From $10,000 to $40 Million. And Counting
"I would prefer that we continued to stay under the radar."
For some, entrepreneurship is an innate condition. It's 1996 and 25-year-old Andrew Schofield is selling advertising for a small trade-magazine publisher in Norwich, England. Even then, Schofield thought about starting his own business.
That year, he and an ad-sales colleague left their company and launched a competitive magazine in the manufacturing space with a grand total of $20,000 in startup capital. Their model: Create a horizontal business magazine for a trade audience offering case studies and best practices of successful companies in a broadly defined sector;say, construction, or healthcare products, or food service;and then sell advertising to the suppliers of the companies featured. In short, identify and unify an industry's supply chain and leverage the various points along the way for editorial and advertising.
"At that point, we felt we had an opportunity to create a similar product to the one we were working on," Schofield says, and he and the colleague proceeded to leverage their network of contacts into a two-magazine company;the aggressively named Conquest Business Media;that was producing $3 million in revenue by the end of its first year. "We did everything ourselves," he says.
But that spectacular success proved to not be enough for Schofield. In 1999, when the company was generating $4 million, he sold his interest for about $1 million and created Schofield Publishing in the U.K. " I wanted to take a lead, and drive the business forward, and take control of it," he says. "Control is quite important to me, actually."
Fast forward to 2006. Schofield Publishing is now part of Schofield Media Group, with 10 magazines in the U.K., 14 in the United States and $40 million in revenue. It has the case-study-based publication model nailed in the U.S., where 10 of its magazines operate below the competitive radar in many markets and yet generate between $2 million and $6 million each.
Chicago-based Construction Today, for example, is a four-year-old, 8,000-circ monthly that had 224 pages and 75 ads in its February, 2006, issue. It generates $4 million annually, Schofield says. But it's not listed in SRDS, and a quick poll of executives from the other major players in the construction space;Hanley Wood, Reed and Cygnus;revealed that the magazine is not well known. "Never heard of them," reported Peter Goldstone, president of Hanley Wood Magazines, the country's largest construction-industry publisher, in an e-mail message.
Similarly, flagship U.S. Business Review, a six-year-old title published 11 times with a circulation of 10,200, generates about $6 million and had a 232-page folio in its December, 2005, issue, including 73 ad pages. But David Nussbaum, CEO of Penton Media, which publishes Industry Week and Business Finance, has never heard of the magazine.
That's okay with Schofield. "I would prefer that we continued to stay under the radar," he says. "They don't know of us because we are not competing with them directly for ad dollars. We do case studies of successful businesses, which helps us sell advertising."
Practically, it's a two-step process, Schofield says. "We have a large editorial research department whose job is to talk to senior execs in the relevant markets to establish which are going to be the best editorial pieces for us to do," he says. "Then, our telesales team will sell advertising to suppliers when we know we are doing a case study."
Advertisers don't mind that Schofield has a low profile, either. "It has not caused us any major problems being an relatively unknown entity, although this did make our first year tougher for sure," Schofield says. "We have been able to build a $40 million business, two-thirds of it organically, by not going head to head for ad dollars with other titles with the same story."
Traditional b-to-b players in markets that overlap with Schofield's find the approach novel. "Under-the-radar is an interesting term," says Nussbaum. "Clearly, if they are truly driving $4 million of revenue in U.S. Business Review then they are "over the radar" with their readers and advertisers. I'm not sure it competes with Industry Week, though, as our revenues are significantly higher and we offer a full tripod of products to our market, we win editorial awards, and are an opinion leader in a senior-executive marketplace. Does New York Sports compete with Sports Illustrated or ESPN The Magazine?"
Nussbaum's colleague, Penton group publisher Teri Mollison, has heard of the profile model, even though she's not familiar with Schofield. "If the objective is to ingratiate your brand deeply with the communities served, this model is too one dimensional for me," she says. "How can any market derive what key trends or ï¾‘hot companies' are worth reading about when the only criteria to select those companies is which have vendors and distributors who are willing to pony up money to have accolades written about them?"
As a group, circulations for the Schofield profile-based magazines are small, between 7,000 and 10,000, and of surprisingly high quality;generally a mixture of first- and second- year names. "Our criteria is 100 percent qualified single-copy distribution, with over 50 percent requal each year," Schofield says. Ad rates range from $6,000 to $8,000.
"How can any market derive what key trends or ï¾‘hot companies' are worth reading about when the only criteria to select those companies is which have vendors and distributors who are willing to pony up money to have accolades written about them?" Teri Mollison, Penton Media
The case-study magazine model continues to be lucrative for Schofield, generating all but about $8 million of the company's revenue. But in March 2005, the company shifted gears and;in one of three acquisitions in 2005;bought four magazines in the food service and retail categories from VNU Business Media. The other acquisitions were Boston-based RedCoat Publishing, a two-title profile-based company, and SB Communications Group, a London-based healthcare publisher. The VNU acquisition added several traditional b-to-b publications to the company, complementing its case-study magazines and providing a new business direction. But the purchase represented a major risk as well.
As a group, the magazines were losing money, and had been in a virtual freefall in the prior four years;some as much as 20-to-30 percent per year, Schofield says. Now the largest is Beverage World, at about $3 million, with Restaurant Business slightly smaller. And the acquisition required a change in financial strategy. "Up to 2005, I built the company through cashflow," Schofield says. "But it was obvious that we were going to have to make an investment, and this was our first use of outside capital." Schofield borrowed $7 million in subordinated debt from Veronis Suhler Stevenson, and paid "way less" than one-times revenue for the group. The company subsequently did a $13 million refinancing to fund future growth. "He is young and aggressive and he has plans," says VSS managing director Tom Kemp. "We like being a partner."
But Schofield was certain that there was an unexploited opportunity in those magazines, which were clearly dying at VNU. Why wasn't he scared off? "Maybe it's madness! I felt that we could be responsive and change things," Schofield says. "Maybe it's instinct;getting a gut feeling you can do something. You do the market research, but in the end, someone has to make a decision."
The magazines remain also-ran competitors, according to the ad-tracking service IMS. Food Service Director and Restaurant Business declined by 30 percent each from 2004 to 2005, according to IMS data provided by Scholfield. FSD generated 260 pages last year and 374 in 2004, while RB generated 463 pages in 2005 and 655 the prior year. Both were far off the market leader, Lebhar-Friedman's Nation's Restaurant News, which produced 2,362 pages last year and 2,234 in 2004.
Similarly, Retail Merchandiser was last in a five-book field, with 204 pages in 2005, down from 293 in 2004. Market leader Chain Drug Review, published by Racher Press, increased from 763 to 835 pages in the same period.
But Schofield has a turnaround plan in place, and it is starting to show results. Retail Merchandiser, for example, is up 20 percent for January 2006;albeit three pages;and Restaurant Business, which has undergone a major relaunch, is up by 11 pages, or 43 percent, through the January issue following increases in November and December. Schofield says RB had been about chain restaurants under VNU. With the October relaunch, the magazine is now focused on restaurant entrepreneurs. "Advertisers know who the big guys are in the chain restaurants," he says. "What we've been able to deliver is a readership that is harder for advertisers to reach with their direct sales force and that has more growth opportunities. We're telling advertisers they have a chance to be a supplier to a company at an early stage, and if they do their jobs right, they will grow with the company."
Restaurant Business also brought in a strong new publisher, Schofield says, reduced the circulation from 125,000 to 75,000, and the frequency from 18-times to monthly.
Schofield has high expectations for the VNU magazines. "For 2006, we will be up," he says. "They've bottomed out and now we are starting to grow, which for me is very exciting. They just dropped and dropped and dropped and now this small company is starting to fix them."
As with all small, entrepreneurial, fast-growth companies, Schofield Publishing has had its share of growing pains. It only recently hired a CFO for the American side of the business, which accounts for 75 percent of the revenue. And getting reliable and cost effective IT support proved challenging. "I was just working through the yellow pages to find someone," Schofield says. "We had to go through a number of suppliers to find the right one, and each one seemed to think they had to replace all that the guy before him had done. We suffered a great deal with downtime and lost files."
What's more, he says, finding a sales team during the boom of early 2000 was difficult. "Many of those who did come to some of the early interviews seemed to really want be getting into a dot-com deal," Schofield says. "The market downturn actually helped our hiring as a lot more good people came into the job market just as we were really starting to expand."
Internally, Schofield Media has a very small team for a $40 million company, and deploys everyone;even editors;across various magazines. "This helps with our overhead cost base," Schofield says. "As an entrepreneurial business, from very early on we took a different approach to the way we staff our magazines. We produce most of our content in house with staff writers often contributing to more than one title and our design and sales teams also work across various titles."
Still, as Schofield Media grows, Andrew Schofield is determined to provide opportunity for all. "The key for us has been hiring good people at the junior levels and letting them grow with us," he says. "And we've got this culture of wanting to get things done. If our senior team has that in their makeup, it carries through the entire company."
Schofield spends his time these days looking for the next growth opportunity, focused on reaching his goal of creating a $100 million company in the next five years. Says Schofield, "I cannot imagine wanting to go off and sail a yacht or sitting on a beach. For me this isn't a two-year turnaround and sell the business."