You are a published author. You must be rich!

You are an agent. I know you are rich.

If it only were true.

Let’s attempt to explain some of the bottom-line basics of Author Accounting. Please remember this exercise is generic; your mileage may vary. I will use some simplified numbers, so we can all follow the math.

Let’s start with a $20.00 retail-priced book. The publisher sells the book for $10.00 to a vendor (like Amazon, Barnes & Noble, or christianbook.com). That creates a net receipt or net price for the publisher.

The net price is $10.00. The author’s contract dictates that the publisher pay them 15% of the net price. That would mean when this book was sold to the vendor, the author’s account was credited $1.50.

This particular author was paid an advance of $4,500 to write the book. That money is like an advance on your allowance when you were a kid. You must pay back the advance before you earn more money. So if each book sold earned the author $1.50, then how many copies must sell before the $4,500 is earned out? The answer is 3,000 copies. On the 3,001st copy, the author earns an additional $1.50.

The additional money is paid to the author periodically, not as it is received. Most publishers pay the author twice a year. Some pay quarterly.

But because the royalty is based on a net price, the royalty paid will depend on each sale. Some books will be sold at $10.00, some for $12.00, and some for $6.00. It all depends on the situation. For example, the books you see on the spin racks in the grocery store or the airport are sold to rack jobbers at a very high discount to enable them to pay each person in their distribution chain. The author gets less money but sells more copies.

Be aware that some contracts pay the author a royalty based on the retail price and some on the net price. So, if the royalty rate were based on the retail price (like a 7.5% of retail rate for paperback, which is a standard number among the “Big Five”), then the author would still receive $1.50 per book no matter what the publisher sold the book for. The majority of publishers in the Christian market use net receipts as their basis for paying royalties.

Out of that $4,500 advance mentioned above must come the author’s expenses: research materials, conference fees, travel expenses, etc. Some, not all, are deductible at tax time. (Tax time is tomorrow for those of you in the U.S.) And those are only the business expenses. If you are a normal person, you have housing, a car, food, clothing, etc., to pay for as well. But unless that advance is a lot higher, it’s going to be tough to pay your mortgage with the advance money you have received. (Plus, advance money rarely comes all at once. Typically, it is paid out over time. Some publishers pay on signing the contract, on the acceptance of an author’s “acceptable” manuscript, and later on publication of the book.)

When I teach this subject in-person, I usually stop here and ask, “Is this making sense?” “Are you following the math?” Most will answer yes, but the room is deathly quiet because I’m talking about money.

I will often ask the room, “Can you make a living as a writer?”
D.Q.Y.D.J. is the correct answer.

Don’t Quit Your Day Job.

That sounds grumpy and negative, but it is a reality. Most authors do not start their careers with a million-dollar advance and a legion of fans. They build them slowly but surely over time. In the beginning, they struggle mightily to make ends meet and justify the time and energy, just like anyone starting a small business.

The writing profession is a marathon, not a sprint.

Why is your percentage so small? Read Tamela’s article “Why is My Royalty Check So Small?” for a quick answer.

A number of writers are turning to independent opportunities by self-publishing via e-books and print-on-demand in the hope of greater income. There is no debate from me as to the potential for success. A number of writers find this as the solution to their money problems.

But just like every small business venture, there are successes and failures. Your mileage may vary. There is no single solution for every writer. One writer I know has a steady income from e-books but still works at a day job to make ends meet. This writer would be considered successful by any standard but still has to supplement their income. The writer has grown the writing side of their world to the point that they must now decide whether to make the jump to full-time writing in the hopes that revenue will increase because they will have the time to devote all energy to writing and marketing their books.

And if you are interested in Publishing Economics 101, see this post.