Book Business

A Is for Advance

Whenever I lecture at a writers conference 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 your 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. 

What Is the Typical Advance?

There isn’t a “typical” advance. It is always based on the risk the publisher is willing to make before publication. It can be informed by many different factors: sales projections, author’s past success or lack thereof, current economic pressures, projected retail price. The project itself can factor in. It may be this book is considerably more promising than anything that author had previously written. It might be that the book became embroiled in a bidding war between competing publishers, which can drive the advance higher as a means of acquisition.

Let me put it more succinctly: “Don’t quite your day job.” (See my smile as I say that in a humorous way.) Few authors garner an advance that allows them to write full-time unless there is another source of household income that covers their total expenses. Remember that each household defines the words “living wage” differently. You only read about the “big” deals because they are unusual. Of course, the famous person might garner an eight-figure advance. I doubt I would qualify for such consideration if I were to write a book! (But I can dream, can’t I?)

What Is the 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 houses pay one-third on signing, one-third on acceptance, and one-third on publication. (This is becoming a common practice.) Some pay half on signing, half on acceptance of an acceptable manuscript. There can be other triggers to create payments like the acceptance of a proposed story line for subsequent books in a multibook deal. I’ve also seen advance payments tied to “release of paperback” if a hardcover released first.

Is Your Advance a Debt You Must Pay Back?

This is a good question. For example, if you are paid $6,000 as an advance and 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 (earned out), 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 technically that money isn’t lost by the publisher. The advance is a ledger line item in the production costs for a specific book. Cover design, editorial, marketing, print costs, advances, etc. are each a fixed dollar amount that must 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 called “The Myth of the Unearned Advance.” If you have not read it yet, do so ASAP. It will help with your understanding of publishing economics.

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. It’s one reason to have a literary agent!)

Are Advances Getting Smaller?

The short answer is complex in its simplicity. Yes. In some ways advances are shrinking, or the payments are spread out over a longer period of time. 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 and the payout schedule.

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 had the publisher offering about $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 $7.99 for a mass-market 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 advances 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 know an author who received royalty checks for about $30,000 every six months for many years. Unfortunately, the author’s publisher went through some tough financial times and stopped aggressively selling the book when they downsized the sales department. The the publisher was sold. In short order the author’s check dropped to zero (as in zero sales for six months) 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. There can be world events that affect the buying public, 9/11 for example. Or the economic collapse of 2008-2009. The pandemic shutdown of 2020 was another, although that created a boost in sales for kids books because families were all stuck at home.

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. In this scenario, the book begins earning money from the first day of sales since there isn’t an advance to cover.

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 dollar value of a project based on experience and 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 has 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.”

[A previous version of this post was published in 2013, but little has changed!]

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What to Do About Morals?

In a post written last weekend Richard Curtis, agent extraordinaire, expressed surprise at a new morality clause that has apparently appeared in HarperCollins’ contracts. Read his post here [warning: there is some Adult content and comments included in the post].

What the general market doesn’t realize is that many Faith-based publishers have had a “moral turpitude” clause in their contracts for a long time. Moral turpitude is well defined in this post on Wikipedia. It is understood in the legal community as actions or activities that can get you fired from your job, deported if you are a foreigner in this country on a Visa, or have your contract cancelled if you are an author.

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Always Be Curious (The ABCs of the Writing Life)

by Steve Laube

Depending on where you live and your school district policies you may already be in a back-to-school mode or preparing for it.

It got me to thinking about the need for all writers to always have a “back to school” mentality.

Here are five things we can learn from always going “back to school.”

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God Gave Me This Blog Post

God gave me this blog post.

By invoking divine inspiration I have guaranteed that you will read this post and possibly give me money to read more.

Sound like a stretch? Then what if I just wrote or said:
“God spoke to me”
“I was led to write this”
“God revealed this to me”
“I have been called to write this”
“I believe this is an inspired post”

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When Editorial Errors Matter

by Steve Laube

Writers make mistakes. It happens. Often an editor’s job is to be the safety net and catch those tidbits that find their way into an early draft of a manuscript for any number of reasons.

The simplicity of “cut & paste” has created more opportunity for error than ever before. I’ve seen half sentences left in their original place because the writer failed to cut and paste accurately. Many books evolve over time with additional research or new thoughts. Errors can creep in this way. I’ve seen an author actually contradict himself between chapters. There are too many details to keep straight so the writer overlooks the inconsequential trusting the editor to fix things. I remember talking to a Bethany House editor who revealed that an author accidently brought a character back to life, forgetting that the character had died earlier in the story.

None of the above examples ever found their way into the final edition of the book and the public never knew the error was made. An editor caught it and fixed it. That is why errors found in a finished and published book are so jarring.

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To Comma or Not to Comma?

by Steve Laube

I came across this entry in the Eats, Shoots & Leaves by Lynn Truss. The book is a classic on punctuation (although based on British English usage it is still a great book). Read the story below and then answer the questions in the comment section.

On his deathbed in April 1991, Graham Green corrected and signed a typed document which restricts access to his papers at Georgetown University. Or does it? The document, before correction, stated: “I, Graham Greene, grant permission to Norman Sherry, my authorised biographer, excluding any other to quote from my copyright material published or unpublished.” Being a chap who had corrected proofs all his life, Greene automatically aded a comma after “excluding any other” and died the next day without explaining what he meant by it. A great ambiguity was thereby created. Are all other researchers excluded from quoting the material? Or only other biographers?

Which do you think he meant?

What other ambiguities with commas have you seen or written with your own hand?

Why should it matter? It is just punctuation.

Is punctuation important in book contracts?

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Ancient Wisdom from an Ancient Editor

by Steve Laube

I came across a remarkable section in a book written around 124 B.C. The editor of the book wrote the following preface to help the reader understand his methodology and purpose. It shows the concern a good editor has for the ultimate reader. His job was to abridge a massive five volume work into an abbreviated 16,00 word document. Can anyone tell me where this comes from and the name of the editor? (Without googling the text!) I’ll reveal the answer in the comments later in the day.

The number of details and the bulk of material can be overwhelming for anyone who wants to read an account of the events. But I have attempted to simplify it for all readers; those who read for sheer pleasure will find enjoyment and those who want to memorize the facts will not find it difficult.

Writing such a summary is a difficult task, demanding hard work and sleepless nights. It is as difficult as preparing a banquet that people of different tastes will enjoy. But I am happy to undergo this hardship in order to please my readers. I will leave the matter of details to the original author and attempt to give only a summary of the events.

I am not the builder of a new house who is concerned with every detail of the structure, but simply a painter whose only concern is to make the house look attractive. The historian must master his subject, examine every detail, and then explain it carefully, but whoever is merely writing a summary should be permitted to give a brief account without going into a detailed discussion. So then, without any further comment, I will begin my story. It would be foolish to write such a long introduction that the story itself would have to be cut short.

Note a few pearls of eternal wisdom from this ancient editor:

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When Your Proposal Doesn’t Sell

by Steve Laube

It happens. Despite all efforts and good intentions not every proposal we shop will end up being contracted by a major publisher. Of course our agency tries our best to keep that from happening. We carefully choose which projects and authors we represent. And our success rate is extremely high.

But that success rate is not 100%.

Here are a few examples of projects that I represented in past years that did not sell to a major publisher.

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Bookstore Economics 101

by Steve Laube

Understanding the economics of your local brick-and-mortar bookstore should help you understand the upheaval that is happening in our industry. So put on your math cap and let’s take a ride.

This article focuses on the bookstore not the publisher or the writer. I spent over a decade in the Christian bookstore business, and while that was a long time ago the economic principles are the same.

Let’s start with a $10 book (retail price). I’m using $10 because it will make the math a little easier to follow.

The bookstore buys the book for $6 (or 40% discount off the retail price) from the publisher (who calls that $6 the net price). Note that this discount varies between 40% and 50%.

When the books sells to a customer the store then makes a $4 profit ($10 – $6 = $4).

If the store discounts the book during a 20% off promotion they have to sell two copies to make that same $4 profit. But often a 20% off sale is not enough to double the sales volume. Why? Because a high-volume operation like Amazon.com is happy to sell that $10 book for $6.50 (35% off). They can do this because they plan on selling 10 copies at the discounted price and clear $5 in profit. This pricing strategy has a chilling effect on the ability of the local store to compete.

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