The Mill's two-year roadmap to breaking even

Credit: Left to right: Jack Dulhanty, Joshi Hermann Dani Cole and Mollie Simpson

Amongst all the chatter about how to finance local news, one UK media startup provides an innovative template.

The Mill is an independent news organisation based in Manchester. It launched in 2020 with a focus on local news briefings, long-form features and investigations. What makes it distinct is that it is all contained and powered by the newsletter subscription platform Substack.

The Mill offers both free and premium newsletters. The free newsletter goes out twice a week to 25k subscribers, and the premium costs £7 a month for four newsletters per week with 1.5k paying subscribers.

Now in its second year, the publication is breaking even, meaning reader revenue is covering its operating costs. And it has big plans for year three. Journalism.co.uk crunches the numbers with the founder and CEO Joshi Hermann.

Year one: grabbing the low-hanging fruit

The Mill launched in June 2020 with a free model. Its journalism managed to garner enough interest to launch a premium newsletter in late September. 400 people signed up in the first week in an "early vote of confidence". The Mill also made its first hire, then intern Dani Cole.

Within a year, it managed to hit the 1k paying subscriber milestone and have a registered user base of around 14,000.

You can expect to grow in your first year but a lot of the work is ad hoc and so the challenge boils down to having enough bandwidth to convert users from free to paying.

Because he was spending much of these early days editing and writing, Hermann did not have enough time to focus on strategic growth. Instead, he was trying to produce enough content to publish. The Mill ran through approximately £20k in its first year of paying subscriptions.

Read more: Must-have skills for a media startup CEO with Joshi Herrmann

Year two: finding the breathing room

In year two, The Mill got funding from Substack's Local programme, which enabled it to launch sister titles The Tribune in Sheffield and The Post in Liverpool.

That paid for a part-time editor Sophie Atkinson across all three cities, freeing up Hermann to focus on strategic growth: hosting events, trying different referral tools, A/B testing the newsletter, and trialling special member appeals. Atkinson was taken on permanently when the funding from Substack dried up.

By October 2022, The Mill had 1,500 paying subscribers, bringing in £10.5k per month in revenue. Substack takes a revenue share of ten per cent (around £1k) and The Mill does not pay VAT on its reader revenue, because it is non-rateable.

The remaining £9.5k a month will roughly be spent on paid-for social media marketing (up to £1.5k), freelance budget (up to £500), rent (£500) and salaries (£7k) of two full-time junior staff, one part-time editor and Hermann part-time, plus National Insurance and pensions.

Marketing and freelancing can vary depending on the output. There are some periodic smaller costs, including commissioning data analysis work, intern stipends, utilities and office supplies, accountancy and lawyer fees.

Notably, The Mill spends nothing on its tech stack - the big upside of working with Substack. The platform handles maintenance of the website and newsletters, and it takes payments, which are then processed by Stripe.

Joshi Hermann (above) founder and CEO of The Mill

"Ten per cent (in revenue share) is a lot. But it means that you don’t have to worry about tech," says Hermann, adding that the platform is incentivised to fix any issues quickly in a bid to keep you on. It is also less hassle than dealing with IT agencies.

"Tech is a huge time sink. In a lot of startups, people spend too much time tweaking the product. Substack is a straitjacket for your website, they are making it better for the web experience. Customisation is relatively constrained, so you don’t spend loads of time and money tweaking it."

Read more: What support do independent news services need to stay afloat?

It means that journalism becomes the priority focus. Unlike advertising models, reader revenue correlates closely with hard-hitting journalism. As a newsletter-first publication, that means keeping close tabs on how often emails are forwarded on.

A piece on co-living as a solution for senior loneliness, gangster landlords and climate crisis provides a good example. It was delivered to 18k people but opened by 25k. That disparity can only mean it was forwarded thousands of times, as Substack counts these as unique open rates.

Coverage of the landmark Royal Exchange Theatre in Manchester was a hotspot for conversions too. A recent piece added 110 subscribers to the free newsletter and 30 to the premium one, another metric to watch.

Personal and direct approach has proved more inviting over the years. The publication affectionately calls its members "Millers" and encourages reporters to talk about "their" story that they are covering.

"There are lots of disadvantages in local news in terms of having a smaller market. But the one big advantage is that if you produce good journalism, it is so relevant to your audience," Hermann points out.

Year three: diversifying your revenue

You would be forgiven for thinking it is a risky business model to be predicated on one platform. The Mill is able to export its mailing list at any point though and it could leave for a competitor like MailChimp, Ghost or ConvertKit.

In other words, year three promises much of the same but on a bigger level: growing faster and aiming for 2,200 members by October 2023. That would enable them to hire another staff member, increase the freelance budget and raise wages (important for retaining talent). For context, an extra 700 members would add roughly £4.5k a month or £53k per year after Substack's cut.

The Mill has had some early success with bulk subscriptions to local companies. One organisation, for instance, bought 15 subscriptions for their employees to stay connected to their local area.

It also wants to extend sponsorship deals. It recently trialled, successfully, to sponsor a newsletter with a local, independent broadband company launching in the area. Doing more of this in the next year should pay for one-and-a-half more journalists, bringing in £35-40k a year.

The Mill wants to diversify its business model, with reader revenue still being the biggest source of income because it is a reliable financial forecast. An ideal model would be two thirds reader revenue (including supplementary sources like events), and one third "other", such as advertising and sponsorships.

More innovative local news models are needed, but the first few years are far from an easy ride. Hermann's parting advice for those wanting to launch a local media startup:

• It will be more expensive than you think due to upfront costs; build a solid runway of cash from one-off grants, private funding or friends and family.

• The local market is a tougher sell, so do not expect the overnight success seen by highly-followed journalists launching their own Substack newsletters.

• Offer something that feels different to the competition but is still accessible.

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