Business planning for online publishing is a conundrum. The minefield of determining cash flow is laid out here as I see it in my mind for a online publisher with new sites. An established online publishing network’s challenges are significantly different.
One of the things you should do if you run a business is try and project your businesses cash flow. This allows you to plan for bills, temporary decreases in cash flow, and warn you when the business is off track. Cash flow projection also allows you to evaluate your ideas and determine if they are worthwhile. Mathematically determining cash flow is a simple process; subtracting your cash outflow from your cash inflow determines your net cash flow. A positive net cash flow is your goal. What is not so simple is divining the cash inflow when your an online publisher.
Projecting Cash Flow
Cash inflow projections for online publishers are dependant on many factors. I prefer to look at my projections on a per site basis. Some of the typical major factors are traffic of the site, direct advertising payments, advertising network payments ( adsense, kanoodle, overture ), and affiliate sales. In my experience all the payment and sales projections are a derivative of the amount of traffic a site generates. This makes it even more important to project the future traffic of a site in your network.
Projecting the future traffic of your site is a very difficult thing to do correctly. As a site ages most of its traffic flows from traditional search engines, as it scales the search engine rankings. Your individual sites are each subject to many risks which could suddenly reverse that sites fortunes. Your site could suddenly be the victim of a change in search engine algorithms causing it to lose traffic. The site could be reported as spam to a search engine resulting in a penalty. In terms of traffic projection this means for an individual site you must make two possible outcomes. The first outcome is what you expect a sites traffic to be with no search engine referrals and the second is with projected search engine referrals. Armed with the two projections you may now make plans for both outcomes.
The Cash Flow Defenses
The risks previously mentioned also illustrate a business owner you must take measures to prevent ruin should the lose of the search engine traffic occur. Since you can not insure that an individual site will never lose search engine traffic it is prudent to diversify your income sources. Some examples of ways to diversify your income sources are to have a network of sites, provide services separate from your online publishing, or selling oranges on a street corner.
There are other ways of providing some insurance for your online business. One is to maintain a large cash reserve to maintain you through lean times. Maintaining a cash reserve is always a wise choice for any business. Another way is to preplan for cuts in expenditures should you lose a significant amount of cash inflow. These passive defensive measures provide some place for a business to retreat to and regroup.
Conclusion
I hope I have illustrated how nearly impossible it is to make accurate projections, on a per site basis, of cash flow. I do believe that a network of sites can have a accurate projections, providing the publisher is cautious and prudent in their online marketing strategies.
Some related reading:
Essential Elements of a Good Business Plan For Growing Companies
Get a New Business Plan, Stan
Publishing Business Models
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