Entrepreneurship the Opportunity That I

Entrepreneurship

The opportunity that I am exploiting is to create a magazine that caters to the AIDS/HIV audience. This includes victims, their friends and families, and medical practitioners. At present, there are only a few reliable sources of information, split between information available online which can be unreliable and information contained in medical journals, which is inaccessible to the general public. My magazine allows me to bridge that gap between the two communities and provide valuable information to all concerned through one common channel.

Revenue in the magazine business comes from two sources -- the purchasers and the advertisers. The purchasers pay for the magazine, the advertisers pay for the right to access the purchasers. There is an inverse relationship between the price of a magazine and its circulation, all other factors being equal. The point of maximum revenue is where this downward sloping line meets the upward slope of the advertiser line, which is positively correlated with the circulation. Price of the magazine, therefore, is a critical factor to driving circulation. Other factors include marketing, content, distribution and the total potential market size.

Magazines have a number of costs associated with them. There are startup costs -- software, legal work and administrative costs. There are also fixed costs associated with the business, including salaries, sales costs and general and administrative expenses. There are also variable costs, such as the cost of goods sold which includes printing costs, set up time, writing costs, visuals, shipping, warehousing, and a variable portion of sales costs.

With regard to the two main revenue drivers, it is first worth considering the total potential market size. Aid organization AVERT estimates there are over 1 million people living with AIDS in the U.S. Family, close friends and the medical community would increase the total potential market to around 1.5 million people. If we can get 1% of that market, the circulation would be around 15,000. The magazine would be faced with a mail order distribution channel for two reasons. Not only is it a niche product but as there is a stigma associated with the disease, asking people to buy the magazine at a grocery store or newsstand may result in people who want the magazine not wishing to do so in such a public setting. With a mail order business model, marketing would need to be aggressive. Publishing costs would be around $5 per issue (at least $2 for writing/editing alone); mailing costs $1 and the allocated fixed costs to each issue around $0.50. This requires the company to earn a minimum of $6.50 per issue at 15,000 just to break even. A cost of over $7 would be difficult to manage, as that is a point where price sensitivity increases for magazines. Revenue from sales under this scenario would be $105,000. Ad rates for 15,000 targeted consumers could be potentially decent -- around $25,000 per issue -- depending on the layout. This is because the ads would be for drugs, clinics and other high value products/services. Our magazine would allow these advertisers access to a market that is traditionally difficult to access.

The result of these revenue drivers, based on a bi-monthly publication run, would be an income statement as follows: