Taking on Investors

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Permalink Reply by Greg Wiley on March 25, 2009 at 11:23am

Hmmm. I've been in publishing for years, but just now lauching my own local monthly publication. I'm actively looking to select advertisers for content. I've talked to a few about being contributing writers and also on an Advisory board. I also plan to heavily discount their Advertsing rates . . . I see it as win:win! I can find sufficeint other advertisers to remain profitable.

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Permalink Reply by Ben Levy on June 29, 2009 at 4:52pm

I would provide a discount. An investor will realize that a steep discount doesn't help his investment's revenue. If he squeezes you, I would limit future opportunities for said "partner".

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Permalink Reply by Kevin Leonce on June 30, 2009 at 5:10pm

This is an interesting scenario.

Let's first look at the sale of advertising space. If your investor is a potential advertiser within your market it is best to manage this with as much diplomacy as possible. Offer a discount that you would offer (or consider offering) your key advertisers or strategic partners. Your role is to safeguard your investors financial interest and produce a ROI while providing sustainability and growth for the business....giving free advertising when this space can be sold would do more harm than good.
I have seen in large conglomerates discounts are offered to other business units in the group, but not given for free.

Then comes the ethical issue. If your investor turned potential advertiser has significant market share (or is looking at leverage to gain such a share) providing free advertising would only benefit the investor's business and potentially damage the reputation of yours. Be weary of granting exclusive non competing rights as well..we have seen O2 Uk being left in the dust with the launch of the Nokia N97 as a result of their exclusive Iphone deal (speculative since Nokia prefers not to say).

Before your investor comes on board these matters should be discussed at length as to prevent putting you and your business at long term risk.

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Permalink Reply by Eddie Lee Rider, Jr. on September 15, 2009 at 1:02pm

All good answers above. It's tempting.

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Permalink Reply by Dean Cook on October 7, 2009 at 6:19am

All these answers are very good.

You need to take into account the ongoing sustainability of the magazine. Don't be swayed into a decision by the investor. They would already be benefitting by the discounted rate. You have access to their target audience. Just think, what would it cost them to market their business if your magazine wasn't around?

Also being a discounted rate, I would strongly recommend that payments are received on order. Be firm but fair. You have a business to run too.

I have seen it before with a couple of B2B publications. All that was promised, never turned up and the publisher went bust.

I have a feeling it's more of a cost-effective marketing channel for them as opposed to an investment in your business.

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Permalink Reply by Jon Baldwin on October 13, 2009 at 2:29pm

The investor and the advertiser should, for all accounting and business purposes be separate. Your advertiser should pay a fair rate, because as a part owner they are essentially paying themselves and growing their investment. It's a bit of a dance with the numbers, but legitimately, being the free-ad vehicle for this entity does not bode well for the longevity of the publication. That investment money will run out, and what's will cover the print and distribution costs after that?

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