LESS IS MORE
LESS IS MORE
How Self-Publishing Can Put More Money in Your Pocket,
Even If You Sell Less Books
by Richard Hoy
This articled be may be reprinted/redistributed FREELY
as long as the entire article and byline are included.
========================================
This week I'm hoping to show you why the economics
of epublishing are so much better than traditional publishing.
And how that translates into more money in an author's
pocket, even if you sell less books.
The key to it all is managing costs. I'm going to give you a
peek into what it costs to bring a typical book to market.
We'll then compare those costs for a traditionally published
version of the book, a print-on-demand version of the book
and an electronic version of the book.
In the end you'll see that, while an author may sell less
books by using the techniques of epublishing, the margins
are so dramatically better that they can actually make
more profit.
WHAT DOES A BOOK COST?
It is amazing to me how nonchalantly some authors who are
self-publishing price their books. At Booklocker.com, we've built
minimum prices for books to protect our authors (and ourselves)
from selling a book for less than it costs to produce and deliver
it. But some authors, I'm convinced, would sell a book costing
$10.00 for $5.00 just so they could sell more. Sure, you'll sell
more. But you'll also go out of business pretty quick.
So let's take a moment and think about what it really costs
to produce a book.
TRADITIONAL PUBLISHING
The first obvious cost is the printing cost. But even before
that you have the cost of creating the writing (the advance
paid to the author and later royalties). You also have the
cost of production (designing a nice cover, editing, formatting),
the cost of inventory (having thousands of dollars in cash
in the form of books in a warehouse rather than in your
pocket where you can use it for other things), the cost
of distribution (getting the book to a place the customer
can buy it), and the cost of fulfillment (the transaction
costs, shipping and handling to get the book from the
market into the hands of the customer).
In traditional book publishing you also have this other
weird cost called returns. What that means is the
publisher agrees to buy back any unsold copies of
a book. And it might be as much as a year later that
they have to do this. It is a cost that I imagine plays
havoc with a traditional publisher's bottom line
because they never really know how many books
might be returned.
WHY YOU CAN'T SELL A $10.00 BOOK FOR $5.00
Before we do the cost comparison between traditional
and epublishing, one other concept that is important to
understand is the concept of managing cash flow. If
you only learn one thing about running a business,
learn about managing cash flow.
Simply put, cash flow is the number of dollars flowing
into a business versus the number of dollars flowing out
over a period of time (usually monthly). There are three
cash flow situations a business could be in at any one
time.
First, you can have more cash coming in than is going
out. This is the situation you want to be in (until tax time,
of course). This is the sign of a healthy company.
Second, you can have an equal amount of cash flowing
in as is flowing out. This is the sign of a stable company.
Third, you have less cash flowing in than is flowing out.
This is a company headed for bankruptcy. How fast the
cash is flowing out determines when they go bankrupt.
From a business perspective, traditional publishing has
two strikes against them right from the top. And the
strikes are related to cash flow. The first is this returns
policy. They may sell 15,000 copies of a book one
month, but realize six months later that they really
sold only 5,000.
The second strike is the cost of inventory. If there are
15,000 copies of a book in a warehouse somewhere
each worth $10.00, that is $150,000 in cash the
publisher is counting on to fund their business. But
they can't access any of it until they sell those books.
And they have to sell the books at $10 each. If they
end up selling those books at $5.00 each, but they
counted on making $150,000 to pay their bills, they're
$75,000 short. Let's hope the author is one of the
people they decide to pay.
I think this, in a nutshell, explains why traditional publishers
pay so little and take all the rights they can get. They are,
admittedly, taking a lot of risk.
COMPARING COSTS
Now that we have a good idea of the costs involved and the
concept of cash flow, lets look at what an author could
actually pocket under three book publishing models.
Let's assume the book has a cover price of $12.95.
Traditional Publishing
If 90% of the list price of a traditionally published book
is tied up in costs other than royalties, the author might
get a 10% royalty on the list price and give up all rights
to the work. If the publisher sells 10,000 copies of that
book in a year, the author pockets $12,950.00 in
royalties often paid by the publisher in one annual
lump sump.
Print-On-Demand Publishing
In the case of print on demand through Booklocker.com,
only 65% of the list price is tied up in costs other than
royalties. So that means the author gets 35% royalties.
Plus they keep all rights to the books. But they have to
front the cost for setup, which is $199.00. So at a per
book royalty of $4.53 ($12.95 x 35%), an author has to
sell 44 books to make back the setup costs. After that,
the author needs to sell 2859 books in a year to make
$12,950.00 in royalties. That is roughly 1/3 the number
of books. And Booklocker.com pays monthly (not
annually), so an author's cash flow is steady.
Ebook Publishing
In the case of ebooks published through Booklocker.com,
only 30% of the list price is tied up in costs other than
royalties. That means the author keeps 70% royalties
on books priced at $8.95 or higher. And, of course,
authors keep all rights to their ebooks, too. There is
no setup cost with ebooks on Booklocker.com. So at
a per book royalty of $9.07 ($12.95 x 70%), an author
only needs to sell 1427 books in a year to make
$12,950.00 in royalties.
LESS IS MORE
Selling 2859 print books or 1427 ebooks in the course of
a year using the Internet is an achievable goal for a single
author using a company like Booklocker.com. Plus authors
get a predictable monthly amount of cash flow and they
keep all the rights to their book.
So that is how selling less can actually make you more.
Type at you next week!
~~~~~
Email your
comments and column ideas to
Richard Hoy
at: richard@booklocker.com
~~~~~
Richard Hoy is the co-owner of Booklocker.com, the
most author-friendly epublisher online offering up to
70% royalties on ebooks, 35% royalties on print on
demand books (the highest in the industry), and
non-exclusive contracts. Booklocker.com strives to
help authors make money by combining epublishing
with Internet marketing. See guidelines at:
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**This articled be may be REPRINTED/REDISTRIBUTED FREELY
as long as the entire article and byline are included.**
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