How authors make money

and avoid losing it!

The authors who make the most money from their books are the ones who treat their writing as a business. With any business, you have income and expenditure, and when one is deducted from the other, you end up with a profit – or in some cases, with a loss.  With the recent increases in the cost of book printing, it is timely to check what your margins are and to make sure that you are earning what you deserve.

For authors, their royalties are often based on the net profit of a sale. This means, the amount that is left after costs have been deducted. If one of those costs is the printing of the book, then it makes sense to ensure that this is a low as possible.

Most authors will resource a quantity of books to cover the period leading up to their book launch. By ordering a quantity, they can benefit from economies of scale and get their books at the lowest possible price.  Obviously, the more you order, the cheaper the cost. However, if you order too many, then you will also have to factor in the cost of storage which might, over time, wipe out the saving of printing a large quantity. It is a balancing act.

The most profitable sales an author can make are to the routes to market where they are the retailer and have no one else in the supply chain to take a margin. Books sold by the author from their website, email marketing, at their events, and through joint ventures, can generate a profit of 60% to 70% on each book. Very profitable.

Books sold through the book trade or through Amazon are less profitable because the retailer and distributor will require a profit margin for themselves. For example, a book shop will expect a margin of 45%. The distributor who supplies the bookshop will be looking for a margin of 10 to 15%. Put the two together, and that means offering a discount of 60%.

This leaves the author with 40% from each sale. Out of this 40% comes the cost of printing and dispatch. If a book costs more than 20% of the retail price to print, the only person who is going to be squeezed is the author. Everyone else will be doing very nicely, thank you.

Because of the convenience of the book trade print to order system, which allow for printing just one copy at a time, it is very tempting for authors to rely on it as their main source for book printing. But this would be a costly mistake.

Every time you place an order for books, there is a small handling charge added by the printer. For short runs, this is £1.85. However, that might be more than your profit margin and mean the difference between profit and loss! In addition, you have the cost of carriage to add. For a very small quantity of books, this can also wipe out your profit margin.

Putting yourself in the mindset of an Author-preneur means being aware of where profit leaks can occur. With the profit margin on a book trade sale being around 10% of the cover price of the book, you need to be aware that this could easily be wiped out if you either don’t buy your books at the lowest price, or if you fail to take into account the cost of dispatch.

It might seem like an unnecessary expense to buy a quantity of books when you can buy them to order as you need them, but that initial outlay in order to get the lowest print price may be the difference between profit and loss for the author.

The other lesson to be learned from this is to ensure that your retail price is set correctly at the beginning. Many authors try to sell their books at the lowest price possible in the belief that this will make their book more attractive to the potential buyer. This is not necessarily the case. If a book has a strong enough benefit to the reader, then the price is far less of an issue.

The retail price also fixes the wholesale price, which is 40%. That is what the author receives and what has to cover the printing, dispatch costs, and the author’s royalty.  The lower the cover price, the lower that 40% becomes.  So never under-price your book.  The book retailer will probably discount it anyway, but even if they do, it will not affect what you get paid.

Your own sales will always be your most profitable sale so do not fall into the trap of discounting your own book to try and attract sales.  By doing so, you are putting out entirely the wrong message. What you are saying is, ‘I don’t think my book is worth the money!’  Not a good message. Instead, and in order to get the sales yourself, rather than the potential purchaser going elsewhere to see it they can get it cheaper, always ‘add value’.

Bundle along with your book a PDF eBook version, a MP3 audio interview with the author, a MP4 video clip of the author giving a workshop on their specialist subject, downloadable companion materials, a checklist – or indeed anything that has a perceived value.  By doing so, you are giving people a really powerful reason for buying direct from you and not going elsewhere. In fact, it makes a discount appear almost irrelevant by comparison.

Of course, it is your book that will unlock all the other income opportunities that will come your way. As a published author, you have a status. You become of interest as a guest speaker at events, you become of interest to the media, you are seen in your industry as an expert. How well you use your status as a published author to grow your business is down to you but never forget, it was the book that made them possible.

Chris Day – founder of Filament Publishing Ltd and also of AuthorCraft, the professional network for authors.

This topic, and all of the other aspects of becoming a successful author, are covered in the training sessions and expert presentations at AuthorCraft, the professional network for authors. Events take place on the fourth Tuesday of the month (except August and December). For further information, visit www.authorcraft.co.uk

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