In the preceding story, publisher Brenda Tallman discussed the editorial functions of her newspaper, the Plattsburgh Press-Republican in New York State. Here, interviewed by Montreal Gazette columnist Peter Hadekel, she turns her attention to business considerations.

Running a small-town newspaper in the United States is not unlike operating any other business. Competition for the customer dollar is strong, and management has to look for new ways to contain costs and to expand revenues.

Brenda Tallman has met those challenges successfully. She has managed to cut costs without affecting the newspaper's quality. In addition, she has moved aggressively into growth areas such as commercial printing and special publications, while launching a Sunday edition of the Press-Republican.

Tallman is proud of the fact that the cost-cutting has not meant shrinking the "news hole" -- the amount of space devoted to news. "We feel very strongly that we need to continue to put out the product that our customers are accustomed to receiving," she says.

Newspapers, of course, are in business to make a profit for their shareholders. And small-town newspapers in the United States historically have been profitable operations.

The Press-Republican is the only daily in the city of Plattsburgh. Although the newspaper faces competition from two other papers at the perimeter of its 7,800-square-kilometer circulation area, the Press-Republican dominates the local newspaper market.

As a consequence, it has grown into one of the larger private businesses in the town, with 200 full-time and part-time employees and annual revenues estimated at $10 million.

Some small-town newspapers have used their dominant position in the marketplace to make money from advertisers while ignoring editorial quality. It has been a profitable formula for some, at least for a time, but that is not the philosophy of the Press-Republican, which produces a colorful and lively newspaper with a strong accent on local news and sports.

"Our main goal," Tallman says, "is to produce a good newspaper." That goal is one shared by the Press-Republican's parent company, Ottaway Newspapers, Inc., which has adopted the attitude that "quality is our only product," says operating vice president Richard Barker.

Being part of a large newspaper group has helped the Press-Republican serve its market better. More than 20 years ago, it moved into a modern plant with new presses that provide excellent color reproduction. The paper submits an annual capital investment budget to Ottaway. Recently, for example, the Press-Republican was authorized to spend $90,000 on new equipment that will trim and fold newsprint into tabloid (magazine-sized) pages for use in special publications.

Its affiliation with Ottaway does not mean that the Press-Republican is being subsidized by other newspapers in the group. It must pay its way on an operating basis, which means that Tallman must keep a close watch on expenses. That is not easy in a sluggish economy without laying off staff or cutting back on the size of the paper -- neither of which Tallman has done. Most of the paper's costs are for wages and benefits, and for the purchase of newsprint.

"We have tried to be resourceful and frugal," she says. "We have come up with some creative ideas, including a thorough review of how we buy our supplies and if we are getting the best possible cost." That means scrutinizing everything -- right down to the type of notebook the newspaper buys for its reporters.

The 36 journalists and editors at the Press-Republican are paid an average of $500 a week and receive a package of benefits that includes medical and dental insurance and a pension plan. The company also offers benefits such as a vision plan covering eye care and an employee assistance program that counsels workers with personal problems. The journalists do not belong to a labor union, but 11 employees in the composing room, 5 pressmen, and 3 workers in the distribution center are covered by union agreements. A union attempt to organize the paper's entire staff was voted down.

Tallman describes labor relations at the paper as good, although she acknowledges that some of the changes she has introduced have met resistance. "There is a lot of change going on in many businesses, and that can create concern for all employees. We have not done things overnight here. People are aware that we have done things as gradually as we could. Part of the process involves explaining the need for change."

One of Tallman's strengths as a manager is her ability to relate to her employees. "She connects with people very, very well," says Ottaway's Richard Barker. Under Tallman, the Press-Republican has adopted a participatory style of management in which department heads are encouraged to take risks and make decisions on their own.

"We allow dissent because we feel we need that," she says. "A person is entitled to his or her opinion and should feel comfortable expressing that dissenting point of view without fear of chastisement." However, she adds, "there is a fine line between someone who is always negative and someone who has severe misgivings about something."

Tallman's commitment to people means the newspaper spends a considerable amount of time and money training employees and supervisors on everything from how to sell advertising to how to write a better news story.

Each department submits an annual training budget, and employees are occasionally sent out of town to attend training workshops and conferences. A satellite dish on the roof of the Press-Republican building allows the newspaper to tune into televised training courses produced by the Newspaper Association of America, an industry trade group.

About 75 percent of a newspaper's revenue comes from the sale of advertising, with the balance derived from home-delivery subscriptions and single-copy sales.

The most lucrative advertisements a newspaper sells are so-called display ads by department stores, automobile dealers, or other major retailers. In a paper of the Press-Republican's size (typically 24 pages each weekday), a display ad can fill up to one-half of a page.

Other staples of the paper's regular advertising base are classified and help-wanted ads. The pages of the Press-Republican contain about 60 percent advertising and 40 percent news, a standard ratio in the industry.

In addition to the advertising printed as part of the paper's regular press run, the newspaper inserts color advertising brochures known as "pre-prints." Produced by major national retailers and distributed with the newspaper for a fee, pre-prints are a growing source of revenue for small-town papers.

Despite its local monopoly in the newspaper market, the Press-Republican faces real competition for advertising from television and radio. More than a dozen radio stations serve small pockets of the circulation area. Three television stations in the region are carried by cable into the Canadian city of Montreal, about 100 kilometers away, to a potential market of 3 million inhabitants, many of whom like to shop across the border.

Keeping advertisers happy is one of the most difficult challenges facing any American small-town newspaper. There is a fine line between reporting aggressively on local matters and offending commercial interests that may have a stake in the issue. Over the years, most good newspapers have tried to build a wall between the newsroom and the advertising department, and advertising managers suggesting stories about clients have usually been rebuffed.

For Tallman, the issue is straightforward. "Our news columns are not for sale," she says bluntly. "The Press-Republican will not compromise its editorial standards, nor allow itself to be intimidated, simply to hold on to an advertiser's business."

Press-Republican editor Jim Dynko recalls several news stories that elicited angry responses from local advertisers. On one occasion, an automobile car dealership threatened to cancel its advertising because of a story in the paper about a sports car built by another company.

Another time, a reporter wrote a story about problems dealing with real estate agents when buying a new home. "The local realtors went crazy; they cut back their advertising, and there was a little apprehension about it," Dynko reports. "But eventually they came back.

"From time to time, someone will call up and suggest a story and remind us of how much they are spending on advertising in the Press-Republican," Dynko adds. "But we do not want to know who is buying and who is not."

That does not stop the newspaper's business side from making a real effort to court advertisers. One of the Press-Republican's plans is to develop a computer software program that will allow it to customize an advertising budget for a business as small as a local shoe store.

Building the paper's advertising base goes hand-in-hand with increasing circulation. The Press-Republican has about 16,000 home-delivery subscribers and sells another 7,000 or so copies a day in stores and vending boxes.

Those numbers have not grown recently, which is why Tallman plans an aggressive circulation drive. The campaign will include television and radio promotion of the paper in areas where circulation is weakest.

Also, to develop a new generation of younger readers who will continue to purchase the paper as they get older, the Press-Republican supports a "Newspaper in Education" program, which gets the paper into schools as a classroom tool. One feature of Plattsburgh's program is a student press corps of writers and photographers who produce their own newspaper with the help of the Press-Republican.

To develop the teenage and college-age market, Tallman has started a new publication aimed at young consumers called What's Up. It is distributed free every two weeks. She calls it an "artistic success," but it has yet to attract as much advertising as she would like.

When asked about the future of her newspaper, Tallman is characteristically optimistic. She is eager to explore new ventures to deliver information into subscribers' hands. And she is open to new ideas. "It is a key to our future growth," the publisher says.