IVP - Andy Unedited - Accounting Mysteries

Accounting Mysteries

The accountants I work with are some of my favorite colleagues. It's not their fault that accounting is backwards.

For example, "accounts receivable" is money other people owe you. And what does accounting consider this money to be that you do not have? An asset of course! And money you do have in the bank would seem like a good thing, right? Wrong. It is a liability if you have unpaid bills. No wonder eyes glaze over when accountants speak. (But as I say, it's not their fault.)

If you are reading along with me through Tom Woll's book Publishing for Profit you might be tempted to float into dreamland--especially when you come to the section on intangible assets. Now that has got to be a airy-fairy concept if there ever was one, no? No. It actually points to a major, but often overlooked, business publishing strategy.

Work with me here. It's worth it.

Accounting normally refers to intangible assets as "goodwill, or that amount received for a company when it's purchased, over and above its book value." Woll says that publishing uses intangible assets in the legal sense of "those assets that can't be readily valued by themselves (such as cash and accounts receivable). . . . The most important intangible assets for a publisher are contracts and copyrights" (p. 91). What is the value of a book that will sell year after year into the distant future? It's hard to say, which is what makes it intangible. Nonetheless it can be a very large sum.

Woll offers the example of a small publisher, Vanguard Press, whose annual sales never exceeded $1million even though it published authors who became very well known, such as Saul Bellow and Joyce Carol Oates. When it came time to sell the company, however, two books in its list were determined to be worth more than the entire rest of the company.

In 1934 Vanguard had published an unknown author--Theodor Geisel, also known as Dr. Seuss. Random House wanted to acquire The 500 Hats of Bartholomew Cubbins and And to Think That I Saw It on Mulberry Street so they could market the entire Dr. Seuss line freely. So in 1988, more than fifty years later, Random House bought Vanguard for a price determined by the value of these two books alone.

What falls out from all this?

* Publish for Your Backlist. Some publishers live and die by the bestseller, the quick influx of cash. But publishers that last (and build large net worth via intangible assets) publish books that last, books that they target from the beginning to go into their backlist, not just sell like crazy for six months and then die.

* Cultivate Your Backlist. To help your backlist books last even longer, put new cover designs on them every so often and put out new editions or derivative books.

* Publish Your Own Books. It can be tempting to quickly build or add to your list by taking books from book packagers or from other sources (such as international publishers). But in such cases, you usually do not control the copyright (and so your intangible assets are less). To build your value as a company it is imperative that you publish your own original books.

Accountants can be very helpful people. What they say can be, well, invaluable.

Posted by Andy Le Peau at February 25, 2008 8:52 AM