Tuesday, March 10, 2015

The Simple Math of Self-Publishing

I’m a businessman, and even though I’m retired I can’t shake off that part of me. I’m also a writer. And that makes me a businessman too.
All of us writers (and artists, actors, etc.) would like to think that our art is separate from the business side of the endeavor. It’s not. As a matter of fact, some of the greatest artists in history clearly understood that. The most well-known was Mozart, from whom numerous letters and written evidence exists that show that he was all about the commissions and fees he had coming to him. Art was his livelihood and he embraced that.
Capitalist business economics are simple; sales – costs = net profit. And it’s the profit you’re going for. That’s your income.

Let’s take a look at a simple self-publishing model.

You write a book and you are going to self-publish it. (and for this model we will say there are no related actual costs to you actually writing it.)

Here are some of your costs (plug in your own numbers):
Cover design                    $100.00
Editor                               $300.00
Total                                 $400.00

Here are your revenue streams.
You offer the book on Amazon.com at $2.99 for an ebook at a 35% royalty plan. $1.04 revenue earned per sale.

So, how many ebooks do you need to sell?

The basic math is to take your cost and divide it by your actual royalty percentage.
$400 / 35% = $1,143.00 in sales.
$1,143 / 2.99 = 383 units sold and downloaded.

Let that sink in … you have to sell 383 ebooks to break even. And that’s assuming you don’t take on any more costs.

Let me give you a real world example. I’m considering subscribing to the basic pro plan of Hootsuite, to help me better manage my social media posts. The cost of that is $9.99 per month.
$9.99 / 35% = $29.00 in sales
$29 / 2.99 = 10 units sold per month just to cover Hootsuite.

So, bottom line on this simple illustration, I have to sell 10 ebooks at $2.99 each (35% royalty), every month, just to justify the cost of subscribing to Hootsuite’s most basic pro plan. And, with the first example with the $400 cost, I have to sell 383 ebooks at $2.99 each during the lifetime of the published work to justify the expense of producing it.

So, what can I do to make the numbers work in my favor? Here’s my take on it.
·         Minimize costs – Do my own editing. Make my own covers. That means I have to become proficient at both. That might require some investments, which add to the cost.
·         Increase Revenue – Maximize my per unit net revenue. That may mean changing my royalty plan to the 70% plan. That effectively cuts the number of units that needs to be sold in half. Also, I may need to raise my prices. That would mean that I have to sell fewer units to cover my costs. (That gets into a thing called Value Propositions. That’s a whole ‘nother article.)
·         Increase unit sales – My personal preference is to have a unit sales target and work toward that, rather than a gross sales number. The number is smaller and easier to grasp.

And all this doesn’t take into account the question about how much your time is worth. Your time is a cost.

The only absolute truth in the universe is mathematics. Everything else has varying degrees of validity.

Those are the numbers.

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