When it comes to money and publishing, many people in this space have a crazy misconception about how much money is or is not being made by authors. People are super curious about the compensation authors receive and my inbox and email are full of these questions. To the surprise of many, the amount differs between indie/self-published authors and traditionally published authors.

To clear things up, I decided to lay out the basic revenue streams for authors. Outside of creating additional revenue streams, which I won’t cover tonight, there are three ways an author can make money directly from their book.

1.   The Advance

2.   Royalties off book sales

3.   Selling Your Book

The Advance –  traditionally published author

When a publisher acquires a book manuscript, it usually offers the writer an advance against the royalties/future earnings. What this means is for every dollar given to you in the advance, your book must earn a dollar in sales. It’s a signing bonus that is negotiated and paid to the author before the book is published.

The structure of an advance is the same across the publishing industry and ranges from $0 to millions of dollars. The advance amount is an indication by the publisher what they believe they can recoup from your book sales.

For Example:

Michelle and Barack Obama received a record-breaking advance of $65 million for their memoirs. And just as the publisher predicted, Michelle’s book Becoming is selling very well.

So again, for every dollar Michelle Obama received in the 65 million dollar advance, she must earn the money back. This is calling Earning Out the Advance.  If you do not sell enough books to recoup the advance amount (investment in publishing your book) you will owe the publisher the difference. For some authors the advance is the only payment they will receive for the rights to their books because either the sales were flat/even or the book simply didn’t earn out.

Royalties

Publishers will offer you a contract where you get 10-15% royalties off each sale. But there is lots of negotiating around this number to determine if it comes off the list price of the book or net royalties. E-books and audiobooks should have a higher royalty rate (once the upfront costs are recovered, it’s like selling air).  Make sure you negotiate both.

Print On Demand – KDP/Kindle Direct Publishing or Ingram Spark offer 60-70% royalty rate which the author receives after expenses (net royalties). For my $7.99 Color Journal the royalty would be $2.46 per book.

Selling Your Book

Order a set quantity from an offset printer. The cost per book will be determined by the quantity you buy.  The cost will be lower, but you will be totally responsible for distribution of the book, mailing it out to people who buy. Offset printing is good for back of the room sales at speaking events and author signings that are not in the brick and mortar bookstore setting.

So let’s recap. There are three ways an author can make money directly from their book. Advance you have to pay back if your book doesn’t sell, Royalties need to be negotiated for all formats of the book and lastly Selling Your Own Book where you will be in charge of distributing your work.

Please share this Live if you feel the information I shared can feed someone you know. In the process of writing a book, download my Step-by-Step Guide for Aspiring Authors. The link is also in my bio. See you on the journey!