Business Calculations for New Authors
By Jerry D. Simmons | April 24th, 2007 | No Comments » (Click to add yours!)
You may not like it, but once you start selling your book, you’re in business—exchanging a product (your book) for money. Predators are looking for new author/business people who have not yet figured out how to earn a business profit from their books. Following is a sample calculation for determining whether a marketing service is worth the expense. This example evaluates the profitability of a book fair; the same calculations apply to other marketing services:
- Determine the revenue you will earn from the sale of each book. For example, if you paid $8.00 a copy of your book and you sell it for $12.00, your revenue earned is $4.00 per book. Revenue is not profit— keep going.
- Calculate the tax you must pay on the price of each book sold. For example, at $12.00, city; state; and county taxes might be 8.1%, or $0.97.
- Subtract the tax expense from your revenue, $4.00 – $0.97 = $3.03 revenue per book—this is not profit…keep going.
- Determine how many books you must sell to earn back your fee: $150.00 divided by $3.03 = 50. You must sell 50 books just to earn back the event fee.
- Now calculate other costs involved. For example, for a one-day book fair in a town to which you must travel, add up the cost of your meals during the trip, hotel, and gas. Let’s say these costs total $185.
- Calculate how many books you must sell to earn back your $185 in other costs: $185 divided by $3.03 = 61.
- Add the total number of books you must sell just to cover your expenses for this event: 50 + 61 = 111. This is your break-even point; you must sell 112 books to earn a profit.
- Determine the probably of breaking even (earning back your expenses) by considering that the average number of books sold at a book fair, where many other authors compete for sales from same audience, is six. (Obtain this number by asking other authors how many books they’ve sold at such events— beware: they may inflate the number.)
- Calculate your profit. If you sell 6 books, you will earn back 6 x $3.03, or $18.18. Subtract your expenses from your earnings: $18.18 – $335 equals -$316.82—a negative number. In this case, the event will cost you $316.82—the amount of your loss, the opposite of profit.
The only business that earns money at this book fair is the vendor who charges authors $150 each. If there are 25 authors at the fair, the vendor earns revenue of $3,750; the vendor’s expenses are the cost of renting the space to hold the fair, let’s say $1,000; plus travel & living at $185; plus advertising costs of about $500. The vendor makes a profit of $2,065 ($3,750 – $1,685).
Unlike naïve author/business people, service vendors who prey on them do not operate at a loss. Before plunking down your money, ask yourself these two questions:
How many books must I sell to make this expense pay for itself? How likely is it that I’ll sell the number of books necessary to recover my costs?
This free article was provided courtesy of Marilyn Haight; WordedWrite.com (http://www.wordedwrite.com).
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