Monthly Archives: September 2008

The New Financial Realities of Book Publishing

Especially if you self-publish, you will want to set up a financial model. While no one can tell you with any certainty how many books you can expect to sell, you can be precise about what you will spend to get an idea of how many books you must sell to break even and then turn a profit.

More important, you need to consider opportunity cost. The time away from your business that you spend authoring a book will be time away from clients. But it is time invested in the intended return of more and usually larger client projects once you are recognized as an author.

It is a reasonable strategy to decide to break even on a book (or possibly take a loss) on your first book on the basis of book sales alone. Your real financial gain may be to your primary business, and your book may be one method of marketing for that business.

What has changed what used to a be profitable industry?

Big chain stores and Amazon.com have significantly changed the publishing industry over the past decade. The good news for the consumer: Books are less expensive and more readily available than ever. Amazon.com regularly discounts 30 percent off the retail price of books.

Where does this 30 percent come from? It comes directly from the profits of the publisher and ultimately from the royalty earned by the author. It is estimated that only 10 percent of books published are profitable to both publishers and authors. Because this leaves about 90 percent of books that either break even or lose money, publishers have had to decrease their costs in order to stay in business. Cost reduction usually takes the form of offering fewer services to authors, especially first-time authors. Unfortunately, they are essential services that formerly helped increase the odds of success.

For instance:
Publishers now give surprisingly little editorial guidance. Writers must be able to communicate and organize their ideas in a marketable way, a skill relatively few authors have developed.
Writers face the significant hurdle of having to market their books. Even if an author writes an outstanding book and is not a promotions expert, the book may only sell a few hundred copies.

Because publishers are no longer able to help bridge the gap between author and reader, the author must be able to do it all or have the budget to hire the help she needs. Of course, this assumes she can find the right people. The learning curve is so high for a first book that most writers end up frustrated. If they are willing to tough it out, though, they may be more successful with a second book or they may never try again.

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