Tag Archives: business

Easy and free Royalty Management for Book Publishers (And Anyone Else)

What follows is an easy free royalty management for book publishers to generate book royalty statements for copyright holders in a matter of minutes. In particular, this royalty management method is ideal for publishers using Lightning Source, Ingram Spark, Amazon KDP, or any other wholesaler who sends sales reports in CSV or Excel format. You don’t need expensive software to do this, just a copy of Microsoft Excel or access to Google Sheets (I use Google Sheets and will explain the process from this perspective).

There is one caveat, a large book publisher (1,000+ book titles) might need something more robust. This method is ideal for small to medium-sized publishers, and it would also work for any other organization managing and paying out royalties.

Once the spreadsheet is set up, generating multiple royalty reports is as simple as copy, paste, print. It’s a massive time saver!

Free royalty management for book publishers. Better than the old ways!

The Process

First, you need to learn how to use Pivot Tables. These will allow you to sort, calculate, and analyze data across columns and rows. These external links will tell you how to do it:

How to make Pivot Tables in Google Sheets.

How to make Pivot Tables in Excel.

Once you are ready to begin your free royalty management for book publishers, create a new spreadsheet in Google Sheets. Name it for the royalty period that you want to report on (in the future, you will just duplicate this spreadsheet for new royalty periods).

The first sheet we make is called “Currencies.” This sheet contains the exchange rate for the various international markets that you work in and collect royalties from. It is also a good place to write down any instructions for using the spreadsheet or reminders.

Google sheets offers an alternative free book publishing royalty software, you just have to build it out to your specs.
A Google spreadsheet that contains sheets within it.

Next, create unique sheets for each source from which you, the publisher, receive checks, and thus sales statements. For clarity, the above screenshot has three sales sources: eBook (Amazon KDP), Paperback (Amazon KDP), and LSI (Lightning Source Inc.). If you use other wholesalers or distributors, you will need to create unique sheets for them as well. If you as a book publisher handle direct retail and wholesale orders as well, then create the appropriate sheets for those.

Royalty tracking for book publishers isn't easy, but google sheets can remove a lot of the pain for free.
This sheet contains Amazon KDP’s statement for eBooks sold in all markets. Note that one title can have many sales listed separately or combined.

The next sheet we create will contain the sales statement issued by Amazon KDP for all eBooks sold in all markets. This sheet is called eBook. Creating sheets for other sales channels mirrors this process.

Download the CSV or Excel version of your sales statement, and open it. Copy the column headers into your new spreadsheet. Don’t delete any of them, even if the data they contain is useless to you.

Add a column at the end called “True Royalty.” This column will contain the total amount you, the publisher, received for the sale adjusted to the appropriate exchange rate (home currency won’t change, i.e. if you are in the United States, then the amount will stay the same). Note: we will get to the Copyright Holder’s Royalty later.

Next, copy and paste your sales statement into the new sheet. To do this, highlight everything in your sales statement except the headers and hit copy. Then, click on Row 2, Column A of the new sheet, and hit paste.

Now, set the value for the “True Royalty” column. For every row that has sales data, make sure this is the value. This is the Google Sheets version:

=IF(J2="USD",O2,IF(J2="EUR",O2*Currencies!$B$2,IF(J2="JPY",O2*Currencies!$B$5,IF(J2="CAD",O2*Currencies!$B$3,IF(J2="GBP",O2*Currencies!$B$4,IF(J2="AUD",O2*Currencies!$B$6,IF(J2="BRL",O2*Currencies!$B$7)))))))

If you need more or fewer currencies, then adjust appropriately.

If you did everything right, the values in the “True Royalty” column will reflect the total amount that you received in your home currency. Run a couple of manual calculations to verify that you did it right.

Note: this formula uses Net Sales for royalty calculations. If your organization uses List Price or Gross Sales as the basis, then adjust the formula.

One challenge of of book publisher royalty management is foreign sales. Google sheets can make quick work of this.
The True Royalty column adjusts the Royalty to the appropriate exchange rate. The highlighted row changes the Royalty from Canadian dollars to USA dollars. Note: if the book publisher uses the list price as the basis for the Royalty, then the Avg. List Price column would be used.

Next, we will make the first Pivot Tables. These will be used on the sheet called Totals, which displays the Units Sold and True Royalty for every book in every sales channel. I have mine set up to combine all markets (USA, UK, EU, etc). So in this example, the Pivot Tables displayed on the Google sheet “Totals” are: all Amazon eBook sales, all Amazon paperback sales, and all Lightning Source Inc. paperback sales.

Here is a snippet of that sheet:

Google sheets pivot tables provide high-level details of book royalty tracking, from the sum of all royalties to number of copies sold.
A Pivot Table displaying total unit sales and exchange rate adjusted royalties for all currency markets for all Amazon KDP eBooks sold for the given period.

You can edit the Pivot Table from the Pivot Table Editor on the right of the dashboard. Here it is:

An example of a pivot table from a Google sheet built to calculate author book royalties.

This particular Pivot Table grabs all of the data from the eBook sheet (the sheet containing the sales statement for all Amazon KDP eBooks for the period). In the Editor, you can adjust how the data is sorted and what is displayed, calculated, and filtered. The Filters will be used on the Royalty Statements for individual rights holders.

Finally, the Royalty Statement:

An example of a auto-generated book royalty statement, created using a series of Google sheets.
Example of an auto-generated Royalty Statement using Google Sheets and Pivot Tables. Hit Command+P to print this to a PDF.

Above is the Royalty Statement for the Copyright Holder of one or more titles. In this statement, there are 3 Sales Channels, and each of those is created using a Pivot Table similar to the “Totals” sheet Pivot Tables. The only difference is that these Pivot Tables have filters applied to the book title data.

The rest of the sheet reflects the Copyright Holder’s royalty rate and the total they will receive. There are also places for deductions to cover Author purchases or other expenses that get applied to the account. You can customize these calculations.

Concluding Thoughts

Once the free royalty management for book publishers is set up, the sheets really are a massive time and money saver for book publishers. This is especially so for small and medium-sized publishers who have better things to do than sort data and run reports all day long. Remember, we got into publishing to be creators, so let’s spend as much time creating as possible.

If you are a fellow publisher, check out our publishing services and how we can help your book publishing workflow.

Enjoy.

Book Printing: Print Only What You Can Sell

Note: As of 2023 this post is ageing. Some aspects may be dated. However, the core lessons hold true for the new author looking to self-publish or an entrepreneur looking to start a small publishing business.

When a new publisher is looking at printing options, there is a temptation to print too many copies. The more books the publisher orders, the bigger the discount the printer will give. It is very easy to fall into the trap of asking for a quote for 1,000 copies and ordering 5,000. The discount of 25% to 50%, or even more, that the publisher would get by ordering 5,000 copies causes the publisher to forget everything discussed in the book pricing chapter.

I was guilty of this mistake, once. Then I vowed to never again forget one simple rule: print only what I have sold. Today it is easy for a publisher of any size to use offset printing, Print-on-Demand, or electronic formats to publish their books. These options allow the publisher to develop a game plan that will stick to this simple rule.

Learn from my mistake

For the first book that I published I ordered a print run of 1,500 copies.

Initially I wanted to order only 500 copies. Based on all the research I had done and pre-sales, I knew that I would sell at least 500 copies in the first year. My plan was to have the first 500 copies, which were as good as sold, printed using offset printing. Then I would fill all subsequent orders using Print-on-Demand.

So I asked the printer to give me a quote for 500 copies. Feeling curious, and slightly optimistic, I also asked the printer to give me quotes for 1,000 and 1,500 copies. I never should have done that.

When the printer sent the quotes to me, I was amazed at the massive “discount” that I would get if I ordered 1,500 copies instead of 500 copies. The discount was a little over 33%. A 33% reduction in printing costs per book! I ordered the 1,500 copies and justified my action with the thought that eventually I would sell all 1,500, and when I did I would have made more money per book versus printing 500 copies.

So what happened? I sold the first 500 copies—the copies I knew I would sell—within the first couple of months. The rest of the books sat around in storage for years. They trickled out copy by copy, a painful thing to watch.

The added cost of printing an extra 1,000 copies over what I needed hurt my cash flow, which stopped me from spending more money on marketing, which in turn hurt the overall sales of the book. It was another hard lesson to learn: print fewer to sell more.

Print only what you have sold

That’s right. Print Only What You Have Sold!

Here are some good reasons to follow this rule:

  1. It forces the publisher to do more marketing before releasing the book.
  2. It forces the publisher to pre-sell the book as much as possible before releasing the book.
  3. It forces the publisher to face realities: if the publisher can’t market the book and can’t pre-sell the book, then it will be more difficult to sell the book once it is out.
  4. It helps keep more cash on-hand, and not lock up that cash in inventory.
  5. Less inventory.
  6. The project will turn a profit faster.

Choosing the best printing option

When abiding by the rule of Print Only What You Have Sold, there are a few printing options publishers can pursue.

For the trade paperback publisher, which is where I do most of my business, Print-on-Demand or offset print runs will work equally well. POD printers like Lightning Source produce paperbacks that often are better quality than a lot of offset printed paperbacks. No longer should questions of quality push publishers towards making financially unsound decisions!

If the publisher must do a traditional, offset print run—for example, a photograph art book—then pre-selling the book is vital! For many real life example, look at the books on the Kickstarter website. Why are the publishers and authors putting their books on Kickstarter? So that they can pre-sell as many books as possible before they have invested a dime in printing.

So, for the trade paperback publisher, the key is matching pre-sold volume to the best printing option for that volume. Here is a general rule of thumb:

  • Fewer than 500 copies—Print-on-Demand
  • 500 copies or more—Offset

Here is another fear that the modern publisher can vanquish:

  • Do not worry about having enough supply!

With Print-on-Demand, books can be ordered, printed, and shipped within a couple of business days. Books are now part of the Just-in-Time fulfillment cycle, where manufacturers produce only what has sold and then ship the products worldwide direct from the factory. And often everything is done overnight! It is a revolutionary change. Yet the publishing industry, despite having access to POD for decades, is still underutilizing this technology compared to what could be done.

So, unknown supply needs should not influence the publisher’s decision on what printing process to use or how many copies to print. Supply is available 24 hours a day, 7 days a week, worldwide.

Here is an example. If I pre-sell 500 copies of a book, then I will order those books from an offset printer. I will fill all other orders using POD … Unless there are enough new orders—after the first 500 have been printed and sold—to justify another offset print run. In this situation, the POD will fill the gaps between offset production times so that orders are never delayed. Customers will not experience delays nor significant differences in quality.

SUPPLY AND DEMAND

Ultimately we are left with a near perfect economy, where supply and demand are almost in harmony.

Know your audience and which format they want

Most of the audiences I publish for want print books. This is something I realized only after investing months of time formatting beautiful ebooks, sometimes coding them from scratch.

To be honest, it was obvious from the beginning which formats my audiences prefer. My books fall into several categories: academic, outdoors non-fiction, and inspirational. The audiences that I sell to are, for the most part, well-defined niche audiences. I am not publishing Harry Potter, which appeals to almost everyone. So it makes sense that eBooks account for only 2.5% – 5% of my business.

If a publisher is producing fiction and general audience non-fiction, then eBooks are likely to be a more important part of the publisher’s income.

Similarly, if a publisher wants to produce an art book of photographs or paintings, then Print-on-Demand is not the right solution. The publisher will have to use more traditional printing methods to get the very high quality that their audience will demand.

If the publisher knows the audience, the publisher will know where to invest time and money during the design and production phases.

Conclusion

Do not print 1,000 books with few ideas for selling them. Do not fall into the trap that so many passionate authors and publishers have fallen into—if we publish it, they will buy it. This is a sure recipe for a garage full of books.

In sum:

  1. Know your audience and what format/s they prefer
  2. Pre-sell the books (especially important for printed books, less important for eBooks)
  3. Print only what you pre-sold
  4. If the content category permits, use Print-on-Demand to fill orders during low demand

Remember! Print Only What You Have Sold!

Book Submissions and Acquisitions

Here is how it is going to happen.

  1. The new publisher establishes an imprint with one or more books that will sell.
  2. A website is built for the imprint. This includes a book submissions page with information on how to submit book proposals.
  3. The initial books are successful and penetrate the market, the publisher gains new contacts in the industry, and the imprint becomes known.
  4. Authors and others learn of the imprint and the submissions roll in.
  5. An undisciplined, new publisher sees these submissions and gets excited. This enthusiasm leads to taking on projects that the publisher doesn’t know how to market.
  6. Alternatively, the disciplined publisher browses the submissions, finds no leads and thus rejects all submissions, and then continues with the original business plan.

Discipline and hard choices

What does it take to be disciplined?

I do a lot of high risk sports, like mountain climbing and rock climbing without ropes. I’ve also worked in high risk industries, like logging and tree trimming. Participating in these activities demands discipline. If I climb into an area beyond my abilities, the probability of injury or death increases, substantially. More often than not my ego and passion want to push deeper into the danger zone, past where my abilities end. Strong discipline reins in my ego and passion, keeping me in the realm of possibility. Discipline reminds me to stick to the plan.

Don’t mistake discipline for being risk averse. Discipline is a methodical way of dealing with risk. Discipline says, I can’t do this today, but with strategic training and experience I can do this in the near future.

Following the plan that I laid out in the chapter on pricing will help you to stay disciplined while making the hard choices that all publishers must eventually make—rejecting good books because the publisher doesn’t know how to sell them.

Here are some basic rules to follow:

  • Stick with what you know.
  • Stick with what you can sell.
  • If you don’t know it and you don’t know how to sell it, don’t publish it.

Reviewing submissions—separating the wheat from the chaff

When reviewing submissions, there are a few basic questions that must be answered.

Many publishers ask that inquiring authors answer these questions in their submissions—this is a good, time-saving technique. It forces the author to think about who is going to buy the book. And it helps the publisher to see how savvy the author is and how well the author understands the audience.

Here are some questions to ask when reviewing submissions:

  1. Who is going to buy this book?
  2. Why are they going to buy it?
  3. Do they already want to buy it, but it is not available?
  4. What does the competition look like?
  5. Is there a good reason no one else is publishing this or similar content?

Let’s assume that every question about the audience is answered. The publisher then needs to ask a second round of questions to decide if the book is right for the publisher.

  1. Is this a quality book or a bargain book?
  2. Does this book have to be printed using a specific method?
  3. How much editing is this going to take?
  4. How long will it take to design the cover and interior?
  5. How much marketing must be done to reach the audience?
  6. What is the overall labor investment?
  7. Finally, and once again, does the book make financial sense based on the publisher’s pricing and volume strategy?

Notice that most of the second round questions have to do with the publishing process. Each publisher will have a unique publishing process, or workflow, and books will need to fit into this to be published. Just as each artisan has a process for sculpting, painting, sewing, or carving, the publisher must have a process for publishing books. The office is the publisher’s workshop. The computer, pen, and paper are the tools. The publisher needs to develop a successful, profitable process and stick with it. The publisher can modify the process, but slowly and incrementally.

Be wary of publishing books that deviate too far from the proven formula.

Learn from my mistake

The first unsolicited submission that I received truly piqued my interest. The gears started turning in the creative part of my brain as I read the proposal. I saw how the book could expand my business into a parallel niche market—newer and larger than the market where I operated. I saw huge potential for the book—bigger than any book I had published.

However, I knew nothing about the new niche market. I had no contacts (aside from the author) within it. And I didn’t know how to sell the book to the audience. I didn’t even know who the exact audience was. Sure, I had a broad idea for who the audience could be. But that was it. I did not know how to reach them. And that is not enough to market a book.

In my enthusiasm for both my first unsolicited submission and the theoretical potential of the book, I went forward and published it. Yet throughout the publishing process, when any of the above questions arose or I looked at pricing and volume options, logic told me to abandon the project. But I never listened.

The book was a complete flop. Dead on arrival. I lost lots of time and money on the project.

My problem: I did not have the discipline to say no even though all the evidence pointed to that conclusion.

It is always nice to get submissions. Submissions validate the publisher’s existence almost as much as sales. But the publisher must avoid hubris when facing reality.

Book pricing—Solving the Great Mystery

Book pricing is difficult and a bit like cold fusion—many people claim to have discovered the key to success, but none can prove it. That being said, there are steps that publishers can take to eliminate some of the magical guesswork from the process of setting prices for books.

Publishers must always remember why prices exist. Prices exist to create profit. The publisher should strive to generate their desired profit from the primary audience. Understanding the primary audience and the price elasticity of the book within the primary audience is critical to designing success and achieving profit goals. What follows is the method that I use to decide prices for books.

An early, tough lesson

Five years ago I spent days obsessing over how to price the first book that I published. Most of my thoughts swirled around one aspect of the book pricing game: What price is the audience for this niche book willing to pay?

I priced the book at $14.95. However, I now know that I could have priced the book higher, at say $18.95, and I would have moved the same volume. Though the book has been successful, that error in pricing lost me about $5,000 in profit.

Where did I go wrong during my first pricing decision?

I focused too much on the price that I thought the audience would tolerate. While the question I asked when I set the price is a good question and an important one to answer, it is not the only question a publisher should ask. Asking only that question can create misconceptions with big consequences. As it turns out, I did not understand the audience as well as I presumed. Often, our assumptions are our worst enemies.

A better process for pricing a book

If I were publishing that book now, for the first time, here are some of the questions I would ask:

  1. Who is the primary audience? And do I have enough knowledge of and access (i.e. marketing and distribution) to the primary audience to sell the book?
  2. Is the primary audience fixed at a certain number of readers, and do I know that number?
  3. Using the answer from #1, what price at that volume covers my costs (including labor) and my profit?
  4. Is the primary audience going to buy this book regardless of price?
  5. Beyond the primary audience, can I sell this book to anyone else at a profitable volume?

These are very important questions. And I should ask them not only when setting the final price of the book, but also during the acquisitions process when deciding whether to even publish the book. Here is what I am looking for in the answers:

  1. The primary audience is going to generate the bulk of the revenue and momentum for the book. If I cannot answer either part of Question #1 with detailed, knowledgeable responses then I do not publish the book. It does not matter how passionate I am for the book, or how awesome the author is. If I don’t understand the audience, then I can’t sell the book. It really is that simple. Stick with what you know. Part of this question also deals with marketing, which I talk about in another chapter.
  2. Question #2 is one of the most important questions I can ask, and this is especially true for niche publishers and self-publishers. If I can answer yes and I know the approximate size of the audience, then this answer will decide the price of the book. Then I only need to use the following equation to set the price: cost+profit/volume. I love it when I get books like these because I know from the beginning how much profit I am going to clear on the project. This question is also connected to Question #4. Knowing the size of the audience and an affirmative response to #4 is the best outcome for most small publishers.
  3. This is a great question because it forces me to understand the true cost of pursuing a project. See the next section for an example of the spreadsheet setup that I use to create a variety of profit predictions at various price points, discounts, and volumes. I believe it is very important to visualize this part of the pricing process, and so I recommend that every publisher use a similar spreadsheet when setting prices. This spreadsheet not only gives me the answers to Question #3, it also forces another gut check when looked at after getting the answers to the other questions. And it automatically triggers other questions. Is the primary audience big enough to buy the minimum volume for the book to create a profit? Do I understand enough about the primary audience to move the needed volume?
  4. If I can answer yes to this question then I am very happy. I still need to figure out if the primary audience is big enough to provide the needed profit, and I can determine that using the data from the spreadsheet that I will use to answer Question #3.
  5. This is often a difficult, but very important question to answer. If I stick to the model of generating desired profit from the primary audience, then finding new, secondary audiences puts icing on the cake. For each new audience, I try to use the same method just described—this is the best process for predicting outcomes and ensuring success.

The answers to these questions allow me to do several things:

  • Determine if a project is worth pursuing
  • Determine if a project is worth continuing
  • Determine how important the book is to the success of the business
  • Plan for the future by estimating expected cash flow

What I just described demonstrates that the process of choosing a price for a book creates a detailed qualitative and quantitative analysis that deals with more than trying to pick up a few more customers through clever price points. The process gets to the very core of the book, asking the core questions that many publishers willingly disregard at their own peril. I too have fallen into this publishing trap while in pursuit of creative passion and beautiful literature—enough times that as I write these words I grind my teeth thinking about all the profits wasted on projects that were long dead before they started. If only I had used this process …

Looking at all the options—quantitatively

Now that I have outlined the basic process, let’s go back to Question #3: What price and volume covers my costs, including labor?

Below is an image of the spreadsheet that I use for making the calculations that will answer my question. I call it the Publisher Profit Calculator.

Book_Profit_Calculator

This spreadsheet includes a lot of parts. No unique piece of data provides that much information. But the relationship of all the pieces provides an incredible amount of useful information that will influence the final price of a book.

Here is an explanation of each part:

  • Retail: This is the retail price. It is a part of the calculation used in all the other columns.
  • Page Count: This is the final, total page count of the book. It is used to calculate the printing cost (used in the After Printing column) and the Page Profit column.
  • Discount: This is the wholesale or distribution discount. When estimating future cash flow and profits, always reference the biggest discount given. Referencing only the biggest discount will keep expectations realistic, provide room for error while forecasting, and sometimes it results in unexpected profits later in the life of the book. Just like disaster preparedness, always plan for the worst—but in this case using the biggest discount and slimmest margins.
  • Royalty: This is the percentage the author receives. It is used to calculate the dollar amount that the author receives in the Author Royalty column.
  • Wholesale: This is the wholesale or distributor price. It is calculated using the Retail and Discount columns.
  • After Printing: This is calculated using: Wholesale less printing cost (printing cost is calculated in the background based on the Page Count). This number gives the gross revenue before royalties.
  • Author Royalty: This is the amount the author receives per book. For the purposes of this example spreadsheet, the Author Royalty is the Royalty percentage multiplied by the Wholesale price—which is based on a net-price received royalty model.
  • Pub. Profit: This is the amount the publisher clears after printing costs and royalties. This is an important column in the final price making decision.
  • Profit Margin: This column uses the Retail price and the Pub. Profit columns to calculate the percentage of the retail price that is publisher net profit. This is a good column to watch across all the books being published under an imprint. I try to the keep the Profit Margin around 30% with margin of +/- 5%. Remember to look at the row with the largest expected Discount.
  • Min. Volume: This is the minimum volume that I must sell to recoup the cost of publishing the book. The total expenses for this example are listed in the upper right corner: $2,200. The column uses the Publisher Profit calculation and the total expenses to calculate the number of books that must be sold to break-even. This number should include the publisher’s labor. This column has the most influence on my final price setting decision. This number can be modified to include profit as well.
  • Page Profit: This is the publisher’s profit per page. It is calculated using the Page Count and the Pub. Profit columns. This column has a similar role to the Profit Margin column—it gives the publisher a benchmark to aim for. I must note that profit per page tends to decrease with longer books because the retail price has a hard time keeping up. But that is okay because I am selling more pages and so profit holds steady.

Example of my method in action

Let’s say I’m getting ready to acquire a new book. Before I begin the publishing process, I want to get a good idea for the primary audience and whether I can make a profit publishing the book. Let’s pretend that the book title of the book is “Paddling Missouri’s Big Rivers.” It is a guide, a memoir, and a history to the big rivers of Missouri.

Now let’s work through the questions and the Publisher Profit Calculator to find out if I should publish the book.

  • Who is the primary audience? And do I have enough knowledge of and access (i.e. marketing and distribution) to the primary audience to sell the book?

The primary audience is paddlers, people interested in the Missouri’s natural and cultural history, and people who know the author. I am connected to the Missouri paddling community and I was born and raised in Missouri, so I believe that I have enough knowledge and access to the primary audience to sell the book.

  • Is the primary audience fixed at a certain number of readers, and do I know that number?

The size of the primary audience is limited, but I do not know the exact number. Using my unique knowledge of the primary audience, I estimate that the primary audience is 300 strong. I believe that this is a conservative estimate, but when estimating it is always best to err on the side of caution

  • Using the answer from #1, what price at that volume covers my costs (including labor) and my profit?

My costs, including labor but excluding printing, are $2,200. The book is 200 pages long and I already entered the cost of printing the book using Print-on-Demand into the above spreadsheet. Using the Book Profit Calculator spreadsheet, I see that I need to price the book at a minimum of $24.95 to break-even, given that the primary audience is 300 strong. This price assumes that I will sell all 300 books at a wholesale discount of 50%. In reality, I know that the margins are often better because I will sell a few at full retail value and I will sell many of the wholesale copies at a 40% discount. Again, I am creating a safe forecast.

  • Is the primary audience going to buy this book regardless of price?

This can be a hard question to answer. Much of the time it is qualitative question. From market research, I know that similar titles have sold at prices ranging from $22.95 to $29.95, and the primary audience did not balk at the higher prices. They are a passionate primary audience and will pay a premium, up to a point.

This is good news. At $29.95, I will make a profit on 61 copies, a net profit of $561 after covering my labor costs, other expenses, and royalties.

  • Beyond the primary audience, can I sell this book to anyone else at a profitable volume?

I believe that this book has the potential to be popular beyond the primary audience, especially in local bookstores (where I can organize signings and talks) and at local outdoor stores (where I can also organize signing and talks).

I have talked with the owners and buyers of the bookstores and outdoor stores. They tell me that $29.95 is too high for their regular customers. They suggest that a price of $22.95 would be perfect.

As much as I would like to price the book at $22.95, that price does not give me a break-even profit based on the estimated size of my primary audience. But I believe in the wider appeal of the book beyond the primary audience. I price the book at $24.95—the minimum break-even price.

The real price of books

The method discussed above takes a micro approach to book publishing and book pricing. Now lets switch to a macro perspective.

Macro is the big picture. It is the entire industry. It is books vs. music vs. movies vs. television.

The real cost of a book to the consumer is not the retail price listed on the cover. The real cost is the time it takes to read the book.

In the example above, the book costs $24.95. If the customer clears $25 per hour at their job, then it costs an hour of their time to buy the book. However, the real cost is in the time it takes to read the book and the other things the customer could be doing during that time.

Let’s estimate that the average reader needs 8 hours to read the 200 page book. For the customer making $25 per hour, that is $200 worth of time. The real cost of the book to the customer is $225. That is an expensive book!

A 2 hour-long, $10 HD movie downloaded from iTunes has a real cost of only $60.

Should this insight affect how I price books? Sometimes, yes. But it depends on the book. Is the book competing with other cultural products? Or does it stand alone? …

Consumer demand for books and price tolerance

There are several good academic research articles out there covering the book industry, including accounting, profits, and pricing.

“The demand for books estimated by means of consumer survey data” by Vidar Ringstad Knut Løyland is a good resource to reference while reading this chapter.

Here are the highlights from the article:

  • Books are price sensitive and compete with other cultural goods.
  • Sex and age matter.
  • Single persons and households with small children, especially those with children less than 7 years, are frequent book buyers.
  • The decreased price of substitutes like TV, video, and music could crowd the demand for books.
  • Books are luxury goods.

When asking a question like, “Will the audience buy this book regardless of price?”, I am trying to get at the above points. Is the book a luxury item? Or is it something that the reader needs? Does it compete with other cultural goods? Or does it stand in a class of its own?

If the reader is an average hiker with no navigation skills and no desire to get lost in the woods, then the reader will probably buy a hiking guide because it is a tool that she must have to go hiking, just like good shoes. If there is only one hiking guide to the area she wants to hike in, then the reader cannot be overly price sensitive. If there are multiple guides to the area, then the hiker becomes more price sensitive because there is competition in the market. And if the reader is not sure if she even wants to go hiking, then the book is facing even more price sensitivity.

The points highlighted by Ringstad and Løyland in their study are important to consider beyond the pricing process. The publisher must also take them into perspective while acquiring material and editing material. Will the 800 page sprawling opus sell as well as a 100 page quick and intense read? And which will readers appreciate more? We must remember that we are in the age of short blog posts, tweets, and 30 second to 3 minute YouTube videos. How do books fit into this paradigm?

Using historical data to understand the relationship between price, volume, and profit

I have published books for 5 years and have about 60 titles in print across a diverse range of subjects. Using the consolidated sales data for all the years and all the titles, I have created the following two charts.

Looking at these charts I see that books priced under $10 account for very little of my gross sales and volume.

The majority of the published books fall between $10 and $20. While the $10-$20 range has the highest volume, the gross sales are too heavily weighted toward bottom.

The $30-$40 range has the fewest books, but they surpass in gross sales the majority of the books in the lower price ranges. Yet the volume is not all that impressive when compared to the high volume achieved by some of the $10-$20 books.

How do I interpret this data?

I look at these charts and conclude that, historically, I have under-priced my books. It is clear that assigning low prices to books did not help sales and assigning high prices to books did not hurt sales.

Of course, when I look at these charts I have the benefit market and business specific knowledge not displayed on the charts. Much of that knowledge came from asking the four questions that started this chapter. Asking those four questions has ultimately led me to the conclusion that I must give higher prices to the books I publish and that the primary audiences for the books I publish are not as price sensitive as I once thought.

Concluding thoughts

When choosing a price for a book, publishers must take many variables into account. Failure to consider all the variables can mean the difference between publishing a profitable book and losing money on the book.

The most important aspect of the pricing process is finding the break-even point and ensuring that the primary audience for the book will buy the needed volume to reach that point.