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Total with advance; minimal-maximum sales @ 7.5%
(Commission 10%)
Year 1 $ 750 $3750 $7500 $15,000
Year 2 $ 750 $3750 $7500 $15,000
Year 3 $ 750 $3750 $7500 $15,000
Year 4 $ 750 $3750 $7500 $15,000
Year 5 $ 750 $3750 $7500 $15,000
Range $3750 $75,000 $ 3,750–$75,000
Total Revenue Potential @ 10% with $10,000 Advance (0 to 100,000 sales)
$13,750–$85,000
Page 227 Option A: Using the two writers/content experts in the $25/hour range ($23,125) produces the best scenario for generating a profit over 5 years, including discounting all fixed costs. However, this option is not recommended due to the high probability of needing additional content expertise and creating increased workloads for others throughout the organization. Profit/(loss) @ $25/hr: ($13,125) to $68,875
__ Option B. Using two writers/content experts in the $45/hour ($46,250) range would provide the most realistic scenarios for generating a profit over 5 years, including discounting all fixed costs. If the project is pursued, Option B is recommended. Profit/(loss) @ $45/hr: ($36,250) to $38,750 Option C. Using two writers/content experts in the $75/hour range ($64,250) is not recommended due to workload. They would be available on a support basis, with minimal cost impact. Profit/(loss) @ $75/hr: ($54,250) to $20,750
Option D. Using two writers/content experts in the $100/hour range ($82,500) is not recommended due to workload and writing skills. They would be available on a support basis, with minimal cost impact. Profit/(loss) @ $100/hr: ($72,500) to $2,500
Option E. Using two writers/content experts in the $150/hour range ($96,475) would lead to a loss on the project, even discounting all fixed costs, and is not recommended due to more appropriate uses of the individuals' time. They could be listed as coauthors to increase recognition, and improve marketing and advertising options. Profit/(loss) @ $150/hr: ($86,475) to ($11,475)
2. Marketing value. Potential advertising/marketing uses would include (publisher advertising, seminars-linkages, web site usage), and can be increased by listing specific senior executives as coauthors (see Option E, above). To ensure a conservative estimate of the value of the project, no dollar value is projected for this benefit.
3. Skill/process development. There is strong potential for improvement in the writing/editing skill levels of individual contributors and the group, as well as improving knowledge of the publishing process. These improved skills would have value for future projects and would decrease the costs associated with training seminars. To ensure a conservative estimate of the value of the project, no dollar value is projected for this benefit.
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Basis of Calculations. The potential profit for the project is summarized using the data in Table 1 (Revenue) and Table 2 (Cost, salaries).
A. Profit. The potential profit for this project is defined as revenue minus costs.
Revenue—The revenue potential of the project is defined by a negotiated contract, which is summarized in (Table 1: Revenue Projection for Project B-1999–07).
Costs—Four cost factors were evaluated.
Fixed costs. The primary fixed cost is a salary line for the potential writers/experts (Table 2). This salary line is calculated across a range of hourly rates ($25–$150/hour). Other fixed costs are neutral (i.e., facilities, equipment, support staff) with respect to the project.
Potential lost revenue. It is assumed that the potential loss of revenue associated with individual contributors (writers) due to their association will be minimal due to the use of contract writers. In fact, the use of contract writers to replace our writers who will be on this project will give us a low-risk opportunity to explore alternative staffing options.
Workload. The workloads of the individual contributors will remain constant, as the writers will be released from participation in other projects (replaced by contract employees, see Table 2), and the facilities, support staff costs, etc., are sunk costs.
Potential liabilities. The potential liabilities associated with the project are minimal, and using an appropriate postwriting process will allow us to validate the lack of liability.
B. Marketing value. There are several marketing and/or advertising uses for the project; however associating cost/benefit values with them is problematic. The key value is an opportunity to leverage the company's image and increase consulting (seminar, etc.) work. No dollar value is assigned to this opportunity.
C. Skill/process development. Two potential added benefits from involvement in the project. The first is the potential for skill development of individual writers (their ability to handle materials written for external publication rather than for the internal use of corporate clients). We can subsequently leverage this skill in two ways: negotiating contracts for other publications based upon internally held knowledge, and/or selling/
vending those skills to clients who need to publish materials.
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TABLE 2 SALARY RANGES (TASK/HOURS × HOURLY RATE) FOR POTENTIAL CONTRIBUTORS FOR PROJECT B- 1999–07
Hourly Rate
Task Hours $25/hr $35 $50 $75 $100 $150
1) Lost Income
a) Submitting 50 $1250 $1750 $2500 $3750 $5000 $7500
b) Negotiating contract (with legal) 25 $625 $875 $1250 $1750 $2500 $3750
c) Research time (10–15 hrs./chapters) 150 $3750 $5250 $7500 $11250 $15000 $22500
d) Drafting time (5 = 75/15 chapters) 75 $375 $525 $750 $1125 $1500 $2250
e) Editing time (3× 10/per edit) 30 $750 $1050 $1500 $2250 $3000 $4500
f) Figures/tables (3× 3.3/3 = 10/15 chapters) 150 $3750 $5250 $7500 $11250 $15000 $22500
g) Sample materials (28 × 2.5 or 2/10) 5 $125 $150 $250 $375 $500 $750
20 $500 $700 $1000 $1500 $2000 $3000
h) Working with colleague (5, 15) 75 $1875 $2625 $3750 $5625 $7500 $11250
i) Working with series editor (2, 15) 30 $750 $1050 $1500 $2250 $3000 $4500
j) Proofing after copy editor (5, 15) 75 $1875 $2625 $3750 $5625 $7500 $11250
j) General clean up of chapters (2, 15) 30 $750 $1050 $1500 $2250 $3000 $4500
2) Training replacement editors (10–20 hrs/2) 20 $500 $700 $1000 $1000 $1000 $1000
40 $1000 $1400 $2000 $2000 $2000 $2000
3) Replacement editors ($25–$50/hr = 15/wk/12) 180 $4500 $6300 $9000 $9000 $9000 $9000
4) Tracking projects (time, 1–2 hr/day/90) 90 $2250 $3150 $4500 $6750 $9000 $13500
180 $4500 $6300 $9000 $13500 $18000 $27000
5) Total Projected Salary Ranges $23125 $32350 $46250 $64250 $82500 $96475
Page 230 Next Steps. There are four possible courses of action. The first two options are for us to notify the publisher that the project is not profitable as proposed and to (a) decline to participate or (b) negotiate further. A third option is to locate an alternate publisher. A fourth option is to proceed and use the project as a marketing tool. We recommend proceeding and using the project as a marketing tool by listing senior executives as coauthors.
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