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The Steve Laube Agency

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Home » Money

Money

Author Accounting 101

By Steve Laubeon April 17, 2023
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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.

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Category: Book Business, Career, Contracts, E-Books, Economics, MoneyTag: Author, Economics, Money

Money Problems?

By Steve Laubeon November 21, 2022
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Money is of significant importance to every one of us. Some writers live on the revenue generated by their efforts. We represent a number of clients who are the main breadwinners in their families. It is unfortunate that the role of the agent is regularly defined by the size of the deal. The film Jerry Maguire made the slick, money-centered agent into a cliche with his client shouting, “Show me …

Read moreMoney Problems?
Category: Book Business, Money, PersonalTag: Money, thanksgiving

The Myth of the Unearned Advance

By Steve Laubeon September 12, 2022
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[I wrote much of this article back in 2011. Upon review, I stand by the analysis. I’ve left the past comments to accentuate the discussion.] ______________ A common myth permeating the industry is that a book is not profitable if the author’s advance does not earn out. I would like to attempt to dispel this myth. First, let’s define the term “advance.” When a book contract is created between …

Read moreThe Myth of the Unearned Advance
Category: Book Business, Career, Money, Writing CraftTag: Agents, Book Business, Contracts, Get Published, Money, Traditional Publishing

When the Gloves Come Off

By Steve Laubeon August 17, 2020
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Fist Slams Table in Anger

The publishing experience is rarely done in isolation. This means working with other people. And if their performances or efforts do not meet your expectations, conflict can occur. Over the years I’ve seen more conflict than you can imagine–of all types and variety. But the majority of issues boil down to four areas: Editorial Production (cover design?) Marketing and publicity Getting …

Read moreWhen the Gloves Come Off
Category: Book Business, Career, Communication, EditingTag: Career, Communication, Editing, Money

Where Is My Money?

By Tamela Hancock Murrayon February 10, 2020
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Before I became a literary agent I had no idea how much energy this profession spent being a “collections agent.” Recently someone asked us the following questions (use the green button to the right to ask your question!):
What do you do, as an agent, when a publisher does not pay advances on royalties on time as per their legal contract?
What if a publisher is consistently late (months) saying …

Read moreWhere Is My Money?
Category: Agency, Book Business, Contracts, MoneyTag: Agents, Money, Returns

How Do You Measure Success?

By Steve Laubeon December 9, 2019
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by Steve Laube

A few years ago while talking to some editors they described an author who was never satisfied (not revealing the name of course). It this author's latest book had sold 50,000 copies the author wondered why the publisher didn't sell 60,000. And if it sold 60,000 why didn't it sell 75,000? The author was constantly pushing for "more" and was incapable of celebrating any measure of …

Read moreHow Do You Measure Success?
Category: Book Business, Career, TrendsTag: Book Business, Career, Money, Success

Who Gets Paid in Publishing?

By Steve Laubeon March 18, 2019
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The economics of publishing is a bit of a mystery if you are just coming into the business. With all the talk about indie publishing vs. traditional publishing and the talk about how writers can get rich if they follow a certain plan, I got to thinking. Maybe we should do a quick look at the economics of publishing to see if anyone is making off like a bandit. Sorry for you non-numbers people, but …

Read moreWho Gets Paid in Publishing?
Category: Book Business, Get Published, Money, Writing CraftTag: Book Business, Contracts, Get Published, Money, Writing Craft

How Authors Make Money

By Bob Hostetleron August 29, 2018
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So, you’ve written a book. Good for you. Now the money will start rolling in, right? Not exactly. There are a number of ways authors make money, but writing a book is only one step in a long and arduous journey. And, though the details vary widely from one author to another (and one book to another), there are six basic ways an author makes money. An advance When you sign a book contract, the …

Read moreHow Authors Make Money
Category: Book Business, Money, The Writing LifeTag: Career, Money, The Writing Life

Many Happy (?) Returns!

By Steve Laubeon August 27, 2018
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Every traditionally published author needs to understand the principle of “Reserves Against Returns” which is an integral part of publishing economics. It can reduce the amount of money an author receives in their royalty statement. It is usually a shock and elicits a phone call to their agent crying “What happened to my money?” Did you realize that book publishing is the …

Read moreMany Happy (?) Returns!
Category: Book Business, ContractsTag: Book Business, Contracts, Get Published, Money, Traditional Publishing

The Minimum Wage Author

By Dan Balowon March 13, 2018
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Most authors earn less than legal minimum wage writing books. Most do so for their entire writing careers. (U.S. Federal minimum wage is $7.25 per hour. A full time person working 40 hours per week would earn an annual revenue of $15,000 at that rate.) In fact, they work for free for a long time before getting paid and once they do get paid, the amount earned almost never makes up for the long …

Read moreThe Minimum Wage Author
Category: Economics, Money, The Writing LifeTag: Career, Money, The Writing Life
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