A is for Advance

by Steve Laube

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Whenever I lecture about money the room becomes unusually quiet. Instead of a common restlessness from listeners there is a thrumming impatience to reveal the punch line. The punch line that declares every writer will be rich.

Now that I have our attention let’s turn to the topic of the day. The Advance. This is defined as the money a publisher pays to the author in “advance” of the publication of the finished book. We read about the seven-figure advances in the news because they are unusual and quite substantial. The amount given to everyone else can be rather different. (Read the article where Rachelle Gardner answers the question “What is the Typical Advance.”)

Payout Schedule

The money is not given all at once. There is usually an amount given for signing the book contract and the balance comes at various stages of the writing process. Some pay half on signing, half on acceptance of an acceptable manuscript. Some pay one-third on signing, one-third on acceptance, and one-third on publication. There can be other triggers to create payments like an acceptable proposal for subsequent books in a multi-book deal. We even had one highly unusual situation where the total amount of the advance was divided up over the course of 15 months and the publisher paid the author monthly.

Is Your Advance a Debt You Must Pay Back?

This is a common question. For example, if you are paid $6,000 as an advance and you are paid a royalty that is equivalent of $1.25 per book you would have to sell 4,800 copies to “earn out” the advance (4800 x $1.25 = $6,000). After your advance is covered you are then paid a royalty for every copy sold thereafter.

But what if your book only sells 4,000 copies? What happens to the unearned advance money? The answer is “you keep it.” The publisher “loses” that money. But, in my opinion, that money isn’t lost per se. The advance is a line item in the production costs for a specific book. Cover design, editorial, marketing, advances, etc are each a fixed dollar amount that much be covered by sales. If the publisher gives a small advance but overspends on marketing they lose money, even if the advance earns out.

But let’s be very careful with equating an unearned advance with an unsuccessful book. I wrote an article a while back called “The Myth of the Unearned Advance.” If you have not read it yet, do so a.s.a.p. In my opinion that article is critical for every author, publisher, and editor to understand.

The bottom line is that you do not have to write a check to the publisher for the unearned money. (Beware of contracts that do have a clause for returning unearned advance money. Those contracts do exist but are rare nowadays.)

Are Advances Getting Smaller?

The short answer is complex in its simplicity. Yes. In some ways advances are shrinking. It is a matter of cash-flow for the publishers. If they have money tied up in an advance they don’t have that cash for their operating expenses. Therefore there is a constant tug and pull between agents and publishers over the size of the advance.

At the same time we have not seen a precipitous drop in advances offered. If the project is a good one and multiple publishers are interested the up-front money becomes one measure by which a publisher can indicate the level of their desire to acquire a book. We’ve had a number of projects receive multiple offers. But we’ve also had cases where only one publisher made an offer.

How Do Publishers Calculate the Amount to Offer?

A rule of thumb used for many years is that the publisher will offer $1 for every book they project to sell in the first year after publication. But that calculation is becoming antiquated. With retail prices going up the earning power for the author on each book can go up as well. In addition the higher royalty rate for ebook sales combined with the lower retail price for ebooks makes any sort of “rule of thumb” a rather difficult exercise. This is further complicated with some publishers whose books have a smaller retail price (like $5.99 for a paperback) and thus must calculate advances differently.

Is That All They Are Paying Me?

Sticker shock is usually expressed when the price is far too high. Writers experience reverse sticker shock. They look at the $6,000 being offered up front and calculate the number of months it will take to write the book and realize they can’t afford to be a writer! If you look at the “rule-of-thumb” above and the publisher offers you $6,000, it is likely they have modest sales expectations for your book. If they have offered you $75,000 in advance you can assume they have greater sales expectations.

I’ve had many veteran authors treat their advance as the only money they will ever see for their book. Thus, if the advance does earn out, they receive new income for every copy sold. This can be a nice bonus.

One caution. If you are ever in the great position of receiving nice royalty checks on a regular basis remember that books usually have a certain “shelf-life” (even as the definition of “shelf” is changing). I knew an author who received royalty checks for about $30,000 every six months for many years. Unfortunately her publisher went through some tough financial times and they stopped aggressively selling her book to save salary expenses. Her check dropped to zero almost immediately and never recovered. Always treat your royalty payments as a bonus because you never know what might happen in our world which might affect the economy and suddenly affect your publisher.

What if the Publisher Offers Zero Advance Dollars?

If the size of the advance is a way to measure the enthusiasm and commitment a publisher has for your book, then a zero advance isn’t too exciting. But in those situations it is likely a company policy regarding advances or a smaller publisher that simply does not have the cash to pay out advances. Instead they treat the arrangement as a shared risk and the royalty payments become the only way you get paid.

Can an Agent Always Get a Bigger Advance for an Author?

“Always” is a loaded word. Doesn’t leave much wiggle room. I can confidently say that a good agent knows the approximate value of a project based on experience and a knowledge of how each publisher approaches their negotiations. Therefore we are usually able to maximize the amount a publisher is willing to advance to an author. That’s not to say we have “won” every negotiation but it shouldn’t be about winning or losing. It is about creating a win-win situation whereby the author, the publisher, and the agent are satisfied with the arrangement. If the author feels underpaid this can affect performance. If the publisher feels “buyer’s remorse” they may reduce marketing efforts. If the Agent feels sandbagged the relationship with that publisher may be wounded which will affect future negotiations. Thus it is best to find a level whereby everyone “wins.”

17 Responses to A is for Advance

  1. Ron Estrada May 27, 2013 at 4:19 am #

    Thanks, Steve. It doesn’t sound all that different than any other business. I have to sit down with the CEO every year and determine how much I get for marketing and advertising. Of course, it’s never enough in my mind. But it all comes down to cash flow.

  2. Judith Robl May 27, 2013 at 5:15 am #

    Steve, your “Myth of the Unearned Advance” was an eye-opener for me. And this post delivers more information on those subtleties and nuances of the publishing climate. Thank you so very much

  3. Leslie May 27, 2013 at 5:54 am #

    Thanks! This post and the other two that you linked were very helpful. I have more questions yet, but I will check the treasures in the archives. 🙂

  4. Tricia Goyer May 27, 2013 at 6:04 am #

    Steve, one thing you said to me YEARS ago is that I was going to be a “20-year overnight success,” meaning it usually takes 20 years–if one is dedicated–to make it in publishing. I have thought about that many, many times and it helped me not to focus on the advance of just one project. Long term thinking goes a long way in this business. I’ve seen my advances grow, but I’ve also put in a lot of work to see that happen. Thank you for sharing!

    • Andrea Cox May 27, 2013 at 8:16 am #

      Tricia, your comment added to the meaning of this article for me. It’s good to know at my pre-publised stage to think long term instead of focusing on one advance. Once I get to that stage, I’ll try to remember this nuggest of wisdom. Thanks!

      • Tricia Goyer May 27, 2013 at 8:22 am #

        Glad I could help! Yes … think long term!

  5. Rick Barry May 27, 2013 at 6:25 am #

    I note your statement that, “Therefore there is a constant tug and pull between agents and publishers over the size of the advance.” Although I sold my first 2 YA novels without an agent, I see the advantage (and the reduced awkwardness) for an author to have an agent to handle the haggling.

    Question, Steve: Do you have advice concerning how an author can leverage the advance to generate more sales? For instance, buy more copies of one’s own book and gift them to especially vociferous readers? Buy ads? Or…? Although it’s tempting to run out and buy something with the advance, I’m thinking there must be shrewd ways to use it to promote the book.

  6. Robin Patchen May 27, 2013 at 6:40 am #

    I’ve taken to thinking of writing as a very time-consuming, extremely frustrating, and completely addicting hobby. If I ever make any money at it, that’ll be a nice bonus. But, let’s face it, most of us could make a much better living working at the 7-Eleven.

    Thanks for the post, Steve. Happy Memorial Day.

    • Peter DeHaan May 27, 2013 at 9:30 am #

      Robin, it may be true we’d make more money at an entry level job, but would we be as happy?

  7. Jan Cline May 27, 2013 at 7:08 am #

    Wow. This answers many questions for me. I’ve heard that some authors are preferring smaller advances. But that doesn’t make sense if you don’t have to pay it back. It’s amazing to me that publishers in this economy can still offer them. There is hope! Thanks Steve.

  8. Andrea Cox May 27, 2013 at 8:21 am #

    Steve, as an aspiring author, I found this article very helpful. I haven’t even yet thought about the advances that may come my way once I have an agent and get my work on publishers’ desks. Learning from an agent who’s been there, done that confirmed to me that I won’t make a million bucks overnight. Good thing is, I wasn’t expecting it. I enjoy writing and would love to be able to earn a living from it someday.

    Thanks for the great article! Have a blessed day.

    Andrea Cox

  9. Chris Morris March 21, 2014 at 2:54 pm #

    Steve,
    I really appreciate you laying this out there so clearly for me. As an author hoping to see my first book picked up by an agent then publishing house, I have wondered about this. Many of my writing colleagues are walking down the self-publishing path, so this is invaluable information for me. Particularly helpful is what seems to you likely a simple statement that advances are not typically paid back for an “underperforming book”.

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