’t landed that massive pay load which means we can just run off and be rich, it’s meant we’ve learnt to reinvest little pockets into the company when we can.

There are so many outgoings in our business that our attitude to profit is always ‘caution’. Wages, print run, rent, bills, travel – there are so many possibilities for unseen costs that we’ve found it useful to play it safe and leave a little bit in the bank. That means if, say, a VAT bill comes in higher than expected, you’re still going to be covered.

Living in the times we do, with costs spiralling at a moment’s notice, that just seems like basic, common sense. Dull as it is, being thrifty with your cash and keeping some of it back for a surprise means that you’ll never get into trouble.

But once you’ve got your bases covered, you can start to ask more interesting questions about what to do with profits. The most important question to ask first is: do you know where you’re going? Largely for us, issue-to-issue it has been a case of constant reinvestment, of using any spare cash to drive growth. When Crack started it was quite a Bristol-centric magazine but the plan was always to branch out as widely as possible, and that meant investing in increased print runs.
That was part of us looking at the long game. We could have remained comfortable as a Bristol-only magazine but we’re ambitious people and so we expanded whenever it was possible.

It’s important to keep control though. Using your cash to reinvest this way creates a danger of stretching too fast beyond your means and being unable to keep up with the demands made on the business. With Crack we worried about expanding to a new city but not returning enough advertising revenue to cover the extended run.

Every business move comes down to taking well-calculated risks though, being cautious over every aspect that could go wrong and eventually making the right call. That’s easier said than done and we’ve definitely always had that sense of anticipation when expanding in to a new city, but we’ve yet to have a duff one. Like any company, contemplating a new product or a new market comes down to thorough risk assessment.

Still, it’ll be a weird day when we’re no longer investing our profits in to expansion. Part of me thinks we’ll never stop, there are always new cities to reach and it’s not as if we want the competition catching up with us. As much as anything, reinvesting profits is exciting; growing your business is exciting – meeting new people, making the product bigger and better. Without constant reinvestment we’d have never grown or reinforced our brand, and if we hadn’t done that then there’s no way we’d have worked with the profile of brands in the way we are today.

We just did a fashion shoot with Nike and that generates content for the site. Even if this does all sound a bit motivational speaking, I honestly think we might get bored if we’re not reinvesting and growing.

I realise this isn’t for everyone. There are plenty of people running good businesses, growing at a steady pace and spending their profits on nice holidays. Hopefully there’ll be a point in the future when we can sit back and take a bit more money. But reinvestment has been essential in working with the bigger clients and gaining the bigger name that will allow us to get there. So be cautious with your gambles but do take them.

This whole operation has been a risk, starting in the biggest downturn in UK history has been a risk, but calculate where to invest those little bits of cash you have and go for it.



CRACK MAGAZINE

Despite launching in just 2009, Crack has expanded rapidly across the UK, enjoying cross promotions with the likes of Nike and kick-starting street press publishing along the way.

Illustrated by Lesley Nichols

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