Payment Plans and you

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Mike Tourangeau | Forum Activity | Replied: Wed, Nov 11 2015 11:18 PM

Bob Pritchett:

Jack Caviness:
Interesting post, Bob. The new policy makes it appear that FL is in a serious cash-flow bind. That creates a bit of uneasiness concerning the long-term viability of our investments.

We're not in any danger of disappearing. We're a significant business with a wonderful, active customer base (thank you!) that still makes a profit.

We're just managing cash. Yes, we promoted payment plans. They work great to a point. 

This isn't a crisis, or an emergency, or even the end of tweaks to the program -- it may tighten more, loosen in other ways, etc. 

This is just a math problem. 

I don't wish to share all our internal accounting -- and it's crazy complicated with lots of variables -- but I think that if you look at even simple scenarios you can see how this can be a problem. Now that most active purchasers have a payment plan going, most people just buy new things by extending their payment plan. That means that this month's sales -- which we expect, at some level, to use to pay this month's bills -- are effectively being pushed out 2, 3, or even 15 months from now. So TODAY we get a new cash obligation, but TODAY we get no cash. And last year didn't have the same ratio of payment plans, so its delayed payments aren't equal to what we're deferring today.

It's not a big corporate secret that our royalties are generally due every quarter, and that paychecks are due every two weeks. Our royalties range from zero (public domain content) to as high as 70% (in some very unpleasant cases).

So if you buy a $1,000 of product on 24 months (thank you!), you have a $41.67 + $5 = $46.67 first month payment. 

We may owe royalties of $500 on this purchase. The royalties are due at the end of the calendar quarter, which is at max 90 days away, but on average 45 days away. (It could be tomorrow.) 

So let's say we've collected two payments by the time royalties are due. We've got $93.34 from you so far, and make a $500 payment. Now our cash position is DOWN over $400. At the end of a YEAR we'll have collected $560.04 but by then will have had to pay taxes (let's say we're 10% profitable, so we pay the IRS 35% or more of the $100 profit -- another $35).

A year after you start the payment plan we're only $25.04 ahead in cash (on a $1,000 sale) and we haven't considered payroll and other expenses!

(Even if our royalty was only $200 on this particular purchase we'd be underwater for more than four months.)

Yes, like many businesses paid over time we can take our receivables to a bank and borrow against them, but you can't borrow against the whole balance (more like 60-75%), and now you're also paying interest (thankfully low right now), etc.

This is why credit cards exist, and why many products sold with time payments have another company manage the payments. It's because time payments is its own business... and while a producer like Faithlife can 'do a little bit', if it becomes too big a part of their business, they have to either reign it in or push it off on another company whose financial model -- and backing -- is designed for it. 

I'm sure you're thinking that we can 'make it up in volume' or 'once it starts going payments from last year will cover costs for this year', and that's all true, to a point -- except that if your profits aren't outrageous (ours aren't) and your growth isn't a rocket ship (ours isn't) and you aren't rolling around in excess cash (we aren't) and don't have a venture capital fund backing you (we don't) and you can't borrow 100% of your receivables (we can't) and you are deferring revenue but not expenses, you can hit a math wall.

For what it's worth, we are both profitable and growing this year. We're just tweaking our payment plan system so that we can continue to serve you well without having to borrow future receivables from someone we meet in the alley behind the dumpster. :-)

This makes total sense.

Posts 154
Sakarias Ingolfsson | Forum Activity | Replied: Thu, Nov 12 2015 12:01 AM

Dan Pritchett:
The added bonus to using Logos Book Cache is that they are saving the $5/mo. payment plan fee every month

Yeay, and even better if you get a dedicated savings account at your bank. You´ll collect interest on your savings, and the money is not bound to Logos, should you wish to buy your books in a different format, or if you should need the money in a pinch ;-)

This could be different, though. The Book Cache program could for example rewarded its subscribers for the loyalty. Therefore I have added a UserVoice petition to that end.

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JT (alabama24) | Forum Activity | Replied: Thu, Nov 12 2015 3:23 AM

I'd love to set up a book cache account. Add the ability to purchase Vyrso resources, Dan, and it's a done deal. Wink

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Jack Caviness | Forum Activity | Replied: Thu, Nov 12 2015 3:34 AM

Bob Pritchett:

Jack Caviness:
Interesting post, Bob. The new policy makes it appear that FL is in a serious cash-flow bind. That creates a bit of uneasiness concerning the long-term viability of our investments.

We're not in any danger of disappearing. We're a significant business with a wonderful, active customer base (thank you!) that still makes a profit.

We're just managing cash. Yes, we promoted payment plans. They work great to a point.

Thank you for the more detailed explanation. Perhaps I should have made it clear that I was speaking of the perspectives that this policy change could produce. Actually, I trust you to make wise business decisions. But at the same time, I must say that communication is not necessarily FL's strong suit.

Posts 824
GregW | Forum Activity | Replied: Thu, Nov 12 2015 4:49 AM

Dan Pritchett:

Many book lovers that discover they're spending the same book budget amount on Logos books each year will find that using Logos Book Cache is the answer, to not only the Pre-Pub problem of having cash up front, but will also find it solves this 25% down payment issue as well.

The added bonus to using Logos Book Cache is that they are saving the $5/mo. payment plan fee every month.

It won't solve everyone's issues, but for those who aren't sure what they will buy in the future, but know they are going to spend a set amount, they can start a Logos Book Cache subscription now, avoid the $5/mo. payment plan fee and be well ahead of the game when they find the next title they want.

https://www.logos.com/book-cache

I recently let my payment plan stop when it was paid off as I didn't feel it was the best way for me to manage my purchases, but when I try setting up Book Cache in my profile, I can't find anywhere there to do it. I'd love to be able to set it up, and vary the payment when I want to without having to call/email Logos. I'm UK-based, so having a payment plan for me introduces currency risk, and it is in my interest to accumulate credit when Sterling is strong, but not when the dollar is stronger. It's also a pain from here (even with the dedicated UK number) to have to call. Is there an easy way to set up Cook Cache online? 


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Posts 3003
David Taylor Jr | Forum Activity | Replied: Thu, Nov 12 2015 5:50 AM

Dan and Bob,

What about the option of adding something like PayPal for payments. I know you already do this for International customers.  Yes, there is a percentage on the payments, but I assume you have that for credit cards already.  That option would allow people to do payment plans (interest free for a time) and you would get your money up front.

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Posts 2824
Michael Childs | Forum Activity | Replied: Thu, Nov 12 2015 6:44 AM

If the new policy works to FL's financial advantage and strengthens the company, well and good.  It will continue.  And in the long run, we benefit from a stronger FL company.

If the new policy hurts sells to the point that it is counterproductive to FL, then the policy will be modified or dropped.

That is simple business.  In the mean time, it is a good time to evaluate your Logos Library and decide what you really need and what you don't really need.  It is a good time to decide what is the best way to pay for future resources, and maybe start saving for that important expensive resource.

After all, we have not always had Logos payment plans.

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John Fidel | Forum Activity | Replied: Thu, Nov 12 2015 6:56 AM

Bob's explanation makes great sense from a business perspective. I think that easy credit promotes overspending. I also think this will probably curtail many prospective buyers from the purchase of larger packages as a result. FL needs to evaluate the cost/benefit. I don't use the payment plan, but can sympathize with those that do, as well as those that may be struggling with the changes in policy. Here is reason:

Logos drives their sales by special promotions, bundles and seasonal events. This makes preplanned purchasing and budgeting difficult.

Example: When the NIVAC went on sale for around $8/volume, the opportunity and motivation was to buy "now". The saving was only for a few weeks. If you did not plan on this purchase at this time, then it is a budget buster. Especially if you want or need this resources. (For some even if they think they may want or need it in the future) In addition, FL does not announce when to expect new base package deals or bundles and often they are time sensitive. I am not complaining or think this should change because it promotes excitement. However, this not like saving up for a car where you know the price and can structure a budget to accommodate the purchase. Many great deals are only around for a short time promoting the need/desire to buy now or lose out on a great deal. And to be honest, many of the deals are great deals that may not come around again.

I do not have the answer, and am probably stating the obvious. FL's marketing success has actually caused the potential cash flow issues and the recent change in policy.

One idea for those working in a church or ministry that provides a book budget:  Most budgets are Jan-Dec. For Logos they should probably be Oct-Sep. Big purchase opportunity will be base packages that come out in November, Christmas sales and March Madness. In addition you need to have rollover dollars, so if you do not spend one year it carries over to the next. Base package introductions are not every year. Consideration still needs to be made for for unannounced special deals through out the year.

Again, FL revenues are promotion driven, are mostly time sensitive and do promote "buy now or lose the deal", which is really difficult to budget for. The previous payment plan allowed for impulse purchasing to take advantage of great deals and larger packages. The change in policy will require some customers to reevaluate their budgeting,  planning and purchasing habit.

Posts 3937
abondservant | Forum Activity | Replied: Thu, Nov 12 2015 7:10 AM

Dan Pritchett:

Michael Childs:
Large purchases will have to slow down and be delayed until the 25% down payment  can be saved. 

Many book lovers that discover they're spending the same book budget amount on Logos books each year will find that using Logos Book Cache is the answer, to not only the Pre-Pub problem of having cash up front, but will also find it solves this 25% down payment issue as well.

The added bonus to using Logos Book Cache is that they are saving the $5/mo. payment plan fee every month.

It won't solve everyone's issues, but for those who aren't sure what they will buy in the future, but know they are going to spend a set amount, they can start a Logos Book Cache subscription now, avoid the $5/mo. payment plan fee and be well ahead of the game when they find the next title they want.

https://www.logos.com/book-cache



Indeed - that might help in 24 months or so. But in practical terms I probably wont be buying anything of note until then. THEN maybe Book cash can build up for a few months, and THEN I can start spending again. Which is fine. But represents possibly a 10,000$ a year drop in revenue from just one customer. Again, I totally get it. Completely understandable. But for me, stinks.

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John Fidel | Forum Activity | Replied: Thu, Nov 12 2015 7:17 AM

Dan and Bob,

Most businesses that drive revenue through offering credit need to arrange for similar terms with their suppliers. Revenue stream ties to cost of sales stream. Payroll and overhead are exempt. You are selling your suppliers' products by providing a payment plan. Perhaps they should consider offering you similar terms regarding payment of royalties. If you lose sales, then both FL and the publishers lose sales. I know the difficulties of royalty contracts and arrangements, but perhaps this avenue needs to be evaluated in addition to your policy change.

Posts 3003
David Taylor Jr | Forum Activity | Replied: Thu, Nov 12 2015 7:25 AM

John Fidel:

Dan and Bob,

Most businesses that drive revenue through offering credit need to arrange for similar terms with their suppliers. Revenue stream ties to cost of sales stream. Payroll and overhead are exempt. You are selling your suppliers' products by providing a payment plan. Perhaps they should consider offering you similar terms regarding payment of royalties. If you lose sales, then both FL and the publishers lose sales. I know the difficulties of royalty contracts and arrangements, but perhaps this avenue needs to be evaluated in addition to your policy change.

Though I doubt that would ever happen, never hurts to ask!

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Posts 128
Russel Taylor | Forum Activity | Replied: Thu, Nov 12 2015 9:26 AM

I'm already at the extent of what I feel comfortable paying on my payment plan.  But I certainly wouldn't have bit the bullet having to put 25% down up front.  Right now, I'm pretty happy with my resources, so that may be a good thing.  I'll just start being more choosy in the future.

Posts 146
Dustin Pearson | Forum Activity | Replied: Thu, Nov 12 2015 9:37 AM

John Fidel:

Bob's explanation makes great sense from a business perspective. I think that easy credit promotes overspending. I also think this will probably curtail many prospective buyers from the purchase of larger packages as a result. FL needs to evaluate the cost/benefit. I don't use the payment plan, but can sympathize with those that do, as well as those that may be struggling with the changes in policy. Here is reason:

Logos drives their sales by special promotions, bundles and seasonal events. This makes preplanned purchasing and budgeting difficult.

Example: When the NIVAC went on sale for around $8/volume, the opportunity and motivation was to buy "now". The saving was only for a few weeks. If you did not plan on this purchase at this time, then it is a budget buster. Especially if you want or need this resources. (For some even if they think they may want or need it in the future) In addition, FL does not announce when to expect new base package deals or bundles and often they are time sensitive. I am not complaining or think this should change because it promotes excitement. However, this not like saving up for a car where you know the price and can structure a budget to accommodate the purchase. Many great deals are only around for a short time promoting the need/desire to buy now or lose out on a great deal. And to be honest, many of the deals are great deals that may not come around again.

I do not have the answer, and am probably stating the obvious. FL's marketing success has actually caused the potential cash flow issues and the recent change in policy.

One idea for those working in a church or ministry that provides a book budget:  Most budgets are Jan-Dec. For Logos they should probably be Oct-Sep. Big purchase opportunity will be base packages that come out in November, Christmas sales and March Madness. In addition you need to have rollover dollars, so if you do not spend one year it carries over to the next. Base package introductions are not every year. Consideration still needs to be made for for unannounced special deals through out the year.

Again, FL revenues are promotion driven, are mostly time sensitive and do promote "buy now or lose the deal", which is really difficult to budget for. The previous payment plan allowed for impulse purchasing to take advantage of great deals and larger packages. The change in policy will require some customers to reevaluate their budgeting,  planning and purchasing habit.

And this situations just points of the above. Here again Faithlife is pushing hard once again to combine and extend a payment plan due to a sale on the International Critical Commentary Series. And you better take this deal quick before we change our policy, and oh by the way we haven't made that change public so we are sending this ill worded email.

The change is what it is, and really isn't in some ways a bad change, just changes the dynamics for people and each has to evaluate those dynamics.

But how Faithlife is going about it for me is the issue. In some ways the emails amount to questionable sales practices and marketing. This change should have been publicly announced well in advance (especially considering you have just now ruined many's plans over the coming holiday season to take advantage of any deals), and made the offer in that announcement. And the email we did get I feel is poorly worded and made my interpretation of the change worse than it was.

Faithlife says they want our feedback but issues like this continue (I also refer to the threads about email\phone marketing and I haven't seen a change there either), and really this is of their own doing with as many emails we get on adding\extending them and as another noted the default payment option listed on a product page being the payment plan option.

Posts 917
David Carter | Forum Activity | Replied: Thu, Nov 12 2015 9:45 AM

Looking on the bright side, maybe this will put an end to the unsolicited (and speaking personally, unwanted) telephone sales calls.

Posts 120
DBR | Forum Activity | Replied: Thu, Nov 12 2015 9:51 AM

I have been debt free for almost six years and I have no plan to go back in debt for anything, even something small like a payment plan for Logos. I always want to add more resources, but I learn patience and contentment by saving my money and buying what I can afford. I think it is a wise move for a business to get it's payments on credit under control. 

Posts 5248
Dan Francis | Forum Activity | Replied: Thu, Nov 12 2015 10:02 AM

Michael Childs:

If the new policy works to FL's financial advantage and strengthens the company, well and good.  It will continue.  And in the long run, we benefit from a stronger FL company.

If the new policy hurts sells to the point that it is counterproductive to FL, then the policy will be modified or dropped.

I found myself asking do I get Anglican Portfolio right away. The changes would have meant a delay of a few months before purchasing it. Not the end of the world. I will admit with a bigger initial outlay it will have me think twice... That said it is not a bad thing. The people like myself who add onto existing plans may well be the biggest problem, but I do feel for people who suddenly rather than going with GOLD decide BRONZE is all they can afford at this time because it is a 25% down... That said I do understand the reasoning behind this move fully and in the end may create better levels of stewardship for both people and Faithlife. 

-Dan

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Bruce Dunning | Forum Activity | Replied: Thu, Nov 12 2015 10:05 AM

David Ruley:
I have been debt free for almost six years and I have no plan to go back in debt for anything

I commend you for this.

David Ruley:
I think it is a wise move for a business to get it's payments on credit under control. 

And I totally agree with you.

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Levi Durfey | Forum Activity | Replied: Thu, Nov 12 2015 10:16 AM

David Ruley:
I have been debt free for almost six years and I have no plan to go back in debt for anything, even something small like a payment plan for Logos. I always want to add more resources, but I learn patience and contentment by saving my money and buying what I can afford. I think it is a wise move for a business to get it's payments on credit under control. 

Amen. Smile

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Matthew C Jones | Forum Activity | Replied: Thu, Nov 12 2015 10:36 AM

Dan Francis:
I found myself asking do I get Anglican Portfolio right away.

I was planning on taking advantage of the base package sale that ends Dec 31.  These were in my list:

Anglican Portfolio
Orthodox Platinum
SDA Platinum
Verbum Capstone

I may have to pass on them.

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DAL | Forum Activity | Replied: Thu, Nov 12 2015 10:48 AM

Super.Tramp:

Dan Francis:
I found myself asking do I get Anglican Portfolio right away.

I was planning on taking advantage of the base package sale that ends Dec 31.  These were in my list:

Anglican Portfolio
Orthodox Platinum
SDA Platinum
Verbum Capstone

I may have to pass on them.

 You still can do it that down payment policy does not start till next week .

DAL

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