A Profitable Writing Business

CNBC The Profit TV SeriesOne of my favorite TV shows is “The Profit,” which I first watched in Las Vegas last year, where Marcus Lemonis spends his own money to turn around failing product-oriented businesses. His focus is People, Process and Products. You can run a business with two of three P’s, but you need all three to make a profit. Unlike too many reality TV shows, he isn’t afraid of walking away from a bad deal and ending the show on an unhappy note.

After my father passed away from lung cancer in 2012, I opened a living trust and split the writing business into two business entities: a California LLC for blogging and ebook publishing, and a Wyoming LLC for an Intellectual Property Holding Company (IPHC) to license my copyrights. After changing my workflow, this worked out quite well for a year-and-a-half.

And then I lost my non-writing job last October.

Since the two businesses doesn’t generate enough free cash flow to cover the cost of their respective business entities, and I needed every dollar of unemployment benefits for living expenses, I couldn’t afford to carry any more business losses. The California LLC got dissolved this past December. The Wyoming LLC will get dissolved at the end of this month. Now that the writing business is once more a sole proprietorship, my actual business expenses are quite low without the extra overhead.

The major expenses I have are web hosting and stock graphics for ebook covers. The predictable cash flow of ebooks sales can easily pay for those expenses. Cash flow above and beyond expenses becomes profit. Once you have excessive profits, you can pay for the self-employment taxes that come with being a sole proprietorship and build up a cash reserve. One of the problems I had with an out-of-state LLC is that I didn’t have the $3,000 USD minimum to open a business checking account for the IPHC.

Despite dissolving the separate business entities, I haven’t combined the internal structures for the two businesses. Blogging and ebook publishing is one business line. Licensing copyrights—first serial and reprints—are another business line. The accounting and related paperwork for the two business lines will be kept separate. Once cash flow reaches a critical mass, I’ll resurrect the two business entities and split everything up again.

The mistake I made two years ago was making an emotional decision and not a business decision. The emotional decision was protecting what’s mine from relatives who were eager to take everything my father owned after his death. The business decision would have taken profitability into consideration. After being in the writing business for eight years and the ebook publishing business for four years, it’s time to have a profitable writing business.