John Hewitt's Blog

How to Calculate Potential Book Profits

Most writers have no idea how much money they can expect when their book is published. The formula, however, is fairly straightforward. To begin with, a writer generally receives an advance. An advance is payment, in advance, based on the expected initial earnings of the book. It is a negotiable amount, but once the publisher pays this to the writer, the advance belongs to the writer whether or not the book ever sells a copy. Advances range from a few thousand dollars to over a million dollars for well-known celebrity writers. If you are an unknown writer, your advance should range from nothing to about twenty-thousand dollars in the United States. Some first time-writers negotiate more, but that is the usual range.

Royalties

In order to make the writer more money than the advance, a book has to sell well. If it does, your payment as the author comes from royalties, which you can calculate using the system below. A book that sells moderately well, but is not a bestseller, may or may not make the author a few extra thousand dollars. Royalties (ranging from 4% to 8% in most cases) are generally based on the cover price of the book, but that does not include books that are discounted or remaindered. So, for the sake of argument, say you sold 20,000 full-price copies of a paperback priced at $7 (I know it would more likely be $6.95 but I am going to use round numbers.) If your royalty percentage were a generous 8% you would make a total of $11,200.

Now remember that your advance is an advance on these royalties, so your publisher would subtract the initial advance from the $11,200. If your initial advance equaled $10,000 you would eventually receive $1,200 in additional royalties. An author who makes a total of $50,000 or more from a fiction book should consider himself or herself to be doing very well. For the sake of argument, however, let us say that Oprah Winfrey chooses your book for her book club and you sell 500,000 copies of your book. With this same formula, at 8% you would make $280,000 and would have no trouble finding a publisher and getting a big advance for your next book.

Where the money goes

Surprisingly, the publisher does not make most of the money from your book. The party that makes the most money off the sale of a book is the retailer. By the time a publisher pays all of the related expenses of publishing a book (production, distribution, salaries, promotion, etc.), they generally clear a profit of about a dollar a book for a book with sales of about 20,000. Therefore, the publisher made more than you, but not that much more and they took on all the risk. Remember, if the book never sells a copy, you still get to keep your advance.

For this reason, the market for mid-range books (under 100,000 copy sellers) is very tough, and major publishers are looking for books they expect to sell in large numbers. This is why it is hard to get a fiction book published in today’s market. A first-time author or even an author with modest previous sales is going to have a hard time finding a publisher. When they do, they can expect very little by way of promotion because the publisher expects so little return for their investment.

If you do get your book published, and you want it to sell well, be prepared to spend a great deal of your own time marketing the book. Most authors think it should be up to the publisher to promote the sale of the book, but the author is the one who really needs to be out there making phone calls to bookstores, lining up press interviews and setting up readings and signings.