This is a guest post by John F. Harnish
What’s your book’s magical number?
It’s not the 13-digit ISBN in the front matter of your book. Nor is it the free alphanumeric identifiers assigned by Amazon and B&N to your e-book. No way is it your royalty percentage—the overwhelming majority of those percentages aren’t magical. Nope, it isn’t the price, or the number of pages.
The magical number is the number of books that must sell before you, the author, realize a financial profit from your book. The magical number is the “break-even point,” sometimes referred to as the “profit point,” when earned royalties surpass the cash investment you made in producing your book.
In the book publishing industry’s turmoil of changes, break-even point is more descriptive because 75% to 90% of authors with books available for purchase today won’t sell enough books to cover upfront fees for services rendered to publish and distribute their books.
Some traditionally published authors who were paid an advance for the rights to their books could be falsely thinking this doesn’t concern them, it’s just one of those things self-published authors need to worry about. After all, they were paid an advance so there’s already a profit. Not so—read on and you’ll learn that you have a sales criteria too, and may not have yet passed your profit point. Most likely you’re not even close, especially if you’re a first book author.
Unfortunately, with the increasing glut of digitally printed books, industry reports estimate that in the first five years of the book being available for sale, approximately 15% to 25% of the authors publishing their books through publishing services actually earn enough in royalties to cover the upfront costs. That’s not a good track record for this evolving branch of the book publishing industry—which is only a slightly better percentage than the 10% to 20% of authors published by mainstream houses who sell enough books to earn out their advance. Painting with a broad brush depicts a grim picture of 75% to 90% of published authors not benefiting financially from the sale of content.
For a first book author the advance might be $2,500 to $7,500, against future royalties of 5% to 15%. However, as many as 90% of these traditionally published authors won’t see a penny of royalties, because their books don’t sell and soon go out of print.
Let’s be generous and say the traditional author was paid an advance of $7,500 for a 150,000 word novel. Divide the advance of $7,500 by 150,000 words, and your words were bought for a mere nickel—that’s right, five cents a word. In the interest of simple math, let’s figure the author invested 750 hours writing and rewriting 150,000 words, meaning the author is producing 200 written words per hour—thereby earning approximately $10 an hour based on receiving a $7,500 advance. Actually it’s less than $7,500, because 15% off the top went to the author’s literary agent.
The number of books that must sell to earn out the advance is determined by the selling price of the book and the royalty percentage. Typically, first book authors published by mainstream publishers sell less than 2,500 copies—if they’re lucky. Soon the not-selling books go out of print—but remember, the publisher owns the rights to the content.
Authors publishing digitally through a publishing service pay a one-time setup fee to have their book converted and added into the digital publishing system. Once in the system, it’s easy to print one book or several thousand books. Customers are paying the production cost of printing books when they place the order, along with the profit for the publishing service and the royalty for the author. The profit for the service is often greater than the author’s earned royalty. Publishers have horrific operating expenses and high overhead.
Instead of an advance, authors pay the publishing service a setup fee that could be anywhere from free to $1,500 or more. Let’s figure in round numbers that your total cost of setup and copy editing is in the neighborhood of $5,000 and you earn a $2.50 royalty on each book sold. In order to surpass the $5,000 breakeven point, you’ll have to sell 2,000 books before you will realize a profit from your financial investment.
Oh yes, and to see a return on the sweat equity of approximately $7,500 worth of work you put into writing the novel, you’ll need to sell an additional 3,000 books to be minimally compensated for your time and efforts to complete your book. Add in another 1,000 books required to sell, to cover the expense and time needed to promote your book. This means in the broadest of estimated numbers, you’ll need to sell more than 6,000 printed copies of your book before you earn back your financial investment and are somewhat compensated for the toil of your sweat equity to create the book.
Now you might be mistakenly thinking, selling 6,000 books ain’t gonna be a problem—everyone will want to buy a copy of my book!!! Oh that’s sooo not going to happen. Of the hundreds of thousands of books published by first-time authors, less than 10% will sell the significant quantities necessary to be considered a publishing financial success for the author.
Sadly, an overwhelming number of first-book authors going through a publishing service sell less than one hundred and fifty copies. The few authors steadily selling several hundred printed books every month have been shamelessly promoting their work at every opportunity (and likely shelling out even more bucks on expensive marketing.)
That’s not to say an unknown first book can’t sell hundreds of thousands of copies every month. It happened with Fifty Shades of Gray—it could happen to you. Success came with the social buzz of the Internet.
To figure your break-even point you need to know how much you will be paid in royalties on each book sold. Amazon’s and B&N’s direct publishing services are crystal clear by showing the monetary amount of the percentage of the royalty paid on each download sold. For example, a $3 e-book earning a 70% royalty produces $2.10 in cash for the author.
Some publishers pay a percentage of the retail price, others pay on the discounted selling price, and some use a convoluted formula hidden behind a smoke screen. One promises to pay royalties at a “full 100% of the net”—with no explanation of what percentage of the gross the net is or how it’s determined.
Beware of packaged deals to simultaneously publish printed books and e-books at the same time. Often it’s more cost-effective to test the water with an e-book before investing your money in releasing a printed version. Bundled production, publishing, distribution and marketing services could cost several thousand dollars. At first the special deal appears to save money, but there’s only a savings when, or rather if, book sales surpass the breakeven point. Do the math and figure out how many books must sell to pay for the bundle that usually isn’t joyful.
Take the time to read and understand the financial aspects of the publishing agreement or contract before you sign it and pay the publishing service upfront money. Too often the only ones profiting from your book is the publishing service; they’ve made a profit even if only a few copies sell. Test public interest by first releasing an e-book via Amazon and B&N. They sell 95% of all e-books purchased, and the lesser e-books vendors aren’t worth the hassle.
Indeed, we publish in interesting times, but to successfully profit financially authors need to know the magical numbers for their books.
Enjoy often … John
About this post’s author:
John F. Harnish, aka John Franklin, is the author of over two dozen printed and e-books. His recent series explains the marvelous opportunities ebooks provide for authors. John’s recent enovel is Blast the Hell Out of Tornados. He has been writing professionally and involved in various aspects of publishing for over five decades. John recently retired as a senior executive from a mid-size publisher. He has taught courses in advertising design, marketing, print production, and creative writing. John is a cancer survivor—“so far, so good.” He lives in the greater Philadelphia area with his loyal canine companion Aurora.