Tag s | advances

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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News You Can Use – Oct. 2, 2012

Why is the new J.K.Rowling e-book priced at $17.99? – This brief article presents some succinct economic details to help you further understand how this industry works.

Penguin Sues Authors for Advances Paid – There are at least two sides to every story, but this appears to be a number of cases where a writer signed a contract, accepted a sizeable cash advance, and never delivered the manuscript. There must have been previous attempts to get the money back for Penguin to resort to the court system to collect.

Get Paid More for your Freelance Work! – This article has 37 negotiating tips to improve your freelance editing income.

Congratulations to our clients Aaron McCarver, Diane Ashley, and Susan May Warren for winning the Carol Award for their fiction category. Click here for a complete list of winners and their book jackets. Well done!

The Accidental History of the @ Symbol – The origin of things like these is always fascinating to me. This article is from the Smithsonian Magazine.

The Importance of a Good Contract – “I Love Lucy” is worth $20 million annually…sixty years after the show aired.

My father, Roger G. Laube, passed away on September 15th and we recently held the burial and memorial services with family gathered from six states. He was a remarkable man who had an unwavering faith in God and a vigorous life in business, church, music, and family. He served as an incredible model for all who were touched by him. We love you Dad. You will be missed. An online memorial can be found at this link (http://bit.ly/QCg6tc). Included there is a full obituary and a “more photos” section. (Memorial gifts should be sent to Gideons International.). Picture to the left is from his 90th birthday, last year.

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