Economics of Self-Publishing

This is an expanded written version of the extemporaneous talk I gave at the 2014 PubCamp sponsored by Writer.ly My goal was to furnish actual numbers to help prospective self-publishers to be able to determine their goals and estimate their expenses and income from self-publishing. Because I have a background in bookkeeping (I was the Finance Manager for both Hugo House and Artist Trust), I find numbers fascinating. I hope you do too.

I had not actually crunched my own numbers until I had to prepare for this talk and I learned a lot from this exercise. My next step will be to prepare templates you can use for your estimates. And if you are a self-published author and you wish to share your numbers with me (and the world), I am looking for more examples.

My Early Publishing Ventures 

My publishing career began in 1991 when I started selling a photo-copied, comb-bound book called Celebrating the Seasonal Holy-Days on my web site, Living in Season. Over the years, I made $2,000 on that book (which means I sold about 200 copies at $10 a copy) and had expenses of only $500.

As my website and my mailing list grew, so did my cache of information about holidays, and I began publishing 30 to 40 page PDF packets, one for each holiday. My total income over 12 years averaged $2,000 a year with expense of only about $100 per year (most of that for copies and portfolios and postage and envelopes for packets I printed and sent via mail—I did not keep good records to separate out email versions from print versions). My figures do not include indirect costs like the cost of a post office box and the cost of maintaining a website. It should also be noted that I was sending out a newsletter every month to a mailing list of 6,000 and I was writing columns for magazines and web sites on my topic.

In the last few years, my income from selling books and packets dwindled as I stopped marketing them and as information became more widely available for free on the Internet. Still, I was surprised to see how cost-effective this was as a means of publishing. If you are writing non-fiction and have access to information that people are searching for on the Internet, I think creating and sending PDF packets is more cost effective than creating perfect-bound books.

Of course, if you are going to sell directly from your website you need a shopping cart function (I use a WordPress plug-in) and a way to accept payments. I use Paypal (which can accept credit cards and direct withdrawals from customer bank accounts). Paypal takes a commission of approximately 3% off each sale (it depends on the country of the customer) but it’s easy to use and integrates well with my web site.  There are other options for selling online that I have not explored.

slowtimecoverPublishing Slow Time with Lulu: Learn From My Mistakes

As soon as print-on-demand publishing became available, I wanted to create a real book. My interest in holidays had turned into an interest in time, and I had shopped around a book proposal (with an agent and without) for several years. Finally in 2007 I decided to self-publish Slow Time. I chose Lulu, one of the more reputable independent print-on-demand companies at the time, and found it remarkably easy to use. However, they tend to be more expensive (per book) than other print-on-demand companies and their customer service is terrible (it’s really hard to get an answer to a simple question—by contrast someone at CreateSpace will call you back practically before you’ve finished typing in your phone number).

At the time Lulu was free and my book sold so well (it was in their top 100 books) that they converted it into various e-book formats for free (unfortunately their first versions had horrible formatting problems which I think they have corrected but I actually haven’t checked these versions since I don’t have access to the files they created).

Since 2007, I have sold 1600 copies of Slow Time (the average self-published book sells 200 copies) without doing any marketing except mentioning it on my website. My total income is $7446. However, my expenses are $7800 because of some critical mistakes I made in pricing.

For one thing, I priced the book too high at $19.95. That probably inhibited sales. But even worse, I arranged to sell it directly to Amazon, setting up a vendor account through Amazon Advantage. They send me a purchase order, I order the books from Lulu and have them shipped to me, then I ship them to Amazon. Amazon keeps track of sales and deposits the money I make (40% of the retail price) directly into my checking account monthly.

Printing has been my biggest expense at $5,289. The price of a book varies depending on how many copies you order but since I didn’t have a place to store a lot of books, I tended to order small amounts and use the cheapest (slowest) shipping rates. A single copy (of my 184 page 6×9 book) costs me $8.34. Ten copies cost me $83.40. At 15 there’s a price break of 3%, so each copy is $8.09. At 30 copies, the price goes down to $7.67, a 5% discount. If I ordered 1200 copies, each copy would be $6.67.

If I add in shipping costs at the cheapest rate (mail for 1 to 15 copies; ground above that), each copy goes up to $12.33 for one, $9.86 each for ten, $9.52 each for fifteen, $9.05 each for thirty. The ground rate for sending 1,200 copies is $607 which comes out to $7.18 per copy. Since Amazon only pays me $8.98 per book, I was losing money on every sale, since I was also paying shipping costs to send them to Amazon.

About a year ago, I was able to change my account (I had been trying for over five years, thus my complaint about customer service) so I could send books directly to Amazon from Lulu, thus incurring only one shipping charge. However, Amazon usually only orders 1 to 3 copies at a time. The last time I sent them 3 copies from Lulu at $8.34 each, Lulu charged $11.99 to ship them, so each book effectively cost me $12.33 per book. Since Amazon is paying me $8.98 per book, I’m now losing about $3 per book–which is why I plan to switch to CreateSpace, the Amazon affiliate.

My next highest expense was $1,100 to pay a graphic designer to create the cover and do the interior design (which was complicated as the book included illustrations, charts and sidebars). I also paid an artist $250 for permission to use her original artwork on the cover and in my marketing materials. My only other direct expense was $348 for supplies (envelopes for mailing) and $20 for an ad and $50 for an entry fee for a contest (Slow Time won in its category but I’ve never used that in my marketing material).

sans serif  Ann Dexter sample-001Next Project: Rat City Publishing and Leap of Faith

Despite my lack of success with Slow Time, in 2014 I took a leap of faith and decided to launch a publishing imprint: Rat City Publishing. My goal is to publish good mysteries set in Seattle and make them available online and through local book stores.

The first book I chose to publish is an atmospheric mystery called Leap of Faith by Rachel Bukey. It features Ann Dexter, a Seattle Times reporter, who starts investigating a suspicious suicide and ends up getting involved with a New Age church and its resident psychic. Her search for the truth takes her from the board room of a Seattle software start-up to a Mexican spa, and challenges all her beliefs about love, life and death.

I ordered 10 ISBN’s from Bowker (for $250) and set up an account as a publisher with them. Once I entered the title into the Bowker database, I got a unique ISBN for the book.

We spent the most money ($1,100) on copy editing but it was money well spent. Our copy editor, Erin Doherty, found all sorts of problems which both the author and I had missed. I think paying for a copy-edit is non-negotiable.

Leap of Faith cover 2I wanted this book to look like a traditionally published book. So we spent $500 on cover design, which was cheap (the graphic designer was a friend of Rachel’s) considering how many iterations it took to get the book right. Like many self-publishing authors we first started out thinking the cover should contain all the story elements but quickly realized that was too cluttered. By comparing our book cover, over and over again, to the book covers of best-selling mysteries, we realized the title needed to be more prominent and the sans serif  Ann Dexter sample-001background just needed to convey that it was a mystery.

We also studied other books for ideas on the back cover design. Rachel solicited blurbs and got a great one from Skye Moody: “A sparkling new talent on the mystery scene, Bukey expertly weaves faith and malevolence into a nightmare of deadly surrender.”

 

The graphic designer used the template available from CreateSpace to get the cover in the correct format. CreateSpace has a handy calculator you can use to determine the width of the spine (based on number of pages and kind of paper). I had to determine the price (which I did based on the cost of similar books of similar size) and used that to purchase a bar code from Bowker (showing ISBN and price) which came in the form of an EPS file. (With my next book, I’m going to let CreateSpace create the bar code for me for free).

I did the interior design myself after choosing a trim size of 6×9 (one of the standard book sizes available at CreateSpace) and making sure my margins fit within their guidelines. This was a time-consuming process (about 30 hours of my time) but one I thoroughly enjoyed although I never quite got the headings quite right. (I was formatting the book in Word with a little help from Aaron Shepard’s book, Perfect Pages). (I briefly considered using the templates provided by Joel Friedlander at his website and might do that in the future–they’re more expensive for publishers than for individual authors.)

Submitting the book to CreateSpace was easy and free. I simply uploaded a PDF file for the interior and another for the cover. Then I ordered a proof copy which cost me $13.93. I would have ordered more if I had realized there was a limit (five) on proof copies, as we wanted early copies to send to reviewers and share with the local bookstore where we were planning a launch.

When I showed the first proof copy to my local bookseller, she complained that the bottom margins weren’t aligned. I went back and aligned them but then the pages had widows and orphans. In a dedicated page-oriented program like InDesign you could adjust for both but not in Word. While doing the interior design, learned a lot about typographical conventions for creating books (font choice, leading between lines, alignment on the page, headings, page numbers, etc.). Some readers might never notice these details but others will feel slightly uneasy or disoriented if you flout the conventions.

We noticed some other errors (most of them made in the process of making corrections after the copy-editing process), corrected them, uploaded a new interior PDF and then requested new proof copies.

Once we were satisfied the book was as perfect as it could be (the lovely thing about print-on-demand publishing is that you can simply upload a new file if you find and fix an error),  I approved it and it was listed on the CreateSpace site immediately. It was also available for me to order personal copies. Unlike Lulu which offers a discount for bulk sales, the price per book is the same on CreateSpace no matter how many copies you order but it is far cheaper. My Slow Time book would cost me $4.35 at CreateSpace (instead of $8.34 at Lulu).

And in fact, Leap of Faith also costs me $4.35 a copy. Shipping, of course, is extra. CreateSpace also wanted to charge me sales tax. The only way to get around this is to furnish them with a resale certificate from the State of Washington, which takes a while to set up.

Because I wanted to make the book available to bookstores, I contacted our local distributor, Partners West. I sent them a professional looking press release and let them know that over 50 people were planning to attend the book launch at Elliott Bay. They sent me a contract which stipulated that I would ship the books to them and they would pay approximately $6.00 per book (40% of the retail price), after they’ve received payment from Elliott Bay. If the books don’t sell, and Elliott Bay returns them to Partners, they will return them to me.

Because we were doing everything at the last minute, I ordered 100 books at my author price and had them shipped to me at a total cost of $566.32 which include $435.00 for 100 books plus sales tax (they didn’t have my resale certificate yet) and shipping. So each book cost $5.66 per book. With Partners paying me $6 per book, we’ll make a whopping 34 cents per book. I then delivered the books personally to Partners and they shipped them to Elliott Bay.

Over 75 people attended the event (the author did a great job of rallying her people) and we sold every book in the store, plus a few extras I brought from home. This set us up for success with both Elliott Bay and Partners. Partners reordered, Elliot Bay keeps stocking the books, and I was able to get CreateSpace to send the books directly to Partners at a cost of $5.44 a book (includes shipping but not tax) giving us a net profit of $1 per book.

After the book was launched, I asked CreateSpace to send the book to Kindle but I didn’t like the results (funky formatting which sometimes happens when converting from Word). So I learned how to format an e-book for Kindle (thanks to my friend Annie Pearson) which took about 5 hours. I uploaded that file to Kindle and it is currently available for $6.99. Only 7 copies have sold so far but we get $3.89 per copy so this is an area where we want to focus some marketing efforts.

I have not yet done the formatting necessary to create e-versions for Nook, Apple and Kobo, since we have the e-book enrolled in the Kindle Select program which makes it possible for us to give it away for free for special giveaways but requires exclusivity. Since more e-books are sold for the Kindle, we’re not in a hurry to set it up with other channels, although we will eventually.

Rachel hired a marketing consultant who helped her update her website, got her beta readers to post reviews on Amazon (currently at 25 reviews), and helped rally people for the book launch. In addition, Rachel plans to submit the book to services like BookBub that will promote it at a reduced price (if they accept it). We’re also planning a giveaway on Goodreads which should only cost us $4.35 per book (only print books are eligible for giveaways) plus shipping.

Although I was only planning to have the book available at Elliott Bay and Seattle Mystery Book Shop, where I have personal connections, Rachel’s friends have requested it from bookstores they frequent and it is now available at Edmonds Book Store and Secret Garden in Ballard and Santoros in Greenwood. I imagine all of those booksellers order it from Partners.

CreateSpace does make the book available, through a program they call Expanded Distribution, through Ingram, the national distributor, which provides books to bookstores all over the country through their catalog. But one thing I just learned is that it comes at a cost. The books are non-returnable and at a price point which makes them undesirable for bookstores to order, thus effectively making sure that Amazon will be the primary retailer. If you’re worried about what might happen if Amazon completely takes over all book-selling (and I am), you might want to put your eggs in some other basket

I think it’s important for authors to set clear goals for their self-publishing ventures. I went into this thinking I would be happy just to have the book available for readers but Rachel persuaded me that we should have a slightly more ambitious and business-like goal: to make some money

At the moment, three months after the launch, we are happy with sales of 147 books for a total income of $797. Almost all of that is due from Partners West; we have only sold 20 print copies on Amazon so far and 9 Kindle versions. Since our total expenses are $3,000, we will have to sell 2,200 books at $1 a book or 600 Kindle books at $4 a book to break even. We have a ways to go.

Finding your readers is really the critical piece of this puzzle for self-publishers. Book sales can happen consistently over a long period of time (as with my Slow Time book) but that means it might take a year or more for you to break even.  And don’t over-estimate the effects of marketing. If you want to break even, first consider how many books you can sell personally through your existing networks (and estimate conservatively), then base your budget on that. Anything extra will be pure profit.

 

 

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