From the June 2006 issue of Entrepreneur

Online exclusive: Learn the secrets of what it really takes to start and run a magazine in interviews with Entrepreneur's staff , including editorial director Rieva Lesonsky.

Benjamin Franklin helped write the Declaration of Independence and the Constitution. Yet Franklin's own publication, General Magazine, folded after just six issues. Magazines are tough business.

In fact, 9 out of 10 new magazines fail, according to Cheryl Woodward, publishing business consultant and author of Starting and Running a Successful Newsletter or Magazine.

Those stats didn't stop Simone Gold, a practicing emergency physician now making her mark on the publishing industry. As other doctors zipped through the hospital emergency room, Gold, 39, overheard frequent conversations about lifestyle issues such as technology, money and travel. That was when lightning struck the key. For two years, she mulled the idea of a lifestyle magazine for doctors. Once she began working on her publication, it took her only 13 months to launch her regional magazine, MedicaLife , in the winter of 2005.

Gold isn't alone. Roughly 1,000 magazines are launched every year, says Samir " Mr. Magazine " Husni, a magazine consultant and chair of the journalism department at the University of Mississippi. Nearly 20,000 consumer and trade publications exist in North America, according to the National Directory of Magazines. So how can you launch a magazine that stands out?

Why Magazines?
People love magazines. They're personal, visually appealing, offer a unique voice and address subjects of individual interest. Research institute MRI reports that 84 percent of adults read magazines. Plus, magazines are an incredibly lucrative cash business once yours is profitable. According to Husni, average profit margins for magazine businesses range from 10 percent to 30 percent.

The survival statistics say "don't do it," but they don't tell the full story. "Big companies put a title on newsstands just to see what happens and then fold it within the same year," says Woodward, explaining that this skews the stats.

Husni says that of the magazines that fail, 70 percent never make it past their first issue. Starting a magazine is relatively cheap and easy--at least for the first issue. Woodward estimates you can put the first issue on newsstands for as little as $15,000.

Entrepreneurs who do their homework and plan well for the long haul have a much better chance of survival than the numbers indicate. "The most common mistake is not knowing the business--thinking that by just putting some ink on paper, you can create a magazine," says Husni.

For entrepreneurs who begin developing their magazines while still working other jobs, Gold recommends reading books about the industry and checking out websites, associations and professional gatherings. "Spend time at a newsstand, says Husni. "See what's out there and what you can provide that will be unique."

Once you've researched the field, put your business plan together. Your plan needs to cover your product, industry analysis, audience, competition, marketing strategy, management team and finances. "This takes an enormous amount of time," says Gold. "It's a preview of your commitment level."

After plugging information into the business plan, you'll quickly realize there are often no right or wrong answers--just calculated assumptions that require you to make decisions. For example, you can determine exactly how many magazines you'll have printed, but no one can tell you the number of copies readers will pick up (a 40 percent sell-through rate on the newsstands is considered excellent).

The magazine industry is unique in that some major facets depend on each other. "We're one of the few businesses where the story of the chicken and the egg is so essential," says Husni. "You need the circulation to get the advertising; you need the advertising money to build your circulation." Raising enough startup capital to get your venture off the ground is the best way to avoid being trapped in this vicious cycle.

In the end, the major choices you'll make in your business plan are how often your magazine will be published; whether your circulation is paid, controlled or a combination of the two (paid circulation comes from newsstand and subscription sales, while controlled circulation refers to copies given to a targeted audience for free); the total circulation number, including the copies you'll print and your projected sell-through rates; mechanical costs, including paper, printing and postage; subscription and single-copy sale prices; advertising rates; and your team members, whose strengths should complement your weaknesses.

Remember that a magazine is a business. Many magazines with great editorial content and design have failed because they weren't founded and executed on a sound business plan.

Finding the Money

Funding is arguably the toughest hurdle to jump. Jane Goldman, 51, was an editor for The Industry Standard, a magazine covering the dotcom industry, when it folded in August 2001. Goldman then launched her own magazine, Chow, a fun, casual food publication. Chow was named the best new magazine of 2005 by Amazon.com and received a favorable response from advertisers. Nevertheless, due to insufficient funding, Goldman decided to cease publication of her magazine after the November/December 2005 issue and focus exclusively on her website for the time being.

Still looking to get his first issue to print is Brett Garfinkel, founder of JAQK , a magazine catering to the "no risk, no reward" mind-set of young, affluent men. Garfinkel, 34, who formed his business at the end of 2002, has developed a prototype and received verbal commitments from advertisers, but he's still hunting for the $7 million he calculates it will take to launch JAQK and bring it to profitability.

Garfinkel plans to launch nationally with an estimated paid circulation of 300,000. Such high targets require a lot of money, but Garfinkel believes it will come. When approaching investors, "you can't be shy," he says. "You can't be afraid to hear no."

So where do you look for funding? Well, in another chicken-and-egg scenario, getting funding is a lot easier with a prototype (we'll get to that in a moment), but of course, a prototype requires money. To get started, it's best if you tap your own piggy bank. Husni stresses the three F's: family, friends and fools. "Are you willing to take the gamble of borrowing money from your grandma?" asks Husni.

Robert Jeffrey Jr. and his wife, Minty, founded ColorsNW, a Northwest regional magazine covering multiculturalism, in April 2001. They were able to raise roughly $170,000 through a personal investment of $90,000, a $50,000 loan and $30,000 from friends and family. None of them turned out to be fools, as ColorsNW is profitable with sales of just under $1 million in 2005 and projected sales of $1.2 million in 2006.

Regional magazines can be launched for about $100,000, while national magazines require closer to $1 million to make it through a year of publishing. These figures, of course, depend on the publication frequency and circulation. Traditionally, the largest expenses are printing, paper and postage.

When deciding on the amount of funding you'll need, cash flow is key. Once a magazine hits newsstands, Husni warns it may take six months to a year before the publisher sees any cash returns. New magazine publishers often fail because they haven't anticipated how long it will take to put money in the bank.

Put Together a Prototype
Creating your prototype--a mock-up of how the actual magazine will look--helps express your brainchild to potential advertisers and investors. It doesn't have to be elaborate, but it should convey the design, structure and substance of your magazine.

A prototype, like a business plan, conveys a level of commitment. For many ad agencies, prototypes are essential. Garfinkel received verbal pledges from advertisers based on his prototype.

Cynthia Good, 46, and Genevieve Bos, 41, founded Pink , an Atlanta-based magazine for professional women, and give credit to their prototype for helping secure their national distribution deal with Kable News Co. "We showed them a prototype, gave them our resumes and talked to them about our vision," says Bos. Pink, which launched in June 2005, now boasts a national circulation of 110,000 and projects 2006 sales in the seven figures.

Attracting Advertisers
The bread and butter of most publications is advertising. In 2004, industry ad revenues totaled over $18 billion in the top 12 advertising categories, according to the Publishers Information Bureau. But getting advertising isn't always as easy as it should be.

Woodward tells a classic industry story of an infant Runner's World having to wait several years before Nike committed to buying ads in the magazine. The founders must have thought this would be a no-brainer for Nike, an endemic advertiser. Endemic advertisers are those whose products or services directly address your audience, like running shoes in a runner's magazine. Nonendemic advertisers seek a broad demographic, like a car company targeting affluent males.

To land big advertisers, you first have to find them. Most national advertisers use ad agencies and can be found in "Advertising Red Books," which are available in libraries. For the most part, you can contact regional advertisers directly. But Gold warns that when you make your phone calls, you should be ready for someone to say yes. Have all your materials--including your prototype and a media kit--ready for your sales pitch.

Healthy Circulation
Not every magazine aspires to or is even built to put out a million copies. The Audit Bureau of Circulations states that more than two-thirds of magazines have circulations under 500,000. For example, Jeffrey launched his magazine only in the Northwest with a circulation of 10,000.

For startups, Woodward recommends the regional approach because it's more cost-effective, and you are appealing to advertisers by delivering a niche audience--in Jeffrey's case, readers of color in the Northwest. Jeffrey, 36, has since increased circulation to 25,000.

Launching a magazine regionally doesn't preclude you from eventually distributing nationally. Gold launched MedicaLife regionally in Southern California with a circulation of 50,000 and plans to expand nationally this year with an estimated 2006 circulation of 100,000. She projects 2006 sales of nearly $200,000.

If you do plan to launch a magazine nationally, Husni recommends a minimum circulation of 100,000 to get the attention of national advertisers. "If you don't have 100,000, don't even think of it," says Husni. The ultimate goal, regardless of regional or national status, says Husni, is reaching 10 percent of your target population.

The Internet and Beyond
Any new magazine needs a website to offer media kits, drive subscriptions, generate ads and host content. Even though Chow needs more funding to get back on newsstands, Goldman recognized the importance of her website and has gotten investments to relaunch a new, more extensive version of the site next month.

Jeffrey has extended his brand and web presence by launching a job portal site in addition to his magazine's website . "I finally woke up to the potential of the internet," says Jeffrey.

Husni adds that new media hasn't replaced older media, but rather that the two are complementary. Research company Roper Public Affairs supports this, identifying magazines as having the most influence over how consumers get information and services on the internet. "You can't exist in just one medium anymore," says Husni. "You have to be on the internet, too."

Going to Print
After you've figured out all these elements, you can finally go to print. For most magazine entrepreneurs, funding will be the final sticking point. Should you wait until you have all the money you'll need, or launch with what you can get and hope for the best?

Goldman chose to go for it, launching Chow with $1 million and an understanding that future backing would be needed. "You have to jump in and hope the swimming pool fills up before you hit the bottom," says Goldman.

The water got pretty shallow for Goldman, but Jeffrey and Gold are still afloat. So are you ready to put on your swimsuit?

Read All About It
Publications to help you start a magazine

Insider Tips From Entrepreneur Staff

Neil Perlman, CEO

Before you even get started, before you take that first step toward creating a magazine, you must understand that you're going to need money--and lots of it--if you're really going to make a success of your venture. It takes millions of dollars to start a magazine. And you can expect to lose money for the first four or five years while you're investing in building your circulation.

One of the most important things you'll need to do before launch is to test your idea with focus groups. That feedback is going to be critical in helping you understand whether you have a concept that can attract a market. So after you've decided what your magazine's going to look like and you've developed a prototype, after you understand the niche you're serving and who your competition is, and after you've developed a unique mission statement that distinguishes your publication from all the rest, get consumers' opinions by holding a series of focus groups. After you've done all that, then you're ready to launch.

Since this is a service business, the key ingredient is to have qualified individuals in the appropriate positions. You can't do it all yourself. You've got to have a good editorial team that understands the industry or market, an experienced sales organization to sell pages of advertising, a circulation director who's knowledgeable about subscriber acquisition and retention, and a good financial person who understands magazine accounting. You must have a functional design, but you can go outside for a good design.

The backbone of the magazine business is being able to sell advertising, so your most critical task is finding experienced salespeople who can sell ads. You really need people who know how to sell your concept to advertisers. And you've got to find subscribers--without a large subscriber base, you're never going to make a success of it. So hire a good circulator who can find, attract and retain subscribers.

Seek out other people in the magazine industry, and ask for their advice and counsel. It also wouldn't hurt to have a mentor who can look over your shoulder and help guide you when the going gets rough. And if you have an advisory board, you would certainly want to put experienced magazine people on it.

Finally, and this is really essential, don't get frustrated. You've got to have faith in your concept and stick with it. You're going to see losses--it's inevitable. But too many people give up prematurely because they run out of money and confidence. Don't be one of those people.

Rieva Lesonsky, Senior Vice President/Editorial Director

The reality of magazine publishing today is you need advertisers in order to survive. This is hard for an editor to say, but without ads, you're not going to be able to make enough money to survive.

That said, one of the most important "rules" of editing is to understand your audience and give them what they want. There are increasing pressures on editors today to appeal to advertisers, rather than readers. But if you satisfy your readers, and give them what they need and want, then you'll ultimately satisfy advertisers by providing them with the "right" audience.

It's also important for editors to be experts (or actively develop an expertise) about the subject matter the magazine covers. The more you know, the more you'll be able to anticipate your readers' needs and give them the information they need before they're even aware they need it.

Also, get out of the office. Meet your readers--talk to them. Ask them what they think, not just about your magazine, but about what's going on in their lives in relation to the topics your magazine covers. Also, I believe (and this is a somewhat controversial view among some magazine editors) that it's important for editors to talk to advertisers, but always with a salesperson or the publisher present. You're not there to sell ads--it's unethical to do that--but rather to explain the market and your publication's place in it.

Carrie Fitzmaurice, Vice President/Publisher

When it comes to advertising, circulation is key, because people are going to buy your distribution. So your audience needs to be one that would be attractive to potential advertisers and one that's not currently being served by other vehicles.

When you're pitching potential advertisers, it's critical that you find a way to bring your readers to life, to put a face on your readers, so after you walk out the door with a client or their agency, they have a really clear picture of who your reader is and what makes them tick and also what makes you stand out from the spreadsheet of research they're forced to use to make their buying decisions.

Always call anyone and everyone you think might get you in the door with new clients: product managers, account teams, the clients themselves, in addition to the usual suspects of media planners and advertiser/marketing decision makers at the clients' company.

Know your competition's strengths and weaknesses, and be prepared to articulate them. Your strength comes from knowing as much as you can about who you're fighting for ad dollars with. Also be prepared to sell your magazine through a combination of editorial, circulation/audience and research based on its own merits.

New magazines are not proven, and advertisers have a lot of other options--options that can be backed up with research and third-party endorsements. Do your research on each advertiser you pitch to make sure you know where they're spending their money and see if they have, in fact, advertised in new magazines.

Be prepared to offer "charter rates" to get the advertisers you want in your magazine--this will help the look of your magazine as it hits the market.

Mike Ludlum, Senior Vice President of Operations

Printer selection is critically important when it comes to magazine production. So be sure to get bids from several printers, and make sure they offer all the services you'll need to complete production.

There are ways to save money when it comes to printing:

  • Ask your printer to suggest trim sizes that most economically fit their presses.
  • Consider the location of your printer, which can help in respect to postage savings.
  • Find out if they offer co-mailing services, which will lower postage costs.
  • Although pre-press operations are generally offered by the major printers, you should consider accomplishing as much of this in-house as you can in order to reduce costs.

When it comes to paper supplies, smaller publications should buy their paper through their printer, but larger publications should consider purchasing paper through paper brokers or the mill. Become familiar with different paper grades, and select the grade that best suits your publication for color reproduction, look and feel.

Mark Tavarozzi, Vice President of Circulation

First, know that there's an audience out there that's going to want your product. Much of the economics of a startup are geared toward getting advertisers because they provide the bulk of the revenue needed for editorial, printing and distribution. So do some research on your audience. How big is it, where is it, how well served is it? If there are competitive magazines out there, that's kind of a good thing because it shows there's a true, existing market.

Know how to attract your audience. Whether through newsstand sales, which rely a lot on magazine covers to attract buyers, or internet/direct mail/other subscription acquisition efforts you use, you have to know the hot buttons that appeal to your specific audience that will make them buy. Always stress benefits--that you'll help the reader solve a problem in their life, like losing weight, saving money or becoming successful.

If it fits in your budget, outsource what you can. Doing your own fulfillment, for instance, can appear to be a money-saver, but you're trying to be a publisher, not a data processing company, and your time is valuable. Copywriters specialize in magazine marketing materials that generate response; I've seen plenty of "creative" packages that aren't effective. Be smart, and use experts.

Be prepared to analyze. Follow up on your newsstand distribution and subscription marketing efforts. If something isn't working, change it. Don't waste your limited resources on programs that aren't effective. And the only way to know whether they're working is to look at the numbers.

Paul Fishback, Advertising Production Manager

When it comes to advertising, you need to have a simple rate card with detailed advertising specs for your salespeople and your advertisers. And make your rates and your specs as available as possible--post them on your website, have them ready to go in e-mail format, print up postcards you can mail out to anyone who requests your advertising information.

No matter what, you must stick to the ad deadlines you set or you're going mess with production--and you'll drive yourself crazy. Set dates for an entire year for space close (when you'll stop taking ad orders) and materials close (when you'll stop accepting the actual ad artwork). Once you've messed with your schedule, you could throw off an entire production schedule.

When it comes to your space close date, you want it to be as late as possible in order to get in as many ads as possible, but you still have to remember to accommodate your editorial production schedule. So start with your editorial schedule and work back from there when it comes to establishing ad deadlines.

As you grow, you'll want to work hard to develop a strong relationship between your advertising and editorial production departments. One of the reasons we're so successful is that we've always worked well with our editorial team to develop the give and take that's necessary to make both sides of the business happy and successful.